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

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-Q

(Mark One)

þ

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

EXCHANGE ACT OF 1934

For the Quarterly period ended September 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      Accelerated filer

Non-accelerated filer

Smaller reporting

filer

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 26,583,990 shares of its common stock outstanding as of November 12, 2014.



iGambit Inc.

Form 10-Q

Part I — Financial Information

Item 1.

Financial Statements:

1

Consolidated Balance Sheets

1

Consolidated Statements of Income

2

Consolidated Statements of Cash Flows

3

Notes to Consolidated Financial Statements

4

Item 2.

Management’s Discussion and Analysis of Financial Condition and

Results of Operations

20

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

27

Item 4.

Controls and Procedures

27

Part II — Other Information

28

Item 1.

Legal Proceedings

28

Item 1A.

Risk Factors

29

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

29

Item 3.

Defaults upon Senior Securities

29

Item 4.

Removed and Reserved

29

Item 5.

Other Information

29

30

Item 6.

Exhibits

EX-31.1

EX-31.2

EX-32.1

EX-32.2



PART I — FINANCIAL INFORMATION

Item 1 — Financial Statements

IGAMBIT INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

SEPTEMBER 30,

2014

DECEMBER 31,

(Unaudited)

2013

ASSETS

Current assets

Cash

$

332,379

$

26,870

Accounts receivable, net

100,390

135,292

Prepaid expenses

41,703

10,590

Due from rescission agreement

--

239,779

Assets from discontinued operations, net

--

638,215

Total current assets

474,472

1,050,746

Property and equipment, net

9,628

11,176

Other assets

Deposits

12,132

9,420

$

496,232

$

1,071,342

LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities

Accounts payable

$

292,552

$

316,566

Convertible note payable, net

--

40,250

Derivative liability

--

152,076

Note payable - related party

--

6,263

Total current liabilities

292,552

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

(2,620,470)

(2,197,857)

Total stockholders' equity

203,680

556,187

$

496,232

$

1,071,342

1



IGAMBIT INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(UNAUDITED)

THREE MONTHS

NINE MONTHS

ENDED

ENDED

SEPTEMBER 30,

SEPTEMBER 30,

2014

2013

2014

2013

Sales

$

269,166

$

397,081

$

819,803

$      1,171,621

Cost of sales

115,214

134,014

341,829

399,392

Gross profit

153,952

263,067

477,974

772,229

Operating expenses

General and administrative expenses

338,288

421,298

998,527

1,299,224

Loss from operations

(184,336)

(158,231)

(520,553)

(526,995)

Other income (expenses)

Income from rescission agreement

--

--

--

755,000

Gain on derivative liability

--

--

152,076

--

Amortization of debt discount

--

--

(63,250)

--

Interest expense

(1,429)

--

(8,417)

--

Total other income (expenses)

(1,429)

--

80,409

755,000

Income (loss) from continuing

operations

(185,765)

(158,231)

(440,144)

228,005

Income from discontinued operations

--

--

17,531

--

Net income (loss)

$

(185,765)

$

(158,231)

$

(422,613)

$

228,005

Basic and fully diluted earnings (loss)

per common share:

Continuing operations

$

(.01)

$

(.01)

$

(.02)

$

.01

Discontinued operations

$

.00

$

.00

$

.00

$

.00

Net earnings (loss) per common share

$

(.01)

$

(.01)

$

(.02)

$

.01

Weighted average common shares

outstanding - basic

26,709,056

25,044,056

25,737,023

25,044,056

Weighted average common shares

outstanding - fully diluted

26,709,056

25,044,056

25,737,023

25,987,956

2



IGAMBIT INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

NINE MONTHS ENDED SEPTEMBER 30,

(UNAUDITED)

2014

2013

CASH FLOWS FROM OPERATING ACTIVITIES:

Net income (loss)

$     (422,613)

$

228,005

Adjustments to reconcile net income (loss) to net

cash provided by operating activities

Income from discontinued operations

(17,531)

--

Depreciation

3,574

4,885

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

34,902

(22,976)

Prepaid expenses

(31,113)

87,804

Due from rescission agreement

189,000

(272,223)

Accounts payable

(30,277)

(18,898)

Net cash (used) provided by continuing operating activities

(290,999)

6,597

Net cash provided by discontinued operating activities

655,746

--

NET CASH PROVIDED BY OPERATING ACTIVITIES

364,747

6,597

CASH FLOWS FROM INVESTING ACTIVITIES:

Purchases of property and equipment

(2,026)

--

(Increase) decrease in deposits

(2,712)

1,800

NET CASH (USED) PROVIDED BY INVESTING ACTIVITIES

(4,738)

1,800

CASH FLOWS FROM FINANCING ACTIVITIES:

Proceeds from stockholder's loan

3,600

--

Repayments of stockholder's loan

(3,600)

--

Proceeds from convertible note payable

--

103,500

Repayments of convertible note payable

(54,500)

--

NET CASH (USED) PROVIDED BY FINANCING ACTIVITIES

(54,500)

103,500

NET INCREASE IN CASH

305,509

111,897

CASH - BEGINNING OF PERIOD

26,870

104,721

CASH - END OF PERIOD

$

332,379

$

216,618

SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:

Cash paid during the period for:

Interest

$

8,417

$

2,644

Non-cash investing and financing activities:

Note payable converted to common stock

$

(49,000)

$

--

3



IGAMBIT INC.

Notes to Condensed Consolidated Financial Statements

Nine Months Ended September 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  nine  months  ended  September  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

September   30,   2014   and   December   31,   2013,   respectively,   and   of   accrued   interest

receivable   of   $0   and   $67,625   as   of   September   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 nine months ended September 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  nine

months ended September 30, 2014 and 2013 were $1,657 and $4,292, 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  September 30, 2014

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

operations for the nine months ended September 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  $3,574  and  $4,885  was  charged  to  operations  for  the  nine

months ended September 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

6



awards  expected  to  vest.  The  Company  uses  the  Black-Scholes  option  pricing  model  to

estimate  the  fair  value  of  its  stock  options  and  warrants.  The  Black-Scholes  option

pricing  model  requires  the  input  of  highly subjective  assumptions  including  the  expected

stock  price  volatility  of  the  Company’s  common  stock,  the  risk  free  interest  rate  at  the

date   of   grant,   the   expected   vesting   term   of   the   grant,   expected   dividends,   and   an

assumption   related   to   forfeitures   of   such   grants.  Changes   in   these   subjective   input

assumptions  can  materially affect  the  fair  value  estimate  of  the  Company’s  stock  options

and warrants.

Income Taxes

The   Company   accounts   for   income   taxes   using   the   asset   and   liability   method   in

accordance  with  ASC  Topic  No.  740,  Income  Taxes.  Under  this  method,  deferred  tax

assets  and  liabilities  are  determined  based  on  differences  between  financial  reporting  and

tax  bases  of  assets  and  liabilities,  and  are  measured  using  the  enacted  tax  rates  and  laws

that are expected to be in effect when the differences are expected to reverse.

The  Company  applies  the  provisions  of  ASC  Topic  No.  740  for  the  financial  statement

recognition,  measurement  and  disclosure  of  uncertain  tax  positions  recognized  in  the

Company’s  financial  statements.  In  accordance  with  this  provision,  tax  positions  must

meet  a  more-likely-than-not  recognition  threshold  and  measurement  attribute  for  the

financial statement recognition and measurement of a tax position.

Recent Accounting Pronouncements

FASB ASC 606 ASU 2014-09 - Revenue from contracts with customers:

In May 2014, the FASB issued amended guidance  on contracts with customers to transfer

goods   or   services   or   contracts   for   the   transfer   of   nonfinancial   assets,   unless   those

contracts   are  within  the  scope  of  other  standards  (e.g.,  insurance  contracts  or  lease

contracts).   The   guidance   requires   an   entity  to   recognize   revenue   on   contracts   with

customers  to  depict  the  transfer  of  promised  goods  or  services  to  customers  in  an  amount

that  reflects  the  consideration  to  which  the  entity  expects  to  be  entitled  in  exchange  for

those  goods  or  services.  The  guidance  requires  that  an  entity  depict  the  consideration  by

applying the following steps:

Step 1: Identify the contract(s) with a customer.

Step 2: Identify the performance obligations in the contract.

Step 3: Determine the transaction price.

Step 4: Allocate the transaction price to the performance obligations in the contract.

Step 5: Recognize revenue when (or as) the entity satisfies a performance obligation.

The  amendments  in  this  ASU  are  effective  for  annual  reporting  periods  beginning  after

December   15,   2016,   including   interim   periods   within   that   reporting   period.   Early

application  is  not  permitted.  This  amendment  is  to  be  either  retrospectively  adopted  to

each  prior  reporting  period  presented  or  retrospectively  with  the  cumulative  effect  of

7



initially  applying  this  ASU  recognized  at  the  date  of  initial  application.  Adoption  of  this

guidance  is  not  expected  to  have  a  material  impact  on  the  Company's  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.

Three Months Ended

Nine Months Ended

September 30,

September 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  2006  Long-Term  Incentive  Plan  (the  "2006  Plan").

Awards  granted  under  the  2006  Plan  have  a  ten-year  term  and  may  be  incentive  stock

options,  non-qualified  stock  options  or  warrants.  The  awards  are  granted  at  an  exercise

price  equal to the  fair market value  on the date of  grant  and  generally vest  over a  three  or

four  year  period.  The  Plan  expired  on  December  31,  2009, therefore  as  of  June  30,  2014,

8



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 nine months ended September 30, 2014 and 2013

follows:

Weighted

Average

Weighted

Remaining

Weighted

Average

Average

Contractual

Options

Grant-Date

Life

Outstanding

Exercise Price

Fair Value

(Years)

Options outstanding at

December 31, 2012

1,268,900

$

0.08

$

0.10

6.16

Expired

(600,000)

0.10

--

Options outstanding at

September 30, 2013

668,900

$

0.06

$

0.10

4.94

Options outstanding at

December 31, 2013

668,900

$

0.06

$

0.10

4.69

Options granted

850,000

$

0.04

$

0.09

7.19

Options outstanding at

September 30, 2014

1,518,900

$

0.06

$

0.10

5.02

Options outstanding at September 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

9



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.

Warrant activity during the nine months ended September 30, 2014 and 2013 follows:

(1)Weighted

Average

Weighted

Remaining

Weighted

Average

Average

Contractual

Warrants

Grant-Date

Outstanding

Exercise Price

Fair Value

Life (Years)

Warrants outstanding

at December 31, 2012

275,000

$

0.94

$

0.10

6.42

No warrant activity

--

--

--

Warrants outstanding

at September 30, 2013

275,000

$

0.94

$

0.10

5.67

Warrants outstanding

at December 31, 2013

275,000

$

0.94

$

0.10

5.42

No warrant activity

--

--

--

Warrants outstanding

at September 30, 2014

275,000

$

0.94

$

0.10

4.67

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

Warrants outstanding at September 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

10



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  $3,242  was  recorded  for  the  nine  months  ended

September 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  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  nine  months  ended  September

30,  2014,  the  Company  amortized  $63,250  of  debt  discount.    During  the  nine  months

ended  September  30,  2014,  the  noteholder  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

11



derivative  liability  of  $152,076  was  recorded  during  the  nine  months  ended  September

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 September 30,

2014

2013

Effective tax rate

0.0 %

0.0 %

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  nine  months  ended  September  30,  2014  and

2013 were $5,179 and $12,690, respectively.

Note 10 – Concentrations and Credit Risk

Sales and Accounts Receivable

Gotham  had  sales  to  one  customer  which  accounted  for  approximately 66%  of  Gotham’s

total  sales  for  the  nine  months  ended  September  30,  2014.   The  customer  accounted  for

approximately 70% of accounts receivable at September 30, 2014.

Gotham  had  sales  to  two  customers  which  accounted  for  approximately  44%  and  25%,

respectively of Gotham’s  total  sales  for the  nine  months  ended  September  30,  2013.   The

two  customers  accounted  for  approximately  61%  and  11%,  respectively  of  accounts

receivable at September 30, 2013.

12



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  September  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,  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.

13



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  September  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.

As  of  September  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 nine months ended September 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.

14



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 September 30, 2014.

Loan Payable - Stockholder

During the nine months ended September 30, 2014, a stockholder/officer of the Company

made  cash  advances  totaling  $3,600  on  behalf  of  the  Company,  which  were  repaid

without interest.

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:

2014

$   4,740

2015

19,080

2016

19,440

2017

3,240

$ 46,500

Rent  expense  of  $51,209  and  $55,673  was  charged  to  operations  for  the  nine  months

ended September 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.

15



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  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.

16



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

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

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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   Thomas   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.

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

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

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

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

18



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.

Note 15 – Subsequent Events

On   September   25,   2014,   the   Board   unanimously   approved   an   amendment   to   the

Company’s  Articles  of  Incorporation  to  increase  the  number  of  shares  of  Common  Stock

which  the  Company  is  authorized  to  issue  from  seventy  five  million  (75,000,000)  to

Three  Hundred  Million  (300,000,000)  shares  of  Common  Stock,  $0.001  par  value  per

share,   and   to   create   a   new   class   of   stock   entitled   “preferred   stock”   (together,   the

“Capitalization  Amendments”).  The  Capitalization  Amendments  create  provisions  in  the

Company’s  Articles  of  Incorporation,  which  allows  the  voting  powers,  designations,

preferences  and  other  special  rights,  and  qualifications,  limitations  and  restrictions  of

each  series  of  preferred  stock  to  be  established  from  time  to  time  by  the  Board  without

approval of the stockholders. No dividend, voting, conversion, liquidation or redemptions

rights as well  as redemption or sinking fund provisions are  yet established  with respect to

the Company’s preferred  stock.   On October 3, 2014, the Majority Stockholders executed

and delivered to the Company a written consent approving the Current Action.

19



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.

Revenue Recognition

20



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  nine  months  ended  September  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  nine  months  ended  September

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

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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 $3,574 and $4,885 was charged to operations for the nine

months ended September 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

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expense  on  the  convertible  note  of  $3,242  was  recorded  for  the  nine  months  ended

September 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  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  nine  months  ended  September30,  2014,  we

amortized  $63,250  of  debt  discount.   During  the  nine  months  ended  September30,  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

Convertible Note 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  nine  months  ended  September  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.

23



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.   We   are   focused   on   expanding   the

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

Assets.  At  September  30,  2014,  we  had  $496,232in  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  September  30,  2014,  our  total  liabilities  were  $292,552  compared

to  $515,155  at  December  31,  2013.  Liabilities  consist  of  accounts  payable  of  $292,552,

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   $203,680   at

September  30,  2014from  $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

$(2,620,470)  at  September  30,  2014,  resulting  from  a  loss  from  operations  of  $(422,613)

for the nine months endedSeptember30, 2014.

THREE  MONTHS  ENDED  SEPTEMBER  30,  2014  AS  COMPARED  TO  THREE

MONTHS ENDED SEPTEMBER 30, 2013

Revenues  and  Cost  of  Sales.  We  had  $269,166  of  revenue  during  the  three

months  ended  September  30,  2014  compared  to  revenue  of  $397,081  during  the  three

months  ended  September30,  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.  The  decrease  in  our  cost  of  goods  sold  for  the  three  months  ended

September  30,  2014  was  due  to  a  decrease  in  the  cost  of  the  outsourced  photography

vendors utilized by our Gotham subsidiary.

General  and  Administrative  Expenses.  General  and  Administrative  Expenses

decreased to $338,288 for the three  months ended September 30, 2014 from $421,298 for

the  three  months  ended  September 30,  2013.    For  the  three  months  ended  September 30,

24



2014  our  General  and  Administrative  Expenses  consisted  of  corporate  administrative

expenses    of    $51,116,    rent    expense    of    $16,756,    legal    and    accounting   fees    of

$24,225,employee   benefits   expense   of   $15,933,   directors   and   officers   insurance   of

$11,075  and  payroll  expenses  of  $219,183.For  the  three  months  ended  September  30,

2013  our  General  and  Administrative  Expenses  consisted  of  corporate  administrative

expenses  of  $67,923,  rent  expense  of  $18,415,  legal  and  accounting  fees  of  $19,951,

employee  benefits  expense  of  $28,640,  directors  and  officers  insurance  of  $10,326  and

payroll  expenses  of  $276,043.The  decreases  from  the  three  months  ended  September  30,

2013  to  the  three  months  ended  September  30,  2014  relate  primarily  to a  decrease  in

payroll  expenses  and  a  decrease  in  general  and  administrative  costs  associated  with  the

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

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

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

corporate administrative expenses.

Other  Income  (Expense)  and  Taxes.  There  was  no  other  income  for  the  three

months  ended  September  30,  2014and  2013  respectively.  We  had  interest  expense  of

$(1,429)  for  the  three  months  ended  September  30,  2014compared  to  no  interest  expense

for the three months ended September 30, 2013.

NINE   MONTHS   ENDED   SEPTEMBER   30,   2014   AS   COMPARED   TO   NINE

MONTHS ENDED SEPTEMBER 30, 2013

Revenues  and  Net  Income.  We  had  $819,803  of  revenue  during  the  nine  months

ended September 30, 2014, as compared to $1,171,621 of revenue during the nine months

ended  September  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  .In  addition  to  Gotham’s  operations,  we  had  other  income  of  $80,409  for  the

nine  months  ended  September  30,  2014  primarily  due  to  the  gain  on  derivative  liability,

compared  to  $755,000  of  other  income  from  the  IGX  Rescission  Agreement  for  the  nine

months  ended  September  30,  2013.The  decrease  in  our  cost  of  sales  for  the  nine  months

ended   September   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  $998,527  for  the  nine  months  ended  September  30,  2014  from  $1,299,224

for the nine months ended September 30, 2013. For the nine months ended September 30,

2014  our  General  and  Administrative  Expenses  consisted  of  corporate  administrative

expenses  of  $189,645,  rent  expense  of   $51,209,  employee  benefits  expense  of  $53,271,

legal   and   accounting   fees   of   $73,189,   directors   and   officers   insurance   expense   of

$32,328,  payroll  expenses  of  $548,106and  a  bad  debt  write  off  of  $50,779  as  part  of  a

settlement  for  the  receivable  balance  on  the  IGX  rescission  agreement  .For  the  nine

months ended September 30, 2013 our General  and Administrative Expenses consisted of

corporate   administrative   expenses   of   $206,677,   rent   expense   of   $18,415,   employee

benefits expense of $89,504, legal and accounting fees of $102,655, directors and officers

insurance expense of $30,038, finders and commission fees related the IGX transaction of

25



$30,175  and  payroll  expenses  of  $821,760.The  decreases  from  the  nine  months  ended

September  30,  2013  to  the  nine  months  ended  September  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  $80,409  primarily  due  to

the  gain  on  derivative  liability for  the  nine  months  ended  September  30,  2014,  compared

to  $755,000  from  the  IGX  Rescission  Agreement  for  the  nine  months  ended  September

30, 2013.

LIQUIDITY AND CAPITAL RESOURCES

General

As  reflected  in the  accompanying  consolidated  financial  statements,  at  September

30,  2014,  we  had  $332,379of  cash  and  stockholders’  equity  of  $203,680  as  compared  to

$26,870  and  $556,187  at  December  31,  2013.   At  September  30,  2014  we  had  $496,232

in total assets, compared to $1,071,342 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 $364,747for the nine months ended

September 30, 2014, compared to net cash provided by operating activities of $6,597for

the nine months ended September 30, 2013. Net cash used by continuing operating

activities was $290,999 for the nine months ended September 30, 2014, compared to net

26



cash provided by continuing operating activities of $6,597 for the nine months ended

September 30, 2013. Our primary source of operating cash flows was from a decrease in

the receivable due from the IGX rescission agreement of $189,000 and from continuing

operating activities for the nine months ended September 30, 2014 was from our Gotham

subsidiary’s revenues of $819,903 and $1,171,621 for the nine months ended September

30, 2013.  Additional contributing factors to the change were from a decrease in accounts

receivable of $34,902, an increase in prepaid expenses of $31,113, and a decrease in

accounts payable of $30,277.  Net cash provided by discontinued operating activities was

$655,746 for the nine months ended September 30, 2014 and cash provided by

discontinued operating activities was $0 for the nine months ended September 30,

2013.Cash provided by discontinued operations for the nine months ended September 30,

2014 consisted of $655,746in cash payments received from DDC against accounts

receivable included in the Assets from Discontinued Operations.

Cash  used  by  investing  activities  was  $4,738  for  the  nine  months  ended  September

30,  2014compared  to  cash  provided  by investing  activities  of  $1,800  for  the  nine  months

ended  September  30,  2013.   For  the  nine  months  ended  September  30,  2014  the  primary

use  of  cash  from  investing  activities  was  from  purchases  of  property  and  equipment  of

$2,026  and  an  increase  in  deposits  of  $2,712.   For  the  nine  months  ended  September  30,

2013  the  primary  source  of  cash  provided  by  investing  activities  was  from  a  decrease  in

deposits.

Cash   used   by   financing   activities   was   $(54,500)   for   the   nine   months   ended

September  30,  2014  compared  to  cash  provided  by  financing  activities  of  $103,500  for

the  nine  months  ended  September  30,  2013.  The  cash  flows  used  by  financing  activities

for  the  nine  months  ended  September  30,  2014  was  primarily  from  repayment  of  the

convertible  note  payable.  The  cash  flows  provided  by  financing  activities  for  the  nine

months  ended  September  30,  2013  was  from  the  issuance  of  a  Convertible  note  payable

from an unrelated party.

Supplemental Cash Flow Activity

In  the  nine  months  ended  September  30,  2014  the  company  paid  interest  of

$8,417compared to interest of $2,644in the nine months ended September 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

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

15d-15(e) under the Exchange Act as of September 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 September 30, 2014.

Change in Internal Controls

During  the  nine  months  ended  September 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  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

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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  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.

None

Item 3.   Defaults upon Senior Securities.

None

Item 4.   Removed and Reserved.

Item 5.   Other Information.

None

29



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 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.)

30



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

November 12, 2014.

iGambit Inc.

/s/ John Salerno

John Salerno

Chief Executive Officer

/s/ Elisa Luqman

Elisa Luqman

Chief Financial Officer

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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.)

32