NUTX 10-K Fiscal year ended Dec. 31, 2015

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-K

þ

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

EXCHANGE ACT OF 1934

For the Fiscal Year Ended December 31, 2015

OR

o

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

SECURITIES EXCHANGE ACT OF 1934

Commission File Number: 000-53862

IGAMBIT INC.

(Exact name of registrant as specified in its charter)

Delaware

11-3363609

(State or other jurisdiction of

(I.R.S. Employer

incorporation or organization)

Identification No.)

1050 W. Jericho Turnpike, Suite A

Smithtown, New York 11787

(Address of principal executive offices)

(631) 670-6777

(Registrant’s telephone number)

(Registrant’s former telephone number)

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

Title of Each Class: NONE

Name of Each Exchange on Which Registered:

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

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the

Securities Act. Yes o No þ

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section

15(d) of the Exchange Act. Yes o No þ

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

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

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

the past 90 days. Yes þ No o

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

website, if any, every Interactive Date File required to be submitted and posted pursuant to Rule 405 of

Regulation S-T (Section 232.405 of the chapter) during the preceding 12 months (or for such shorter period

that the registrant was required to submit and post such files). Yes þ No o

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not

contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or

information statements incorporated by reference in Part III of this Form 10-K or any amendment to this

Form 10-K.  o

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

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

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

Large accelerated

Accelerated

Non-accelerated filer o

Smaller

filer o

filer o

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 126-2 of the act):

Yes o No þ

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

As of April 14, 2016 there were 39,683,990 shares of the Registrant’s $0.001 par value common stock

outstanding.

DOCUMENTS INCORPORATED BY REFERENCE: None

iGambit Inc.

FORM 10-K — FOR THE YEAR ENDED DECEMBER 31, 2015

TABLE OF CONTENTS

Page No.

PART I

Item 1

Business

1

Item 1A

Risk Factors

10

Item 1B

Unresolved Staff Comments

10

Item 2

Properties

10

Item 3

Legal Proceedings

10

Item 4

(Removed and Reserved)

11

PART II

Item 5

Market for Registrant’s Common Equity, Related Stockholder Matters

and Issuer Purchases of Equity Securities

11

Item 6

Selected Financial Data

12

Item 7

Management’s Discussion and Analysis of Financial Condition and

Results of Operations

12

Item 7A

Quantitative and Qualitative Disclosure About Market Risk

23

Item 8

Financial Statements and Supplementary Data

23

Item 9

Changes in and Disagreements with Accountants on Accounting and

Financial Disclosure

23

Item 9A

Controls and Procedures

24

Item 9B

Other Information

25

PART III

Item 10

Directors, Executive Officers and Corporate Governance

25

Item 11

Executive Compensation

29

Item 12

Security Ownership of Certain Beneficial Owners and Management

and Related Stockholder Matters

32

Item 13

Certain Relationships, Related Transactions and Director

Independence

33

Item 14

Principal Accountant Fees and Services

33

PART IV

Item 15

Exhibits and Financial Statement Schedules

34

EX-31.1

EX-31.2

EX-32.1

EX-32.2

i

This annual report on Form 10-K is for the year ended December 31, 2015. The

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

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

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

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

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

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

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

ii

PART I

This Annual Report on Form 10-K includes forward-looking statements within the

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

Securities Exchange Act of 1934, as amended. The Company has based these forward-

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Company’s   audited   Consolidated   Financial   Statements   and   related   Notes   thereto

included elsewhere in this report.

ITEM 1. BUSINESS

HISTORY

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

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

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

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

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

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

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

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

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

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

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

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

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

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

full time management roles with the Company.

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

1

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

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

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

(“Gotham”).

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

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

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

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

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

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

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

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

filed on January 7, 2013.

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

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

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

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

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

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

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

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

completed.

On  November  4,  2015,  we  consummated  the  acquisition  of  Wala,  Inc.  doing

business as ArcMail Technology (ArcMail) in accordance with a Stock Purchase

Agreement (the “ArcMail Purchase Agreement”) by and among Wala, Inc. doing

business as ArcMail Technologies (“ArcMail”), Rory T. Welch (the “Seller”) and the

Company. Pursuant to the Stock Purchase, the total consideration to be paid for the outstanding

capital stock of ArcMail is 11,500,000 shares of the Company’s Common stock. 10,500,000

shares of iGambit’s Common stock to the Seller, and/or Seller’s designees at Closing and

the Holdback Amount of 1,000,000 shares of the iGambit’s Common stock to be held in

Escrow and paid to the Seller on later of (i) the first (1 ^st ) anniversary of completion of the

first audit of Purchaser after the Closing, or (ii) that date which is twelve (12) months

from the Closing, provided that in the event iGambit or the Purchaser has any claims for

indemnification against the Seller under the Purchase Agreement, Purchaser shall

continue to withhold the portion of the Holdback Amount subject to such claims until the

parties fully and finally resolve such claims.

The ArcMail Purchase Agreement was disclosed on the Company’s current report

on Form 8-K filed on November 10, 2015.

On November 5, 2015, through our wholly owned subsidiary Gotham Innovation

Lab, Inc. (“Gotham”), we completed the sale of certain assets of Gotham to VHT Inc.

(“VHT”) in accordance with an Asset Purchase Agreement (the “VHT Purchase

2

Agreement”) by and between Gotham and VHT. Pursuant to the Purchase Agreement

the  Company received  $600,000  in  consideration,  $400,000  of  the  consideration  was

received at closing and the remaining $200,000 portion of the consideration is subject to

twelve (12) equal monthly payments beginning January 2016. The sale included certain

of the assets of the Gotham, including the Elliman customer agreement, all customer

accounts, all vendor agreements and all the intellectual property.

The VHT Purchase Agreement was disclosed on the Company’s current report on

Form 8-K filed on November 11, 2015.

OUR COMPANY

Introduction

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

operating subsidiary, of  Wala, Inc. doing business as ArcMail Technology (ArcMail)

which was purchased on November 4, 2015. . ArcMail is in the business of providing

simple, secure and cost-effective email and enterprise archiving and management

solutions to businesses of all sizes across a wide range of vertical markets Revenues

consist  entirely of  revenues  from the  operation  of  our  ArcMail  subsidiary  ($474,679

during   the period November 4, 2015 through the year ended December 31, 2015).   In

addition to ArcMail’s operations, we had income from discontinued operations of

$627,384.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

acquiring less than 100 percent of a target company.

3

Our Strategy to Grow the Company

General

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

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

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

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

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

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

SEC  reporting  company.    In  addition,  we  are  working  on  a  daily  basis  towards  our

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

subsidiary.

Sources of Target Businesses

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

provided following such business combination.

Selecting Acquisition Targets

Our management has virtually unrestricted flexibility in identifying prospective

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

4

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

the following:

Company Characteristics

§ Established Company with proven track record

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

o Company undergoing a turnaround that demonstrates strong prospects for

future growth

§ Strong Cash Flow Characteristics.

o Cash flow neutral or positive,

o Predictable recurring revenue stream,

o High gross margins and

o Low working capital and capital expenditure needs

§ Strong Competitive Industry Position

o Leading or niche market position, and/or

o Strong channel relationships that promote barriers to entry

§ Strong Management Team

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

execute, or

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

team

§ Diversified Customer and Supplier base

§ Proprietary products or marketing position

Industry Characteristics

§ Non-cyclical

§ Services Consumer or niche market

§ Fragmented with potential for consolidation or growth

§ Emerging markets

Industries of Interest

§ Real Estate Services

§ Managed Security Services Providers (MSSP)

§ IT Solutions Providers specializing in security and network technology

products, services, and support

§ Internet

o Cloud Computing

o Security focused applications

5

Investment Criteria

§ Sales Volumes: $500 thousand to $30 million

§ Cash Flow: Neutral or positive

§ Structure: Controlled ownership. Closely held private company

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

§ Involvement: Board oversight

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

§ Marketing:

o Target captures a particular segment of the market

o Target has a focused strategic marketing plan.

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

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

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

effecting a business combination consistent with our business objective.

Diligence Process

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

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

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

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

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

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

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

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

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

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

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

opportunity is approved for further exploration management will discuss potential

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

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

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

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

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

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

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

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

additional diligence is conducted, and definitive  transaction documents are negotiated

and executed.

6

Evaluation of the Target’s Management

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

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

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

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

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

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

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

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

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

Competition

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

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

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

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

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

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

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

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

business.

Companies Currently Under Review

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

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

Our Partner Company

Wala Inc. dba ArcMail Technology

Products and Services

ArcMail is a provider of enterprise information archiving solutions for businesses

of all sizes across a wide range of vertical markets. ArcMail offers a full array of email

and data archiving solutions with broad deployment options that support a wide range of

content types from various sources.

ArcMail’s products and services are offered in a variety of deployment options

that  include  a  turnkey  appliance,  a  virtual  machine  (VM)  software  (VMware  or  MS

Hyper-V), a cloud/premise-based hybrid gateway (which can store information to a SAN,

NAS, or any cloud-based storage provider), and fully-hosted services in the cloud. Each

deployment option can support multiple data types from: most commercially available

mail servers, including all versions of MS Exchange, Linux variants, IBM Lotus Notes,

IBM Domino, and GroupWise among others; most cloud-based systems, including

7

Google Gmail, MS Office365, Google Apps, and Google Docs among others; and

Microsoft SharePoint, enterprise social media such as your corporate Twitter; and

Microsoft and Linux-based file systems.

Whether  a  customer  wants  their  archive  to  reside  behind  the  firewall,  in  the

cloud, or anywhere else, ArcMail offers products and services to fit that deployment

strategy. Whatever deployment option ArcMail’s customers elect, their data is properly

organized and maintained, for e-Discovery, compliance, disaster recovery and for finding

that file that a CEO needs immediately. Customers discoverable information is being

archived using a compliant and secure solution that is scalable, dependable, and easy to

install, deploy, use, and maintain.

In addition to being an archiving solutions provider, ArcMail has created a sales

and  support  organization  to  help  companies  in  search  of  expertise,  information,  and

supporting resources as they investigate their need and develop strategies for enterprise

information archiving. ArcMail recognizes that customers' needs are not met through a

"cookie  cutter/one  size  fits  all"  approach.  As  an  expert  in  the  enterprise  information

archiving market, ArcMail works in partnership with customers to ensure their archiving

solution is tailored to meet their unique situation and environment.

Competitive Comparison

ArcMail’s archiving solution is built on a simple and flexible design that gives

customers  ownership  and  control  over  their  data  and  offers  a  single  comprehensive

solution for regulatory compliance, data retention and eDiscovery. ArcMail’s primary

competitors include Barracuda Networks, Inc., MS Office365, and Google Vault.

ArcMail rarely encounters other competitors such as EMC, Symantec and Smarsh, as

they primarily focus on Fortune 500 and SME markets.

ArcMail competes effectively against its primary competitors by providing a simple and

scalable architecture, and world-class customer support. ArcMail’s primary competitive

differentiation includes:

§ Simplest User Interface

MS Outlook client or a simple Web-based UI

§ Fastest Search and Retrieval

Proprietary algorithms with granular indexing

§ Most  Data Source Types

We archive email, hosted email, SharePoint, system files, social media,

Google Drive, and other data sources

§ Most Deployment Options

We offer appliances, VM software, a cloud/premise-based hybrid

gateway, and a fully-hosted solution

8

§ Leading Storage-Saving Performance

Single-instance storage,  granular retention rules  and  one  of the  highest

Data compression rates

§ Best  Customer Service

Support is provided at our U.S. headquarters by an experienced technical

team

Future Products and Services

ArcMail’s product strategy is to provide architectures and deployment capabilities

that address the widest possible segment of the archiving market. While ArcMail is not

attempting to be “all things to all people” per se, ArcMail, as a result of its differentiated

capabilities, is able to address a majority segment. We see the ArcMail platform

including appliance, hosted and virtual products and services as viable in both the near

and long term. Enterprise class customers will continue to see the appliance model as

preferential to a hosted platform in most cases. The SMB market, which is transitioning

to the cloud in significant numbers, will help our virtualized and hosted solutions

continue to gain ground.

Customers

ArcMail currently has approximately 1,500 client accounts ranging from 50 active

email accounts to 5,000 active email accounts. Most of ArcMail’s customers are in the

Northeast, South, and Central region of the country. The typical profile of our customers

are 100-5,000 email mailboxes/employees. ArcMail’s customers are usually in regulated

industries or have e-discovery legal requests, H.R. audits, and/or regulatory compliance

issues. Their pain points will vary depending on the prospect you are speaking with. No

one Customer constitutes more than 5% of ArcMail’s sales and the loss of any customer

will not have a material adverse effect on the Company’s financial condition.

Expansion Summary

ArcMail’s objective is to be a market leader in the Enterprise Information

archiving industry. ArcMail currently has significant market share in the education and

local/County/State government industry sector. ArcMail is currently expanding its sales

and marketing initiatives to further penetrate the health care, financial services, insurance,

manufacturing,  and  transportation  industry  sectors. ArcMail  has expanded  its  sales

channel overseas to such areas as New Zealand, Australia, Canada, Mexico and other

Latin American countries. ArcMail  is also actively working to expand by providing

services to larger accounts in the SME enterprises with 5,000+ end users.  ArcMail is also

planning to expand its products and services portfolio and customer channels through

acquisition.

Employees

We presently have 14 total employees all of which are full-time.

9

OUR CORPORATE INFORMATION

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

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

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

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

websites does not form a part of this report).

ITEM 1A. RISK FACTORS

Not Required.

ITEM 1B. UNRESOLVED STAFF COMMENTS

None.

ITEM 2. PROPERTIES

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

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

approximately $1,620. The lease is for a term of five (5) years commencing on March 1,

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

the annual rent.

Our ArcMail operations are located in Shreveport, Louisiana, where we lease

approximately 2,989 rentable square feet to used as office space and 178 rentable square

feet to used as storage space, for a total of 3,167 rentable square feet. space. The lease is

for a term of forty five (35) months beginning February 1, 2015 and ending October 31,

2018 payable monthly in the following manner:

02-01-15 through 04-30-15

$    0.00 / mth .

05-01-15 through 04-30-16

$ 3 , 404 . 19/mth . ($13.25 / s.f / yr.-office ; $7 . 00 / s.f.Iyr.- s torage)

05-01-16 through 04-30-17

$ 3,528.73 / mth . ($13 . 75/s.f / yr.--office ; $7 . 00 / s.f./yr.-storage)

05-01-17 through 10-31-18

$ 3,653 . 27/mth. ($14.25/s.f / yr.--office; $7.00/s.f./yr . -storage)

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

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

local statutes and ordinances regulating their operations. Management does not believe

that compliance with such statutes and ordinances will materially affect our business,

financial condition, or results of operations.

ITEM 3. LEGAL PROCEEDINGS

Digi-Data Corporation

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

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

10

("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 certain terms, which included

the following:

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 4. ( REMOVED AND RESERVED)

PART II

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

STOCKHOLDER MATTERS, AND ISSUER PURCHASES OF EQUITY

SECURITIES

MARKET INFORMATION

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

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

Authority, under the ticker symbol “IGMB”.

HOLDERS

As of April 14, 2016, there are 39,683,990 shares of our common stock

outstanding, held of record by approximately 181 persons.   We have 275,000 common

stock warrants outstanding and 1,718,900 common stock options outstanding.

11

As  of April  14, 2016,  approximately 26,583,990  shares  of our  common stock are

eligible to be sold under Rule 144.

DIVIDENDS

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

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

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

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

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

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

any, for use in business operations.

EQUITY COMPENSATION PLAN INFORMATION

We currently do not have an equity compensation plan. In 2006, we adopted the

2006 Long-Term Incentive Plan (the "2006 Plan"). The Plan expired on December 31,

2009. 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.

In addition to the 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.

RECENT SALES OF UNREGISTERED SECURITIES

During 2015 we did not sell securities in transactions not registered under the

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

ITEM 6. SELECTED FINANCIAL DATA

Not Required

ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL

CONDITION AND RESULTS OF OPERATIONS

12

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.

Principles of Consolidation

The consolidated financial statements include the accounts of the Company and

its   wholly-owned   subsidiaries,   Wala,   Inc.   and   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  our  financial  instruments,  including  cash,  accounts receivable,

prepaid expenses, accounts payable, accrued interest, deferred revenue, 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.

Long-Lived Assets

We assess the valuation of components of its property and equipment and other

long-lived assets whenever events or circumstances dictate that the carrying value might

not be recoverable. We base our evaluation on indicators such as the nature of the assets,

the   future   economic   benefit   of   the   assets,   any   historical   or   future   profitability

measurements and other external market conditions or factors that may be present. If such

factors indicate that the carrying amount of an asset or asset group may not be

recoverable, we determine whether an impairment has occurred by analyzing an estimate

of undiscounted future cash flows at the lowest level for which identifiable cash flows

exist. If the estimate of undiscounted cash flows during the estimated useful life of the

asset is less than the carrying value of the asset, we recognize a loss for the difference

13

between the carrying value of the asset and its estimated fair value, generally measured

by the present value of the estimated cash flows.

Revenue Recognition

We recognize revenue from product sales when the following four revenue

recognition criteria are met: persuasive evidence of an arrangement exists, an equipment

order has been placed with the vendor, the selling price is fixed or determinable, and

collectability  is  reasonably  assured.    Revenues  from  maintenance  contracts  covering

multiple future periods are recognized during the current periods and deferred revenue is

recorded for future periods and classified as  current or noncurrent, depending on the

terms of the contracts.

Deferred Revenue

Deposits from customers are not recognized as revenues, but as liabilities, until

the  following conditions  are  met:  revenues  are  realized  when  cash  or claims  to  cash

(receivable) are received in exchange for goods or services or when assets received in

such   exchange   are   readily convertible   to   cash   or   claim   to   cash   or   when   such

goods/services are transferred. When such income item is earned, the related revenue

item  is  recognized,  and  the  deferred  revenue  is  reduced.  To  the  extent  revenues  are

generated from our support and maintenance services, we recognize such revenues when

services are completed and billed. We have received deposits from various customers that

have been recorded as deferred revenue in the amount of $1,190,279 and $0 as of the

years ended December 31, 2015 and 2014, respectively.

Deferred revenue at December 31, 2015 will be realized in the following years

ended December 31,

2016

$

811,227

2017

78,307

2018

298,446

2019

1,200

2020

1,099

$ 1,190,279

Gotham’s revenues were derived primarily from the sale of products and services

rendered  to  real  estate  brokers.    Gotham  recognized  revenues  when  the  services  or

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

Gotham and its customers understood the specific nature and terms of the agreed upon

transactions, and collectability was reasonably assured.

14

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.

Allowance for doubtful accounts was $8,344 and $0 at December 31, 2015 and 2014,

respectively. Bad debt expense of $5,971 and $4,295 was charged to operations for the

years ended December 31, 2015 and 2014, respectively.

Property and equipment and depreciation

Property and equipment are stated at cost.  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 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 as

follows:

Office equipment and fixtures

5 - 7 years

Computer hardware

5 years

Computer software

3 years

Development equipment

5 years

Depreciation expense of $4,917 and $4,766 was charged to operations for the

years ended December 31, 2015 and 2014, respectively.

Goodwill

Goodwill  represents  the  excess  of  liabilities  assumed  over  assets  acquired  of

ArcMail and the fair market value of the common shares issued by the Company for the

acquisition of ArcMail. In accordance with ASC Topic No. 350 “Intangibles – Goodwill

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

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

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

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

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

15

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

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

impairment. As the acquisition of ArcMail occurred on November 4, 2015, it is too early

for management to evaluate whether goodwill has been impaired.   No impairment was

recorded during the year ended December 31, 2015.

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,  we  adopted  the  2006  Long-Term  Incentive  Plan  (the  "2006  Plan").

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

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

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

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

2015, 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 years ended December 31, 2015 and 2014 follows:

16

Weighted

Average

Weighted

Remaining

Weighted

Average

Average

Contractual

Options

Grant-Date

Life

Outstanding

Exercise Price

Fair Value

(Years)

Options outstanding at

December 31, 2013

668,900

$

0.06

$

0.10

4.69

Options granted

850,000

0.04

0.10

Options outstanding at

December 31, 2014

1,518,900

0.03

0.10

4.76

Options granted

200,000

0.01

0.10

Options outstanding at

December 31, 2015

1,718,900

$

0.03

$

0.13

3.82

Options outstanding at December 31, 2015 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

March 24, 2015

200,000

200,000

$0.01

March 24, 2020

Total

1,718,900

1,718,900

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.

Warrant activity during the years ended December 31, 2015 and 2014 follows:

17

Weighted

(1)Weighted

Weighted

Average Grant-

Average

Date

Remaining

Warrants

Average

Contractual

Outstanding

Exercise Price

Fair Value

Life (Years)

Warrants outstanding

at December 31, 2013

275,000

$

0.94

$

0.10

5.42

No warrant activity

--

--

--

Warrants outstanding

at December 31, 2014

275,000

$

0.94

$

0.10

4.42

No warrant activity

--

--

--

Warrants outstanding

at December 31, 2015

275,000

$

0.94

$

0.10

3.42

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

Warrants outstanding at December 31, 2015 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

Convertible Note

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

principal amount of $103,500, convertible into shares of tour 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 our 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 year ended December 31, 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 has 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 year ended December 31, 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.

18

Derivative Liability

Convertible Note

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

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

the market price of our common stock. We have 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. 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 year ended December 31, 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.

Stock Transactions

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   Capitalization

Amendments.

19

Common Stock Issued

In connection with the acquisition of Wala, Inc. we issued 11,500,000 common

shares valued at $.10 per share to the president and CEO of Wala, Inc. on November 4,

2015.

We issued 1,000,000 and 600,000 common shares for services, valued at $.20 per

share on August 3, 2015 and May 18, 2015, respectively.

In connection with the convertible note payable the note holder converted $49,000

of the principal  balance to 1,539,934 shares of common stock during the  year ended

December 31, 2014. The stock issued was determined based on the  terms of  the

convertible note.

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’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,  of  Wala,  Inc.  doing business  as  ArcMail  Technology  (ArcMail)  is  in  the

business of providing simple, secure and cost-effective We are focused on expanding the

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

Year Ended December 31, 2015 as Compared to Year Ended December 31, 2014

Assets. At December 31, 2015, we had $890,686 in current assets and $7,637,996

in total assets, compared to $276,398 in current assets and $280,786 in total assets as of

December 31, 2014. The increase in total assets was primarily due to an increase in

goodwill, inventories, accounts receivable and prepaid expenses from the purchase of the

ArcMail business, and an increase in assets from discontinued operations as a result of

the sale of Gotham in 2015.

20

Liabilities. At December 31,   2015,   we   had   total   liabilities   of $6,076,680

compared to $285,277 at December 31, 2014. Our total liabilities at December 31, 2015

consisted of current liabilities including accounts payable and accrued expenses of

$636,633, accrued interest on notes payable of $302,278, Notes payable of $779,750,

Notes Payable to a related party of $156,566, liabilities from discontinued operations of

$127,353  and  deferred  revenue  of $811,227, and  long-term liabilities  including notes

payable of $2,339,251, notes payable to a related party of $469,699 and deferred revenue

of  $379,052,  whereas  our  total  liabilities  at  December  31,  2014  consisted  of  current

liabilities including accounts payable of $91,177 and liabilities from discontinued

operations of $194,100. We had no long term liabilities for the year ended December 31,

2014. The increase in liabilities was primarily due to the liabilities assumed in the

purchase of the ArcMail business.

Stockholders’   Equity   (Deficiency). Our   Stockholders’   Equity   was   $1,561,316   at

December 31, 2015 compared to Stockholders’ Deficiency of $(4,491) at December 31,

2014. This increase was due to the common shares issued in the purchase of the ArcMail

business and a decrease in accumulated deficit from $(2,882,199) at December 31, 2014

to $(2,798,390) at December 31, 2015 resulting from net income of $83,809 for the year

ended December 31, 2015 compared to net loss of $684,342 for the year ended December

31, 2014

Revenue  and  Net  Income . We  had  revenue  of  $474,679  for  the  year  ended

December 31, 2015, compared to revenue of $1,068,617 for the year ended December 31,

2014. The decrease in revenue was due primarily to the sale of the Gotham business and

purchase of the ArcMail business in November 2015.   We had no other income for the

year ended December 31, 2015 compared to other income of $84,701 for the year ended

December  31,  2014  primarily due  to  the  gain  on  derivative  liability of  $152,076.  In

addition to ArcMail’s operations, we had income from discontinued operations of

$627,384 and $17,531 for the year ended December 31, 2015 and December 31, 2014,

respectively.

General  and  Administrative  Expenses . General  and  Administrative  Expenses

decreased to $965,609 for the year ended December 31, 2015 from $1,383,646 for the

year ended December 31, 2014. For the year ended December 31, 2015 our General and

Administrative Expenses consisted of corporate administrative expenses of $73,308, legal

and accounting fees of $165,041, payroll expenses of $330,671, Directors and Officers

Insurance   of   $42,206,   employee   benefits   expenses   of   $22,385   (medical,   dental,

retirement plan, and life insurance) and $331,998 in stock based compensation expense.

For the year ended December 31, 2014 our General and Administrative Expenses

consisted of corporate administrative expenses of $292,096, legal and accounting fees of

$111,477, payroll expenses of $731,606, Directors and Officers Insurance of $43,754,

employee benefits expenses of $74,975 (medical, dental, retirement plan, and life

insurance), $74,664 in stock based compensation expense,    and a bad debt write off of

$55,074. Therefore the decreases from the year ended December 31, 2014 to the year

ended December 31, 2015 relate primarily to a decrease in payroll and employee benefits

expenses.  In  the  event  the  company effectuates  an  acquisition  in  2016  we  anticipate

additional professional fees associated with the acquisition.

21

LIQUIDITY AND CAPITAL RESOURCES

General

As reflected in the accompanying consolidated financial statements, at December

31, 2015, we had $131,987 of cash and stockholders’ equity of $1,561,316.  At December

31, 2014, we had $126,833 of cash and stockholders’ deficit of $(4,491).

Our primary capital requirements in 2016 are likely to arise from the expansion of

our  ArcMail  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 ArcMail’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  ArcMail’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 $44,907 for the year ended

December 31, 2015, compared to $159,202 for the year ended December 31, 2014. Net

cash used by continuing operating activities was $451,023 for the year ended December

31, 2015, compared to $491,127 for the year ended December 31, 2014. Our primary

source of operating cash flows from continuing operating activities for the year ended

December 31, 2015 was from our ArcMail subsidiary’s revenues of $466,628 and  for the

year ended December 31, 2014 our primary source of operating cash flows from

continuing operating activities was from revenues of $1,068,617 from our Gotham

subsidiary  that  was  sold  in  November  2015.    Additional  contributing  factors  to  the

change were from a decrease in accounts receivable of $56,697, an increase in prepaid

expenses of $199,207, a decrease in accounts payable and accrued expenses of $90,944,

an increase in accrued interest of $47,559 and a decrease in deferred revenue of $64,586,

Net cash provided by discontinued operating activities was $495,930 for the year ended

December 31, 2015 and $650,329 for the year ended December 31, 2014. Cash provided

by discontinued operations for the year ended December 31, 2015 consisted of $495,930

in cash payments received from VHT Inc. pursuant to the VHT  Purchase Agreement.

22

Cash provided by investing activities was $11,524 for the year ended December 31,

2015 and cash used by investing activities was $4,739 for the year ended December 31,

2014. For the year ended December 31, 2015 the primary source of cash from investing

activities was cash from the subsidiary acquisitions and a decrease in deposits.   For the

year ended December 31, 2014 the primary source of cash used by investing activities

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

$2,713.

Cash used by financing activities was $(51,277) for the year ended December 31,

2015  compared  to  cash  used  by financing activities  of  $(54,500)  for  the  year  ended

December  31,  2014.  The  cash  flows  used  by financing  activities  for  the  year  ended

December  31,  2015  was  primarily from  repayment  of  stockholders  loans  and  a  note

payable. The cash flows used by financing activities for the year ended December 31,

2014 was primarily from repayment of the convertible note payable.

Supplemental Cash Flow Activity

In the year ended December 31, 2015 the  company  paid interest of $3,146

compared to interest of $10,033 in the year ended December 31, 2014.

OFF BALANCE SHEET ARRANGEMENTS

We have no off balance-sheet arrangements.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT

MARKET RISK

Not Required.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

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

on page F-1, as follows:

Report of Independent Registered Public Accounting Firm

F-1

Consolidated Balance Sheet as of December 31, 2014 and 2013

F-3

Consolidated Statement of Income for the years ended December 31, 2014 and

F-4

2013

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

F-5

December 31, 2014 and 2013

Consolidated Statement of Cash Flows for the years ended December 31, 2014

F-6

and 2013

Notes to Financial Statements

F-7

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON

23

ACCOUNTING AND FINANCIAL DISCLOSURE

None.

ITEM 9A. CONTROLS AND PROCEDURES

Conclusion Regarding the Effectiveness of Disclosure Controls and Procedures

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

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

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

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

15d-15(e) under the Exchange Act as of December 31, 2015. Based upon that evaluation,

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

controls and procedures were effective as of December 31, 2015.

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

We  are  responsible  for  establishing  and  maintaining  adequate  internal  control

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

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

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

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

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

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

statements for external purposes in accordance with generally accepted accounting

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

procedures that:

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

and fairly reflect the transactions and dispositions of our assets;

§ Provide reasonable assurance that transactions are recorded as necessary

to permit preparation of financial statements in accordance with generally

accepted accounting principles, and that our receipts and expenditures are

being made only in accordance with authorizations of our management

and our directors; and

§ Provide reasonable assurance regarding prevention or timely detection of

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

material effect on the financial statements.

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

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

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

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

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

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

with the policies or procedures may deteriorate.

24

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

over   financial   reporting   as   of   December 31, 2015.   In   making   this   assessment,

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

issued  by the  Committee  of  Sponsoring  Organizations  of  the  Treadway  Commission

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

2015, our internal control over financial reporting was effective.

Change in Internal Controls

During the quarter ended December 31, 2015, there were no changes in our

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

to materially affect, our internal control over financial reporting.

ITEM 9B. OTHER INFORMATION

None.

PART III

ITEM 10. DIRECTORS , EXECUTIVE OFFICERS AND CORPORATE

GOVERNANCE

DIRECTORS AND EXECUTIVE OFFICERS

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

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

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

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

executive officers are set forth below.

Name

A ge

Position

Appointed

John Salerno

77     Chief Executive Officer, President, March 2009

Chairman of the Board, and

(appointed Chairman

Director

and Director in

April 2000)

Elisa Luqman

51     Chief Financial Officer, Executive     March 2009

Vice President, General Counsel,

(appointed Director

and Director

in August 2009)

James J. Charles

73     Director

March 2006

George G. Dempster

76     Director

January 2001

John Keefe

73     Director

July 2013

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

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

experience with public and private computer software and service companies.

25

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

are a benefit to Gotham.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

daughter.

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

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

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

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

26

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

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

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

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

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

outside auditors and legal advisors.

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

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

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

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

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

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

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

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

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

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

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

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

studies   and   management   programs   at   Harvard   University and   Williams   College.

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

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

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

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

analyzing potential acquisition targets for corporate clients and has particular experience

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

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

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

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

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

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

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

a diversified holding company with interests ranging from helicopter services to

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

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

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

University.

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

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

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

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

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

Hofstra   University   Mr. Dempster   was   intimately   involved   in   several   financing

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

27

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

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

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

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

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

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

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

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

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

Nachman   Hays   Brownstein   is   a   national   turnaround   management   firm,   assisting

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

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

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

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

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

Business School.

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

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

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

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

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

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

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

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

appropriate financing vehicles.

COMMITTEES OF THE BOARD

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

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

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

Audit Committee

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

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

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

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

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

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

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

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

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

28

Compensation Committee

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

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

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

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

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

with  outside  compensation  consultants.  The  Compensation  Committee  has  adopted  a

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

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

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

to the Company under Rule 16a-3(e) under the Exchange Act during its most recent fiscal

year and Forms 5 and amendments thereto furnished to the Company with respect to its

most recent fiscal year, and any written representation to the Company from the reporting

person that no Form 5 is required, no person who, at any time during the fiscal year, was

a director, officer, beneficial owner of more than ten percent of the Company’s Common

Stock, or any other person known to the Company to be subject to section 16 of the

Exchange Act with respect to the Company, failed to file on a timely basis, as disclosed

in the above Forms, reports required by section 16(a) of the Exchange Act during the

most recent fiscal year or prior fiscal years, except as described below:

Name

No. of Late Reports

No. of transactions

Failure to file a

that were not

required Form

reported on a timely

basis

Rory T Welch

1

1

0

CODE OF ETHICS

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

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

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

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

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

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

ITEM 11. EXECUTIVE COMPENSATION

Summary Compensation Table

The following table sets forth the compensation received by our executive

officers, for their service, during the year ended December 31, 2015.

29