NUTX 10-Q Quarter ended March 31, 2012

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-Q

(Mark One)

þ

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

SECURITIES EXCHANGE ACT OF 1934

For the Quarterly period ended March 31, 2012

o

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

EXCHANGE ACT

For the transition period from

to

Commission file number 000-53862

iGambit Inc.

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

Delaware

11-3363609

(State or other jurisdiction of

(I.R.S. Employer

incorporation or organization)

Identification No.)

1050 W. Jericho Turnpike, Suite A

Smithtown, New York 11787

(Address of Principal Executive Offices) (Zip Code)

(631) 670-6777

(Issuer’s Telephone Number, Including Area Code)

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

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

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

the past 90 days. Yes þ No o

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

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

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

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

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

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

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

Large accelerated Accelerated filer

Non-accelerated filer o

Smaller reporting

filer o

o

company þ

(Do not check if a smaller reporting company)

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange

Act). Yes o No þ

The Registrant had 23,954,056 shares of its common stock outstanding as of May 14, 2012.

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iGambit Inc.

Form 10-Q

Page No.

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

14

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

18

Item 4.

Controls and Procedures

18

Part II — Other Information

19

Item 1.

Legal Proceedings

19

Item 1A.

Risk Factors

19

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

19

Item 3.

Defaults upon Senior Securities

19

Item 4.

Removed and Reserved

19

Item 5.

Other Information

19

Item 6.

Exhibits

20

EX-31.1

EX-31.2

EX-32.1

EX-32.2

i

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PART I — FINANCIAL INFORMATION

IGAMBIT INC.

CONSOLIDATED BALANCE SHEETS

MARCH 31,

DECEMBER 31,

2012 (Unaudited)

2011

ASSETS

Current assets

Cash

$

216,162

$

224,800

Accounts receivable, net

211,660

269,353

Prepaid expenses

43,635

58,649

Notes receivable

434,512

434,512

Notes receivable - stockholder

17,000

17,000

Deferred income taxes

285,441

184,185

Assets from discontinued operations

420,590

570,590

Total current assets

1,629,000

1,759,089

Property and equipment, net

22,886

18,563

Other assets

Goodwill

111,026

111,026

Deposits

2,070

2,500

Total other assets

113,096

113,526

$

1,764,982

$

1,891,178

LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities

Accounts payable

$

298,359

$

263,195

Note payable - related party

22,265

25,390

Loan payable - stockholder

5,300

--

Total current liabilities

325,924

288,585

Stockholders' equity

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

issued and outstanding - 23,954,056 shares, respectively

23,954

23,954

Additional paid-in capital

2,403,090

2,403,090

Accumulated deficit

(987,986)

(824,451)

Total stockholders' equity

1,439,058

1,602,593

$

1,764,982

$

1,891,178

1

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IGAMBIT INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

THREE MONTHS ENDED MARCH 31,

(Unaudited)

2012

2011

Sales

$

480,348

$

411,903

Cost of sales

255,038

130,221

Gross profit

225,310

281,682

Operating expenses

General and administrative expenses

496,941

452,399

Loss from operations

(271,631)

(170,717)

Other income

Interest income

6,840

7,235

Loss from continuing operations before income tax

(264,791)

(163,482)

Income tax expense (benefit)

(101,256)

(49,217)

Loss from continuing operations

(163,535)

(114,265)

Income from discontinued operations (net of taxes of $82,314

and reserve for bad debts of $250,000)

--

159,785

Net (loss) income

$

(163,535)

$

45,520

Basic and fully diluted earnings (loss) per common share:

Continuing operations

$

(.01)

$

(.01)

Discontinued operations, net of tax

$

--

$

.01

Net earnings per common share

$

(.01)

$

.00

Weighted average common shares outstanding

23,954,056

23,954,056

2

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IGAMBIT INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

THREE MONTHS ENDED MARCH 31,

(Unaudited)

2012

2011

CASH FLOWS FROM OPERATING ACTIVITIES:

Net (loss) income

$

(163,535)

$

45,520

Adjustments to reconcile net (loss) income to net

cash used by operating activities

Income from discontinued operations

--

(159,785)

Depreciation

2,124

672

Deferred income taxes

(101,256)

--

Increase (Decrease) in cash flows as a result of

changes in asset and liability account balances:

Accounts receivable

57,693

(113,616)

Prepaid expenses

15,014

140,365

Accounts payable

35,164

(86,219)

Net cash used by continuing operating activities

(154,796)

(173,063)

Net cash provided (used) by discontinued operating activities

150,000

(82,314)

NET CASH USED BY OPERATING ACTIVITIES

(4,796)

(255,377)

CASH FLOWS FROM INVESTING ACTIVITIES:

Purchases of property and equipment

(1,147)

(3,242)

Decrease in deposits

430

--

Net cash used by continuing investing activities

(717)

(3,242)

Net cash provided by discontinued investing activities

--

150,000

NET CASH (USED) PROVIDED BY INVESTING ACTIVITIES

(717)

146,758

NET CASH USED BY FINANCING ACTIVITIES:

Repayment of loans from shareholders

(3,125)

--

NET DECREASE IN CASH

(8,638)

(108,619)

CASH - BEGINNING OF PERIOD

224,800

465,549

CASH - END OF PERIOD

$

216,162

$

356,930

SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:

Cash paid during the period for:

Interest

$

924

$

848

Income taxes

4,125

13,940

Non-cash investing and financing activities:

Property and equipment purchased through loan from stockholder

$

5,300

$

--

3

---

IGAMBIT INC.

Notes to Consolidated Financial Statements

Three Months Ended March 31, 2012 and 2011

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 22, 2000 before changing to

iGambit Inc. on July 18, 2006.   Gotham was incorporated under the laws of the state of New York on

September 23, 2009.

In the opinion of management, the accompanying interim financial statements reflect all adjustments

(consisting of normal recurring accruals) necessary to present fairly the financial position and the results

of operations and cash flows for the interim periods presented. The results of operations for these interim

periods are not necessarily indicative of the results to be expected for the year ending December 31, 2012.

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 receives payments from Digi-Data based on 10% of the net vaulting revenue payable quarterly

over five years. The Company is also entitled to an additional 5% of the increase in net vaulting revenue

over the prior year’s revenue. These adjustments to the sales price are included in the discontinued

operations line of the statements of operations.

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

discontinued  operations”.    The  underlying  assets  of  the  discontinued  operations  consist  of  accounts

receivable of $420,590 and $570,590 as of March 31, 2012 and December 31, 2011, respectively.

Accounts Receivable

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

bad debts of $250,000 was charged to operations for the year ended December 31, 2010. No reserve for

bad debts was charged to operations for the three months ended March 31, 2012.

4

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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 significant 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 reporting amounts of assets and

liabilities and disclosure of contingent assets and liabilities at the date of the 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.

Revenue Recognition

Contingency payment income was recognized quarterly from a percentage of Digi-Data’s vaulting service

revenue, and is included in discontinued operations.

The Company’s revenues from continuing operations consists of revenues primarily from sales of

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

products or services.

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 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 current creditworthiness of each customer, current

and historical collection history and the related aging of past due balances. The Company evaluates

specific accounts when it becomes aware of information indicating that a customer may not be able to

meet its financial obligations due to deterioration of its financial condition, lower credit ratings,

bankruptcy or other factors affecting the ability to render payment.   There was no bad debt expense

charged to operations for the three months ended March 31, 2012 and 2011, respectively.

5

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Prepaid Expenses

Prepaid expenses consist of the following:

March 31,

December 31,

2012

2011

Prepaid state income taxes    $

22,379    $

31,758

Prepaid insurance

15,756

26,891

Prepaid rent

5,500

--

$

43,635    $

58,649

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. During the three months ended March 31, 2012, the Company purchased

furniture and computer equipment totaling $6,447. Computer equipment is depreciated over 5 years and

furniture and fixtures are depreciated over 7 years. Maintenance and repairs are charged to expense when

incurred.    When  property  and  equipment  are  retired  or  otherwise  disposed  of,  the  related  cost  and

accumulated depreciation are removed from the respective accounts and any gain or loss is credited or

charged to income.

Depreciation expense of $2,124 and $672 was charged to operations for the three months ended March

31, 2012 and 2011, respectively.

Goodwill

Goodwill  represents  the  fair  market  value  of  the  common  shares  issued  and  common  stock  options

granted by the Company for the acquisition of Jekyll by the  Company’s  subsidiary, Gotham. In

accordance with ASC Topic No. 350 “Intangibles – Goodwill and Other”), the goodwill is not 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 carrying amount,

an impairment loss is charged to expense in the period identified. A lack of projected future operating

results from Gotham’s operations may cause impairment.     At December 31, 2011, the Company

performed an impairment study and determined that there is no indication that present and future cash

flows are not expected to be sufficient to recover the carrying amount of goodwill.  The Company has not

performed an impairment study during the three months ended March 31, 2012.  Based on the Company’s

evaluation of goodwill, no impairment was recorded during the three months ended March 31, 2012.

Stock-Based Compensation

The Company accounts for its stock-based 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

6

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vest.  The Company uses the Black-Scholes option valuation model to estimate the fair value of its 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 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.

Note 4 – Notes Receivable

In connection with a letter of intent the Company entered into with Allied Airbus, Inc. (“Allied”) on July

20, 2010 to which both parties were unable to reach a mutually acceptable definitive agreement, the

Company provided various loans to Allied totaling $434,512 at March 31, 2012, for which promissory

notes were issued. The notes are personally guaranteed by the officers of Allied, bear interest at a rate of

6% and are due in one year. As of March 31, 2012, all of the notes became past due. On November 1,

2011, the Company commenced litigation against Allied for nonpayment of the note principal balances

and interest, as discussed in Note 13.

Accrued interest on the notes was $6,482 and $6,983 for the three months ended March 31, 2012 and

2011, respectively.

Note 5 - Earnings Per Common Share

The Company calculates net earnings (loss) per common share in accordance with ASC 260 “ Earnings

Per Share” (“ASC 260”). Basic and diluted net earnings (loss) per common share was determined by

dividing  net  earnings  (loss)  applicable  to  common  stockholders  by  the  weighted  average  number  of

common shares outstanding during the period. The Company’s potentially dilutive shares, which include

outstanding common stock options and common stock warrants, have not been included in the

computation of diluted net earnings (loss) per share for all periods as the result would be anti-dilutive.

Three Months Ended

March 31,

2011

2011

Stock options

2,768,900

2,468,900

Common stock warrants

275,000

3,085,000

Total shares excluded from calculation

3,043,900

5,553,900

7

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Note 6 – Stock Based Compensation

Stock-based compensation expense for all stock-based award programs, including grants of stock options

and warrants, is recorded in accordance with " Compensation—Stock Compensation", Topic 718 of the

FASB  ASC.  Stock-based  compensation  expense,  which  is  calculated  net  of  estimated  forfeitures,  is

computed using the grant date fair-value method on a straight-line basis over the requisite service period

for all stock awards that vest during the period. The grant date fair value for stock options is calculated

using the Black-Scholes option valuation 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  and  the  expected  dividends.  Stock-based  compensation  expense  is

reported  under  general  and  administrative  expenses  on  the  accompanying  consolidated  statements  of

operations.

In 2006, the Company adopted the 2006 Long-Term Incentive Plan (the "2006 Plan"). Awards granted

under the 2006 plan have a ten-year term and may be incentive stock options, non-qualified stock options

or warrants. The awards are granted at an exercise price equal to the fair market value on the date of grant

and generally vest over a three or four year period. Effective January 1, 2006, the Company recognized

compensation expense ratably over the vesting period, net of estimated forfeitures. As of March 31, 2012,

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

arrangements granted under the 2006 plan.

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

stock.  8,822,000 options have been issued or exercised to date.  There are 8,617,520 options outstanding

under the 2006 Plan.

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

Weighted

Average

Weighted

Remaining

Average

Average

Contractual

Grant-Date

Life

Warrants

Exercise Price

Fair Value

(Years)

Warrants outstanding at

January 1, 2012

275,000

$

0.94

$

0.10

No warrant activity

--

--

--

Warrants outstanding at

March 31, 2012

275,000

$

0.94

$

0.10

1.02

Stock Option Plan activity during the three months ended March 31, 2012 follows:

8

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Weighted

Average

Weighted

Remaining

Average

Average

Contractual

Grant-Date

Life

Options

Exercise Price

Fair Value

(Years)

Options outstanding at

January 1, 2012

2,768,900

$

0.04

$

0.10

No option activity

--

--

--

Options outstanding at

March 31, 2012

2,768,900

$

0.04

$

0.10

6.60

The fair value of warrants and options granted is estimated on the date of grant based on the weighted-

average assumptions in the table below.  The assumption for the expected life is based on evaluations of

historical and expected exercise behavior.  The risk-free interest rate is based on the U.S. Treasury rates at

the date of grant with maturity dates approximately equal to the expected life at the grant date.  The

calculated value method using the historical volatility of the Computer Services industry is used as the

basis for the volatility assumption.

Three months ended March 31,

__2012__

__2011__

Weighted average risk-free rate

0.64%

1.89%

Average expected life in years

5.0

4.6

Expected dividends

None

None

Volatility

44%

36%

Forfeiture rate

0%

0%

Note 7 - Income Taxes

The tax provision at March 31 consists of the following:

2012

2011

From operations:

Continuing operations:

Current tax expense (benefit):

Federal

$    (  81,524)    $    (54,046)

State and local

( 19,732)

4,829

Total from continuing operations

(101,256)

(49,217)

Discontinued operations:

Current tax expense (benefit)

Federal

--

82,314

State and local

--

--

Total from discontinued operations

--

82,314

Total

$    (101,256)    $

33,097

9

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A reconciliation of the statutory federal income tax rate and the effective tax rate follows:

Three Months Ended

March 31,

2012

2011

Statutory tax rate

34.0%     34.0%

Effect of:

State income taxes, net of

Federal income tax benefit

(2.1)%    6.1%

Tax effect of expenses that are not

Deductible for income tax purposes    (0.6)%    1.0%

Effective tax rate

31.3%     42.1%

The Company recognizes deferred tax assets and liabilities based on the future tax consequences of events

that have been included in the financial statements or tax returns. The differences relate primarily to net

operating  loss  carryovers.    Deferred  tax  assets  and  liabilities  are  calculated  based  on  the  difference

between the financial reporting and tax bases of assets and liabilities using the currently enacted tax rates

in effect during the years in which the differences are expected to reverse.  Deferred taxes are classified as

current or non-current, depending on the classification of the assets and liabilities to which they relate.

The Company’s provision for income taxes differs from applying the statutory U.S. federal income tax

rate to income before income taxes. The primary differences result from providing for state income taxes

and from deducting certain expenses for financial statement purposes but not for federal income tax

purposes.

In accordance with ASC Topic No. 740, Income Taxes, a valuation allowance is established based on the

future recoverability of deferred tax assets. 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. Management has determined that no valuation allowance

related to deferred tax assets is necessary at March 31, 2012 and December 31, 2011.

Note 8 - Retirement Plan

Gotham has adopted the Gotham Innovation Lab, Inc. SIMPLE IRA Plan, which covers substantially all

employees. Participating employees may elect to contribute, on a tax-deferred basis, a portion of their

compensation in accordance with Section 408 (a) of the Internal Revenue Code. The Company matches

up to 3% of employee contributions.  The Company's contributions to the plan for the three months ended

March 31, 2012 and 2011 were $2,702 and $2,591, respectively.

Note 9 – Significant Customers

Sales of Gotham to three customers amounted to approximately 65% of Gotham’s total sales for the three

months ended March 31, 2012 at 36%, 17%, and 12%, respectively.

10

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Note 10 – Risks and Uncertainties

Uninsured Cash Balances

Substantially all amounts of cash accounts held at financial institutions are insured by the FDIC.

Note 11 - Related Party Transactions

Notes Receivable - Stockholders

The Company provided loans to a stockholder totaling $17,000 at March 31, 2012 and December 31,

2011.  The loans bear interest at a rate of 6% and are due on December 31, 2012.

Accrued interest on the note was $254 and $252 for the three months ended March 31, 2012 and 2011,

respectively.

Note Payable – Related Party

Gotham was provided loans from an entity that is controlled by the officers of Gotham totaling $22,265

and $25,390 at March 31, 2012 and December 31, 2011, respectively. The note bears interest at a rate of

5.5% and is due on December 31, 2012.

Interest expense of $177 and $118 was charged to operations for the three months ended March 31, 2012

and 2011, respectively.

Loan Payable - Stockholder

A stockholder/officer of the Company paid for property and equipment totaling $5,300 on behalf of the

Company.  The loan does not bear interest and will be repaid by December 31, 2012.

Note 12 - Lease Commitment

On February 1, 2012, iGambit entered into a 5 year lease for new executive office space in Smithtown,

New York commencing on March 1, 2012.

Gotham has an operating lease for office space renewable annually on October 16 at a monthly rent of

$5,500.

Total future minimum annual lease payments under the lease for the years ending December 31 are as

follows:

2012

$ 13.500

2013

18,360

2014

18,720

2015

19,080

2016

19,440

$ 89,100

11

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Rent expense of $23,400 and $24,300 was charged to operations for the three months ended March 31,

2012 and 2011, respectively.

Note 13 - Litigation

On  November  1,  2011,  the  Company  commenced  collection  proceedings  against  Allied  Airbus,  Inc.

(“Allied”) for nonpayment of various promissory notes totaling $434,512 at March 31, 2012 in

connection with a letter of intent the Company entered into to acquire the assets and business of Allied, to

which a definitive agreement could not be reached. The claim against Allied includes accrued interest at

the rate of 6%. The Company provided loans to Allied between July 2010 and March 2011 totaling

$541,000, of which $106,488 has been repaid.

Note 14 – Recent Accounting Pronouncements

In  May  2011, the FASB issued  Accounting  Standards Update No. 2011-04, Amendments  to  Achieve

Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRSs (“ASU 2011-

04”), which is intended to result in convergence between U.S. GAAP and International Financial

Reporting Standards requirements for measurement of, and disclosures about, fair value. ASU 2011-04

clarifies or changes certain fair value measurement principles and enhances the disclosure requirements

particularly for Level 3 fair value measurements. This pronouncement is effective for reporting periods

beginning  after  December  15,  2011,  with  early  adoption  prohibited  for  public  companies.  The  new

guidance will require prospective application. The Company will adopt this pronouncement in the first

quarter of 2012 and does not expect its adoption to have a material effect on its financial position or

results of operations.

In December 2010, the FASB issued authoritative guidance regarding when to perform step 2 of the

goodwill  impairment  test  for  reporting  units  with  zero  or  negative  carrying  amounts.  The  guidance

modifies Step 1 of the goodwill impairment test so that for those reporting units with zero or negative

carrying amounts, an entity is required to perform Step 2 of the goodwill impairment test if it is more

likely than not based on an assessment of qualitative indicators that a goodwill impairment exists. In

determining whether it is more likely than not that goodwill impairment exists, an entity should consider

whether there are any adverse qualitative factors indicating that an impairment may exist.  This guidance

is effective for fiscal years, and interim periods within those years, beginning after December 15,

2010.  The Company adopted this standard beginning January 1, 2011, and the adoption did not have a

material impact on the Company’s consolidated financial statements.

In January 2010, the FASB issued ASU No. 2010-6, “ Improving Disclosures About Fair Value

Measurements” , which provides amendments to ASC 820 Fair Value Measurements and Disclosures,

including requiring reporting entities to make more robust disclosures about (1) the different classes of

assets and liabilities measured at fair value, (2) the valuation techniques and inputs used, (3) the activity

in Level 3 fair value measurements including information on purchases, sales, issuances, and settlements

on a gross basis and (4) the transfers between Levels 1, 2, and 3. The standard is effective for annual

reporting periods beginning after December 15, 2009, except for Level 3 reconciliation disclosures, which

are effective for annual periods beginning after December 15, 2010. The Company adopted this standard

beginning January 1, 2011, and the adoption did not have a material impact on the Company’s

consolidated financial statements.

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Note 15 – Subsequent Events

In accordance with FASB ASC 855, Subsequent Events, the Company evaluates events and transactions

that occur after the balance sheet date for potential recognition in the consolidated financial statements.

The effect of all subsequent events that provide additional evidence of conditions that existed at the

balance  sheet  date  are  recognized  in  the  consolidated  financial  statements  as  of  March  31,  2012.  In

preparing these consolidated financial statements, the Company evaluated the events and transactions that

occurred through the date these consolidated financial statements were issued. There were no material

subsequent events that required recognition or additional disclosure in these consolidated financial

statements.

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

FORWARD LOOKING STATEMENTS

This Form 10-Q includes “forward-looking statements” within the meaning of Section 27A of the

Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as

amended. All statements, other than statements of historical facts, included or incorporated by reference

in this Form 10-Q which address activities, events or developments that the Company expects or

anticipates will or may occur in the future, including such things as future capital expenditures (including

the amount and nature thereof), finding suitable merger or acquisition candidates, expansion and growth

of the Company’s business and operations, and other such matters are forward-looking statements. These

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

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

other factors it believes are appropriate in the circumstances.

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

performance and involve significant risks and uncertainties, and that actual results may differ materially

from those projected in the forward-looking statements. Factors that could adversely affect actual results

and performance include, among others, potential fluctuations in quarterly operating results and expenses,

government regulation, technology change and competition. Consequently, all of the forward-looking

statements made in this Form 10-Q are qualified by these cautionary statements and there can be no

assurance that the actual results or developments anticipated by the Company will be realized or, even if

substantially realized, that they will have the expected consequence to or effects on the Company or its

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

statements.

CRITICAL ACCOUNTING ESTIMATES

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

based on our financial statements, which have been prepared in accordance with accounting principles

generally accepted in the United States of America. The preparation of financial statements may require

us to make estimates and assumptions that may affect the reported amounts of assets and liabilities and

the related disclosures at the date of the financial statements. We do not currently have any estimates or

assumptions where the nature of the estimates or assumptions is material due to the levels of subjectivity

and judgment necessary to account for highly uncertain matters or the susceptibility of such matters to

change or the impact of the estimates and assumptions on financial condition or operating performance is

material, except as described below.

Fair Value of Financial Instruments

For certain of the our 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.

Revenue Recognition

Contingency payment income is recognized quarterly from a percentage of Digi-Data’s vaulting

service revenue, and is included in discontinued operations. Our revenues from continuing operations

consist of revenues primarily from sales of products and services rendered to real estate brokers.

Revenues are recognized upon delivery of the products or services.

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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 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 current 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.

As of December 31, 2011, accounts receivable included 50% of contingency payments earned for the

previous  quarter.  Reserve  for  bad  debt  of  $250,000  was  charged  to  operations  for  the  year  ended

December 31, 2010. No reserve for bad debts was charged to operations for the three months ended

March 31, 2012.

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. During the three months ended March 31, 2012, we purchased computer

equipment totaling $6,447. Computer equipment is depreciated over 5 years and furniture and fixtures are

depreciated over 7 years.  Maintenance and repairs are charged to expense when incurred. When property

and equipment are retired or otherwise disposed of, the related cost and accumulated depreciation are

removed from the respective accounts and any gain or loss is credited or charged to income.

Depreciation expense of $2,124 and $672was charged to operations for the three months ended March 31,

2012 and 2011, respectively.

Goodwill

Goodwill represents the fair market value of the common shares issued and common stock options

granted by the Company for the acquisition of Jekyll by the Company’s subsidiary, Gotham. In

accordance with ASC Topic No. 350 “Intangibles — Goodwill and Other”, the goodwill is not 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 carrying amount,

an impairment loss is charged to expense in the period identified. A lack of projected future operating

results from Gotham’s operations may cause impairment.     At December 31, 2011, the Company

performed an impairment study and determined that there is no indication that present and future cash

flows are not expected to be sufficient to recover the carrying amount of goodwill.  The Company has not

performed an impairment study during the three months ended March 31, 2012.  Based on the Company’s

evaluation of goodwill, no impairment was recorded during the three months ended March 31, 2012.

Stock-Based Compensation

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We account for our stock-based 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.

INTRODUCTION

iGambit is a company focused on the technology markets. Our sole operating subsidiary, Gotham

Innovation Lab, Inc., is in the business of providing media technology services to the real estate industry.

During the year ended December 31, 2011 and during the three months ended March 31, 2012 Gotham

produced approximately $1,623,654 and $446,504 of revenue, respectively. We are focused on expanding

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

Gotham has several proposals outstanding to franchisees of one of its main customers, as well as other

potential new clients. In addition to Gotham’ s operations,  during the year ended December 31, 2011 and

during the three months ended March 31, 2012 we earned $160,250   and  $33,844 in technical consulting

fees.  We also received Quarterly Revenue Share Payments and Annual Increase Payments from Digi-

Data Corporation, which were payable pursuant to the terms of an agreement under which we sold certain

assets to DDC in 2006. We earned $247,860   of Contingency Payments from DDC in the year ended

December 31, 2011.  We expect the balance of the amounts due to be paid during 2012.  The agreement

with DDC ended on February 28, 2011. We are also focused on acquiring or partnering with additional

technology companies.

Assets. At March 31, 2012, we had $1,764,982 in total assets, compared to $1,891,178 at December

31, 2011. The decrease in total assets was primarily due to the decrease in cash as a result of the receipt of

decreased contingency payments from DDC.

Liabilities. At March 31, 2012, our total liabilities were $325,924 compared to $288,585 at December

31, 2011. Liabilities consist of accounts payable and a note payable to a related party. We do not have any

long term liabilities.  The increase in liabilities was due to an increase in accounts payable.

Stockholders’  Equity. Our  stockholders’  equity  decreased  to  $1,439,058 at  March  31,  2012  from

$1,602,593 at December 31, 2011. This decrease was primarily due to an increase in accumulated deficit

from $(824,451) at December 31, 2011 to $(987,986) at March 31, 2012, resulting from the end of the

contingency payments from Digi-Data Corp.

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THREE MONTHS ENDED MARCH 31, 2012 AS COMPARED TO THREE MONTHS ENDED

MARCH 31, 2011

Revenues and Net Income . We had $480,348 of revenue during the three months ended March 31,

2012, as compared to revenue of $411,903 during the three months ended March 31, 2011. The increase

was  primarily due to revenue generated by our acquired subsidiary Gotham of $446,504 .  We also had

income  from technology consulting services of $33,844 for the three months ended March 31, 2012..In

addition, we had no income from discontinued operations  for the three months ended March 31, 2012,

compared to income of $159,785 and net income  of $45,520 for the three months ended March 31, 2011.

Our increase in revenue was offset by General and Administrative expenses as well as  a decrease in

income from discontinued operations.  Our decrease in income from discontinued operations was due to

the agreement with DDC ending on February 28, 2011.

General and Administrative Expenses . General and Administrative Expenses increased to $496,941

for the three months ended March 31, 2012 from $452,399 for the three months ended March 31, 2011.

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

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

expenses of $18,294, consulting fees of $14,756 and payroll expenses of $299,778. The increases from

the three months ended March 31, 2011 to the three months ended March 31, 2012 relate primarily to:

(i) professional costs associated with the preparation and filing of a registration statement with the SEC;

and (ii) 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.

LIQUIDITY AND CAPITAL RESOURCES

General

As reflected in the accompanying consolidated financial statements, at March 31, 2012, we had

$216,162 of cash and stockholders’ equity of $1,439,058. At March 31, 2012 we had $1,764,982 in total

assets, compared to $1,891,178 at December 31, 2011.

Our primary capital requirements in 2012 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.

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Cash Flow Activity

Net cash used by operating activities was $4,796 for the three months ending March 31, 2012,

compared to net cash used by operating activities of $255,377 for the three months ending March 31,

2011. Our primary source of operating cash flow from continued operating activities for the three months

ending March 31, 2012 was from our Gotham subsidiary’s revenues of $446,504, compared to revenues

of $411,903  and  a  net  income  of  $45,520  for  the  three  months  ended  March  31,  2011.   Additional

contributing factors to the change were a decrease in accounts receivables of $57,693, prepaid expenses

of $17,014, an increase in accounts payable of $35,164, and deferred income taxes of $(101,256). Net

cash provided by discontinued operating activities was $150,000 for the three months ending March 31,

2012 and cash (used) by discontinued operations was $(82,314) for the three months ending March 31,

2011. The $150,000 provided from discontinued operations for the three months ending March 31, 2012

was a decrease in the DDC accounts receivable. For the three months ending March 31, 2011, the primary

source of cash flow from operating activities was net income of $45,520 and income from discontinued

operations  of $163,588  (net  of  taxes  of  $82,314).  The  agreement  with  DDC  ended  on  February  28,

2011. Revenue earned from DDC totaled $247,860 during the three months ending March 31, 201.1

Of the $247,860 revenue earned from DDC in the three months ending March 31, 2011 we received

$150,000  in  cash  payments  from  DDC  all  of  which  was  for  the  second  quarter  2010  Contingency

Payment. Additionally $92,099 was offset by an increase in the accounts receivable included in Assets

from Discontinued Operations.

Cash used  by investing activities was $(717) for the three months ending March 31, 2012

compared to cash provided by investing activities of  $146,758 for the three months ending March 31,

2011.   The entire source of cash provided by investing activities for the three months ending March 31,

2011 is the DDC contingency payments classified as cash flows from discontinued investing activities.

Cash used  by financing activities was $(3,125) for the three months ending  March 31, 2012 and $0

for the three months ending  March 31, 2011 .  The cash used by financing activities in the first three

months of 2012 was a repayment of a loan payable to a shareholder.

Supplemental Cash Flow Activity

In the three months ending March 31, 2012 the company paid income taxes of $4,125 compared to

$13,940 for the three months ending March 31, 2011. The decrease in taxes was due to a net loss in 2012.

The Company also paid interest of $924during the first three months of 2012 compared to $848 for the

first three months of 2011.

Item 3. Quantitative and Qualitative Disclosures about Market Risk.

Not Required.

Item 4. Controls and Procedures.

Conclusion Regarding the Effectiveness of Disclosure Controls and Procedures

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

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

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

procedures, as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act as of December 31,

2011. Based upon that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that

our disclosure controls and procedures were effective as of March 31, 2012.

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Change in Internal Controls

There were no changes in our internal controls over financial reporting during the first fiscal

quarter of 2012 that have materially affected, or are reasonably likely to materially affect, our internal

controls over financial reporting.

PART II — OTHER INFORMATION

Item 1. Legal Proceedings.

On November 1, 2011, we filed a lawsuit in the Circuit Court in and for Broward County, Florida,

asserting claims against Allied Airbus, Inc. ( as "Borrower") and Michael Polo, Kishore Taneja and

Alberto Gonzalez (collectively, as "Guarantors") for monetary damages arising from the breach of

multiple promissory notes owed by Borrower to  us and to enforce guaranty agreements executed by

Guarantors to secure payment of the promissory notes.    On or about January 20, 2012,  we filed an

Amended Complaint after additional promissory notes owed by Borrower became due and following

Borrower's and Guarantors' default on payment of same.  In response to the lawsuit, Borrower and

Guarantors Polo and Taneja, filed a counterclaim that was subsequently amended on or about February 9,

2012.  The Amended Counterclaim asserts claims against  us for alleged fraud and for alleged violations

of Florida's deceptive and unfair trade practices act for, amongst other things, the alleged failure to loan

Allied $1,500,000.00 following an alleged prior commitment to do so.

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

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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.)

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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 May 15, 2012.

iGambit Inc.

/s/ John Salerno

John Salerno

Chief Executive Officer

/s/ Elisa Luqman

Elisa Luqman

Chief Financial Officer and Principal

Accounting 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.)