NUTX 10-Q Quarter ended March 31, 2013

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, 2013

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 filer

Accelerated filer

Non-accelerated filer o

Smaller reporting company

o

o

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     25,044,056     shares     of     its     common     stock     outstanding     as     of     July 23,     2013.

iGambit Inc.

Form 10-Q

Page

No.

Part I — Financial Information

Item 1.

Financial Statements:

1

Condensed Consolidated Balance Sheets

1

Condensed Consolidated Statements of Income

2

Condensed Consolidated Statements of Cash Flows

3

Notes to Condensed Consolidated Financial Statements

4

Item 2.

Management’s Discussion and Analysis of Financial Condition and

Results of Operations

15

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

20

Item 4.

Controls and Procedures

20

Part II — Other Information

21

Item. 1

Legal Proceedings

21

Item 1A.

Risk Factors

22

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

22

Item 3.

Defaults upon Senior Securities

22

Item 4.

Removed and Reserved

22

Item 5.

Other Information

22

Item 6.

Exhibits

22

EX-31.1

EX-31.2

EX-32.1

EX-32.2

i

PART I — FINANCIAL INFORMATION

IGAMBIT INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

MARCH 31,

2013

DECEMBER 31,

(Unaudited)

2012

ASSETS

Current assets

Cash

$

49,261

$

104,721

Accounts receivable, net

157,045

158,441

Prepaid expenses

118,494

133,077

Assets from discontinued operations, net

320,590

320,590

Total current assets

645,390

716,829

Property and equipment, net

16,332

17,870

Other assets

Deposits

8,370

11,220

$

670,092

$

745,919

LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities

Accounts payable

$

430,745

$

433,958

Deferred income

130,000

--

Note payable - related party

6,263

6,263

Total current liabilities

567,008

440,221

Stockholders' equity

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

issued and outstanding - 25,044,056 shares, respectively

25,044

25,044

Additional paid-in capital

2,729,000

2,729,000

Accumulated deficit

(2,650,960)

(2,448,346)

Total stockholders' equity

103,084

305,698

$

670,092

$

745,919

1

IGAMBIT INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

THREE MONTHS ENDED MARCH 31,

(UNAUDITED)

2013

2012

Sales

$

362,821

$

480,348

Cost of sales

115,770

255,038

Gross profit

247,051

225,310

Operating expenses

General and administrative expenses

449,665

496,941

Loss from operations

(202,614)

(271,631)

Other income

Interest income

--

6,840

Loss from operations before income tax

(202,614)

(264,791)

Income tax (benefit)

--

(101,256)

Net loss

$

(202,614)

$

(163,535)

Basic and fully diluted loss per common share

$

(.01)

$

(.01)

Weighted average common shares outstanding

25,044,056

23,954,056

2

IGAMBIT INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

THREE MONTHS ENDED MARCH 31,

(UNAUDITED)

2013

2012

CASH FLOWS FROM OPERATING ACTIVITIES:

Net loss

$

(202,614)

$

(163,535)

Adjustments to reconcile net loss to net

cash used in operating activities

Depreciation

1,538

2,124

Deferred income taxes

--

(101,256)

Increase (Decrease) in cash flows as a result of

changes in asset and liability account balances:

Accounts receivable

1,396

57,693

Prepaid expenses

14,583

15,014

Accounts payable

(3,213)

35,164

Deferred income

130,000

--

Net cash used in continuing operating activities

(58,310)

(154,796)

Net cash provided by discontinued operating activities

--

150,000

NET CASH USED IN OPERATING ACTIVITIES

(58,310)

(4,796)

CASH FLOWS FROM INVESTING ACTIVITIES:

Purchases of property and equipment

--

(1,147)

Decrease in deposits

2,850

430

NET CASH PROVIDED BY (USED IN) INVESTING

ACTIVITIES

2,850

(717)

NET CASH USED IN FINANCING ACTIVITIES:

Repayment of loans payable to related party

--

(3,125)

NET DECREASE IN CASH

(55,460)

(8,638)

CASH - BEGINNING OF PERIOD

104,721

224,800

CASH - END OF PERIOD

$

49,261

$

216,162

SUPPLEMENTAL DISCLOSURES OF CASH FLOW

INFORMATION:

Cash paid during the period for:

Interest

$

638

$

924

Income taxes

--

4,125

Non-cash investing and financing activities:

Property and equipment purchased through loan from stockholder

$

--

$

5,300

3

IGAMBIT INC.

Notes to Condensed Consolidated Financial Statements

Three Months Ended March 31, 2013 and 2012

Note 1 - Organization and Basis of Presentation

The   consolidated   financial   statements   presented   are   those   of   iGambit   Inc.,   (the

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

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

2000. The Company was originally incorporated as Compusations Inc. under the laws of

the State of New York on October 2, 1996. The Company changed its name to

BigVault.com Inc. upon changing its state of domicile on April 13, 2000. The Company

changed its name again to bigVault Storage Technologies Inc. on December 21, 2000

before changing to iGambit Inc. on April 5, 2006. Gotham was incorporated under the

laws of the state of New York on  September 23, 2009. The Company is  a holding

company which seeks out acquisitions of operating companies in technology markets.

Gotham is in the business of providing media technology services to real estate agents

and brokers in the New York metropolitan area.

Interim Financial Statements

The following (a) condensed consolidated balance sheet as of December 31, 2012, which

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

consolidated interim financial statements of the Company have been prepared in

accordance with the instructions to Form 10-Q and Rule 8-03 of Regulation S-X.

Accordingly, they do not include all of the information and footnotes required by GAAP

for complete financial statements. In the opinion of management, all adjustments

(consisting of  normal  recurring  accruals)  considered  necessary for a  fair  presentation

have been included. Operating results for the three months ended March 31, 2013 are not

necessarily indicative of results that may be expected for the year ending December 31,

2013. These condensed consolidated financial statements should be read in conjunction

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

December 31, 2012 included in the Company’s Annual Report on Form 10-K, filed with

the Securities and Exchange Commission (“SEC”) on June 20, 2013.

Note 2 – Discontinued Operations

Sale of Business

On February 28, 2006, the Company entered into an asset purchase agreement with Digi-

Data Corporation (“Digi-Data”), whereby Digi-Data acquired the Company’s assets and

its online digital vaulting business operations in exchange for $1,500,000, which was

deposited into an escrow account for payment of the Company’s outstanding liabilities.

In addition, as part of the sales agreement, the Company received payments from Digi-

Data based on 10% of the net vaulting revenue payable quarterly over five years.   The

Company was also entitled to an additional 5% of the increase in net vaulting revenue

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

4

discontinued operations line of the statements of operations for the year ended December

31, 2011, the last year of payments.

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

captions   “Assets   from   discontinued   operations”.      The   underlying   assets   of   the

discontinued operations consist of accounts receivable of $320,590 as of March 31, 2013

and December 31, 2012, respectively.

Accounts Receivable

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

quarters and are stated net of an allowance for bad debts of $250,000.

Note 3 – Summary of Significant Accounting Policies

Principles of Consolidation

The  consolidated financial  statements  include  the  accounts of  the  Company  and its

wholly-owned subsidiary, Gotham Innovation Lab, Inc.  All intercompany accounts and

transactions have been eliminated.

Use of Estimates in the Preparation of Financial Statements

The preparation of financial statements in conformity with generally accepted accounting

principles requires management to make estimates and assumptions that affect the

reported amounts of assets and liabilities and disclosure of contingent assets and

liabilities at the date of the consolidated financial statements and the reported amounts of

revenues and expenses during the period. Actual results could differ from those estimates.

Fair Value of Financial Instruments

For certain of the Company’s financial instruments, including cash and cash equivalents,

accounts receivable, accounts payable, and amounts due to related parties, the carrying

amounts approximate fair value due to their short maturities. Additionally, there are no

assets or liabilities for which fair value is remeasured on a recurring basis.

Revenue Recognition

The Company’s revenues are derived primarily from the sale of products and services

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

services.

Advertising Costs

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

months ended March 31, 2013 and 2012 were $1,989 and $6,889, respectively.

5

Cash and Cash Equivalents

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

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

of three months or less.

Accounts Receivable

The Company analyzes   the collectability of accounts receivable from continuing

operations each accounting period and adjusts its allowance for doubtful accounts

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

of accounts  receivables,  including the  creditworthiness  of each customer,  current  and

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

evaluates  specific  accounts  when  it  becomes  aware  of  information  indicating  that  a

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

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

to render payment. There was no bad debt expense charged to operations for the three

months ended March 31, 2013 and 2012, respectively.

Property and equipment and depreciation

Property and equipment are stated at cost. Depreciation for both financial reporting and

income tax purposes is computed using combinations of the straight line and accelerated

methods over  the estimated lives of the  respective  assets. Computer equipment is

depreciated over 5 years and furniture and fixtures are depreciated over 7 years.

Maintenance  and repairs  are charged  to expense  when incurred.    When property and

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

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

charged to income.

Depreciation  expense  of  $1,538  and  $2,124  was  charged  to  operations  for  the  three

months ended March 31, 2013 and 2012, respectively.

Goodwill

Goodwill represents the excess of the aggregate purchase price over the fair value of the

net assets acquired in a business combination, specifically the acquisition of Jekyll by the

Company’s subsidiary, Gotham. In accordance with ASC Topic No. 350 “Intangibles –

Goodwill  and  Other”,  goodwill  is  not  amortized,  but  instead  is  subject  to  an  annual

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

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

indicators of  impairment are  present and future  cash flows are not expected to be

sufficient  to  recover  the  asset’s carrying  amount,  an  impairment  loss is charged to

expense in the period identified. A lack of projected future operating results from

Gotham’s  operations  may  cause  impairment.    At  December  31,  2012,  the  Company

performed its annual impairment study and determined that present and future cash flows

6

were not expected to be sufficient to recover the carrying amount of goodwill, and the

goodwill was written off.

Stock-Based Compensation

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

compensation plan in accordance  with ASC Topic No. 718-20, Awards Classified as

Equity, which requires the measurement of compensation expense for all share-based

compensation granted to employees and non-employee directors at fair value on the date

of grant and recognition  of compensation expense over the related service period for

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

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

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

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

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

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

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

and warrants.

Income Taxes

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

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

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

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

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

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

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

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

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

financial statement recognition and measurement of a tax position.

Recent Accounting Pronouncements

The Company has reviewed recently issued, but not yet adopted, accounting standards in

order to determine their effects, if any, on its results of operations, financial position or

cash   flows.   Based   on   that   review,   the   Company   believes   that   none   of   these

pronouncements will have a significant effect on its consolidated financial statements.

Note 4 – Deferred Income

As of March 31, 2013, the Company  received $130,000 from IGX Global Inc. in

connection with a rescission agreement dated April 8, 2013, as described in Note 12.

7

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,

2013

2012

Stock options

1,268,900      2,768,900

Common stock warrants

275,000

275,000

Basic Total shares excluded from calculation

1,543,900      3,043,900

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

are expected to vest. The grant date fair value for stock options and warrants is calculated

using the Black-Scholes option pricing model. Determining the fair value of options at

the  grant  date  requires judgment,  including  estimating  the  expected  term  that  stock

options will be outstanding prior to exercise, the associated volatility of the Company’s

common stock, expected dividends, and a risk-free interest rate. Stock-based

compensation  expense  is reported under general  and  administrative expenses in  the

accompanying consolidated statements of operations.

Options

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

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

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

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

four year period. Effective January 1, 2006, the Company began recognizing

compensation expense ratably over the vesting period, net of estimated forfeitures. The

Plan  expired  on  December  31,  2009,  therefore  as  of  March  31,  2013,  there  was  no

unrecognized   compensation   cost   related   to   non-vested   share-based   compensation

arrangements granted under the 2006 plan.

8

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 to date.  There  were  no 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 three months ended March 31, 2013 and 2012 follows:

Weighted

Average

Weighted

Remaining

Weighted

Average

Average

Contractual

Options

Grant-Date

Life

Outstanding

Exercise Price

Fair Value

(Years)

Options outstanding at

December 31, 2011

2,768,900

$

0.04

$

0.10

6.85

No option activity

--

--

--

Options outstanding at

March 31, 2012

2,768,900

$

0.04

$

0.10

6.60

Options outstanding at

December 31, 2012

1,268,900

$

0.08

$

0.10

6.16

No option activity

--

--

--

Options outstanding at

March 31, 2013

1,268,900

$

0.08

$

0.10

5.91

Warrants

In  addition  to  our  2006  Long  Term  Incentive  Plan,  we  have  issued  and  outstanding

compensatory warrants to two consultants entitling the holders to purchase a total of

275,000 shares of our common stock at an average exercise price of $0.94 per share.

Warrants  to  purchase  25,000  shares  of  common  stock  vest  upon  6  months  after  the

Company engages in an IPO, have an exercise price of $3.00 per share, and expire 2

years after the Company engages in an IPO. Warrants to purchase 250,000 shares of

common stock vest 100,000 shares on issuance (June 1, 2009), and 50,000 shares on each

of the following three anniversaries of the date of issuance, have exercise prices ranging

from $0.50 per share to $1.15 per share, and expire on June 1, 2019. The issuance of the

compensatory warrants was not submitted to our shareholders for their approval.

9

Warrant activity during the three months ended March 31, 2013 and 2012 follows:

Weighted

Average

Weighted

Remaining

Weighted

Average

Average

Contractual

Warrants

Grant-Date

Life

Outstanding

Exercise Price

Fair Value

(Years)

Warrants outstanding

at December 31, 2011

275,000

$

0.94

$

0.10

1.06

No warrant activity

--

--

--

Warrants outstanding

at March 31, 2012

275,000

$

0.94

$

0.10

1.02

Warrants outstanding

at December 31, 2012

275,000

$

0.94

$

0.10

.92

No warrant activity

--

--

--

Warrants outstanding

at March 31, 2013

275,000

$

0.94

$

0.10

.88

Options outstanding at March 31, 2013 consist of:

Date

Number

Number

Exercise

Expiration

Issued

Outstanding

Exercisable

Price

Date

May 1, 2006

100,000

100,000

$0.01

May 1, 2016

May 1, 2006

100,000

100,000

$0.01

May 1, 2016

May 1, 2006

50,000

50,000

$0.01

May 1, 2016

May 1, 2006

46.900

46,900

$0.01

May 1, 2016

July 21, 2010

113,000

113,000

$0.10

July 21, 2020

July 21, 2010

59,000

59,000

$0.10

July 21, 2020

July 21, 2010

500,000

500,000

$0.10

July 21, 2020

July 11, 2011

100,000

100,000

$0.10

July 11, 2021

July 11, 2011

100,000

100,000

$0.10

July 11, 2021

July 11, 2011

100,000

100,000

$0.10

July 11, 2021

Total

1,268,900

1,268,900

Warrants outstanding at March 31, 2013 consist of:

Date

Number

Number

Exercise

Expiration

Issued

Outstanding

Exercisable

Price

Date

April 1, 2000

25,000

25,000

$3.00

2 years after IPO

June 1, 2009

100,000

100,000

$0.50

June 1, 2019

June 1, 2009

50,000

50,000

$0.65

June 1, 2019

June 1, 2009

50,000

50,000

$0.85

June 1, 2019

June 1, 2009

50,000

50,000

$1.15

June 1, 2019

Total

275,000

275,000

10

Note 7 - Income Taxes

Quarter Ended March 31,

2013

2012

Effective tax rate

0.0 %

30.3 %

The decrease in the effective tax rate for the quarter ended March 31, 2013 is due to the

establishment of a full valuation allowance against the Company’s net deferred tax assets

which was initially recorded in the fourth quarter of 2012. A valuation allowance must be

established if it is more likely than not that the deferred tax assets will not be realized.

This assessment is based upon consideration of available positive and negative evidence,

which includes, among other things, the Company’s most recent results of operations and

expected future profitability. Based on the Company’s cumulative losses in recent years,

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

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

tax assets.

Note 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, 2013 and 2012

were $6,522 and $2,702, respectively.

Note 9 – Concentrations and Credit Risk

Sales and Accounts Receivable

Gotham had sales to two customers which accounted for approximately 44% and 17%,

respectively of Gotham’s total sales for the three months ended March 31, 2013.  The two

customers accounted for approximately 41% and 3%, respectively of accounts receivable

at March 31, 2013.

Gotham had sales to three customers which accounted for approximately 36%, 17% and

12%, respectively of Gotham’s total sales for the three months ended March 31, 2012.

Two of the three customers accounted for approximately 44% of accounts receivable at

March 31, 2012.

Cash

Cash is maintained at a major financial institution and, at times, balances may exceed

federally insured limits. The Company has never experienced any losses related to these

balances. All of the Company’s non-interest bearing cash balances were fully insured at

11

March 31, 2013. As of December 31, 2012, the Company had no amounts of cash or cash

equivalents in financial institutions in excess of amounts insured by agencies of the U.S.

Government, the limit of which is $250,000. The Company did not have any interest-

bearing accounts at March 31, 2013 and December 31, 2012, respectively.

Note 10 - Related Party Transactions

Note Payable – Related Party

Gotham was provided a loan from an entity that is controlled by the officers of Gotham,

such  amounts  outstanding  were  $6,263  at  March  31,  2013  and  December  31,  2012,

respectively.  The note bears interest at a rate of 5.5% and is due on December 31, 2013.

Note 11 – Commitments and Contingencies

Lease Commitment

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

in Smithtown, New York commencing on March 1, 2012.

Gotham has a month to month license agreement for office space that commenced on

August  2,  2012  at  a  monthly license  fee  of  $2,400.    The  license  agreement  may be

terminated upon 30 days notice.

Total future minimum annual lease  payments under the lease for the years ending

December 31 are as follows:

2013

$ 13,830

2014

18,720

2015

19,080

2016

19,440

2017

3,240

$ 74,310

Rent expense of $20,570 and $23,400 was charged to operations for the three months

ended March 31, 2013 and 2012, respectively.

The  Company provides  accruals  for costs  associated  with  the estimated resolution of

contingencies at the earliest date at which it is deemed probable that a liability has been

incurred and the amount of such liability can be reasonably estimated.

Litigation

Digi-Data Corporation

In connection with the asset purchase agreement discussed in Note 2, the Company filed

a  complaint  against  Digi-Data  on  October  1,  2012  for  unpaid  contingency payments

12

owed to the Company totaling $570,590 at March 31, 2013, exclusive of an allowance for

bad debts of $250,000. On or about December 3, 2012, Digi-Data filed its Answer,

Affirmative Defenses and Counterclaim against the Company. The Counterclaim seeks

damages against the Company for breach of the Agreement for the alleged failure to

indemnify   Digi-Data   for   expenses   related   to   pending   litigation   between   Verizon

Communications, Inc. (one of Digi-Data's customers) and an unrelated third party,

Titanide Ventures, LLC, concerning alleged patent violations (hereinafter "Verizon

Patent  Litigation").    Upon  information  and  belief,  the  Verizon  Patent  Litigation  is  a

"patent  troll"  whereby Titanide  seeks  to  extract  settlement  funds  from  alleged  patent

infringers without seeking actual adjudication of its purported patent rights. The

Company has advised Digi-Data of what it believes is "prior act" related to the subject

intellectual property that is at-issue in the Verizon Patent Litigation, a possible defense to

the claims by Titanide. A pre-trial order was issued by the Court with detailed deadlines

regarding among other items, discovery cut-off and status report deadline date of April

29, 2013 and dispositive motions deadline date of May 28, 2013. The Company

propounded its initial discovery upon Digi-Data, responses to which were due on or about

March 8, 2013. On April 4, 2013, Digi-Data provided discovery to the Company. No

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

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

directly resulting from this Order or the settlement agreement between Verizon and the

Plaintiff. On April 4, 2013, an Order of Dismissal in the Verizon Patent Litigation was

filed.  The Dismissal is with prejudice with each party to bear its own costs and fees. On

May 24, 2013, the Company filed a Motion for Summary Judgment with the Court asking

the Court to move in its favor against DDC for the entire outstanding balance due along

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

Law.

Allied Airbus, Inc.

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

Airbus, Inc. (“Allied”) for nonpayment of various promissory notes totaling $434,512 at

December 31, 2011 in connection with a letter of intent the Company entered into to

acquire the assets and business of Allied, to which a definitive agreement could not be

reached.  The claim against Allied included accrued interest at the rate of 6% per annum.

As a result of a settlement reached on June 12, 2012, the Company received payment of

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

Financial Advisor Contract

Brooks, Houghton & Company, Inc. (BHC)

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

financial   advisory services   in connection with the Company’s   proposed business

combinations and related fund raising transactions. As part of that agreement BHC would

be entitled to a “Business Combination Fee” equal to three percent of the amount of the

13

company’s  total  proceeds    and  other  consideration  paid  or  to  be  paid  for  the  assets

acquired, inclusive of equity or any debt issued; however the fee was to be no less than

$300,000. As a result of the IGX transaction, as described in Note 12, BHC initially felt

entitled to $300,000. The Company has taken a position that since the transaction has

been rescinded, that the fee is has not been earned and thus not to be paid. While the

ultimate outcome of this matter is not presently determinable, it is the opinion of

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

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

Note 12 – Subsequent Events

Rescission of Purchase Agreement for Acquisition of IGX Global Inc. and IGX Global UK

Limited

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

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

agreement   dated   December   28, 2012   (the   “Purchase   Agreement”)   with

IGX   Global

Inc.(“IGXUS”), IGX Global UK Limited (“IGXUK”) and T omas Duffy (“DUFFY”) the sole

shareholder of both IGXUK and IGXUS.

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

2012, substantially all of the assets of IGXUS and all of the issued and outstanding shares

of  IGXUK  and  thereby  the  acquired  business  operated  by  IGXUS  and  IGXUK  (the

“Acquired Business”). The original agreement called for a $500,000 payment at closing,

a  $1,000,000  Promissory  Note,  assumption  of  certain  liabilities  of  the  IGXUS  up  to

$2,500,000 and 3.75 million shares of iGambit stock to be earned over a three year period

based upon certain revenue and earnings targets. The Company had arranged financing at

the  original  effective  date  of  the  purchase  to  pay  the  $500,000  payment  and  payoff

certain liabilities of IGXUS.

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

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

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

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

of the financing the Company had  obtained  to fund the  upfront  payment  and certain

liabilities at the original closing date; IGX also assumed and paid certain expenses related

to the purchase. Also as consideration for iGambit’s expenses and inconvenience, the

Company received $130,000 prior to the effective date of the rescission from IGX (see

Note 4), and upon the effective date of the rescission, an additional payment of $275,000,

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

months.   Based upon timing and terms of the Rescission Agreement, the Company has

not recognized the effects of the purchase of IGX on the financial statements presented as

of and for the three months ending March 31, 2013. In addition, the settlement

consideration received under the rescission agreement was recognized on its effective

date of April 8, 2013.

14

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.

15

Revenue Recognition

Our revenues from continuing operations consist of revenues derived primarily

from sales of products and services rendered to real estate brokers. Revenues are

recognized upon delivery of the products or services.

Contingency  payment  income  was  recognized  quarterly  from  a  percentage  of

Digi-Data’s vaulting service revenue until February 28, 2011.

Deferred Income

As of March 31, 2013, the Company received $130,000 from IGX Global Inc. in

connection with a rescission agreement dated April 8, 2013, as described in Note 12 of

the Notes to Condensed Consolidated Financial Statements.

Cash and Cash Equivalents

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

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

maturity of three months or less.

Accounts Receivable

We analyze the collectability of accounts receivable from continuing operations

each accounting period and adjust our allowance for doubtful accounts accordingly. A

considerable  amount  of  judgment  is  required  in  assessing the  realization  of  accounts

receivables,  including  the    creditworthiness  of  each  customer,  current  and  historical

collection  history  and  the  related  aging  of  past  due  balances. We evaluate  specific

accounts when we become aware of information indicating that a customer may not be

able to meet its financial obligations due to deterioration of its financial condition, lower

credit ratings, bankruptcy or other factors affecting the ability to render payment. There

was no bad debt expense charged to operations for three months ended March 31, 2013

and 2012, respectively.

Property and equipment and depreciation

Property and equipment are stated at cost. Depreciation for both financial

reporting and income tax purposes is computed using combinations of the straight line

and accelerated  methods over the estimated lives of the respective assets.    Computer

equipment is depreciated over 5 years and furniture and fixtures are depreciated over 7

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

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

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

charged to income.

16

Goodwill

Goodwill represents the excess of the aggregate purchase price over the fair  value

of the net assets acquired in a business combination, specifically the acquisition of Jekyll

by the Company’s subsidiary, Gotham.     In accordance with ASC Topic No. 350

“Intangibles – Goodwill and Other”), the goodwill is not  amortized, but instead is subject

to an annual assessment of impairment by  applying a  fair-value  based test, and is

reviewed more frequently if current events and circumstances indicate a possible

impairment.    If  indicators  of  impairment  are  present  and  future  cash  flows  are  not

expected to be sufficient to recover the asset’s carrying amount, an impairment loss is

charged to expense in the period identified. A lack of projected future operating results

from Gotham’s operations may cause impairment. At December 31, 2012, the Company

performed its annual impairment study and determined that present and future cash flows

were not expected to be sufficient to recover the carrying amount of goodwill, and the

goodwill was written off.

Stock-Based Compensation

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

compensation plan in accordance  with ASC Topic No. 718-20, Awards Classified as

Equity, which requires the measurement of compensation expense for all share-based

compensation granted to employees and non-employee directors at fair value on the date

of grant and recognition  of compensation expense over the related service period for

awards expected to vest.  We use the Black-Scholes option valuation model to estimate

the fair value of our stock options and warrants. The Black-Scholes option valuation

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

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

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

warrants.

Income Taxes

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

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

liabilities are determined based on differences between financial reporting and tax bases

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

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

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

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

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

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

financial statement recognition and measurement of a tax position.

17

INTRODUCTION

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

subsidiary, Gotham Innovation Lab, Inc., is in the business of providing media

technology services to the real estate industry. We are focused on expanding the

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

Assets. At March 31, 2013, we had $670,092 in total assets, compared to

$745,919 at December 31, 2012. The decrease in total assets was primarily due to the

decrease  in  cash  used  to  fund  the  loss,  the  decrease  in  accounts  receivable  and  the

decrease in prepaid expenses.

Liabilities. At March 31, 2013, our total liabilities were $567,008 compared to

$440,221 at December 31, 2012. Liabilities consist of accounts payable, a note payable to

a  related party and  deferred income.  We  do  not  have any long term liabilities.    The

increase in liabilities was primarily due to deferred income of $130,000 from the IGX

Rescission Agreement.

Stockholders’ Equity. Our stockholders’ equity decreased to $103,084 at March

31, 2013 from $305,698 at December 31, 2012.   This decrease was primarily due to an

increase in accumulated deficit from $(2,448,346) at December 31, 2012 to $(2,650,960)

at March 31, 2013, resulting from losses from operations of $(202,614) for the three

months ended March 31, 2013.

THREE MONTHS ENDED MARCH 31, 2013 AS COMPARED TO THREE

MONTHS ENDED MARCH 31, 2012

Revenues  and Cost of Sales . We had $362,821 of revenue  during the three

months ended March 31, 2013 compared to revenue of $480,348 during the three months

ended  March  31,  2012.  The  decrease  in  revenue  was  due  primarily to  a  decrease  in

revenue generated by our Gotham subsidiary from $446,504 for the three months ended

March 31, 2012 compared to $362,821 for the three months ended March 31, 2013. We

also earned revenue of $33,844 in technical consulting fees for the three months ended

March  31,  2012  compared  to  $0  for  the  three  months  ended  March  31,  2013.  The

decrease in our cost of goods sold for the three months ended March 31, 2013 was due to

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

General  and  Administrative  Expenses . General  and  Administrative  Expenses

decreased to $449,665 for the three months ended March 31, 2013 from $496,941 for the

three months ended March 31, 2012. For the three months ended March 31, 2013 our

General and Administrative Expenses consisted of corporate administrative expenses of

$95,990, legal and accounting fees of $27,284, health insurance expenses of $22,088,

commissions and finder’s fees of $25,000 and payroll expenses of $279,303. 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,

18

health insurance expenses of $18,294, consulting fees of $14,756 and payroll expenses of

$299,778.    The  decreases  from the three  months  ended March 31,  2012 to  the three

months ended March 31, 2013 relate primarily to: (i) a decrease in payroll expenses; and

(ii) a decrease in general and administrative costs associated with the operation of our

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

Gotham subsidiary should remain level going forward, subject to a material expansion in

the   business   operations   of   Gotham   which   would   likely   increase   our   corporate

administrative expenses.

Other Income (Expense) and Taxes . There  was no interest income and no

income  tax  benefit  for the three  months  ended  March  31, 2013  compared to  interest

income of $6,840 and an income tax benefit of $(101,256) for the three months ended

March 31, 2012.

LIQUIDITY AND CAPITAL RESOURCES

General

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

2013, we  had  $49,261  of cash and stockholders’ equity of $103,084 as  compared to

$104,721 and $305,698 at December 31, 2012. At March 31, 2013 we had $670,092 in

total assets, compared to $745,919 at December 31, 2012.

Our primary capital requirements in 2013 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.

19

Cash Flow Activity

Net cash used by operating activities was $58,310 for the three months ended

March 31, 2013, compared to net cash used by operating activities of $4,796 for the three

months ended March 31, 2012. Our primary source of operating cash flows from

continuing operating activities for the three months ended March 31, 2013 was from our

Gotham subsidiary’s  revenues  of $362,821  and $446,504  for the  three months ended

March 31, 2012. Additional contributing factors to the change were from a decrease in

accounts receivable of $1,396, a decrease in prepaid expenses of $14,583, a decrease in

accounts payable of $(3,213) and deferred income of $130,000.   Net cash provided by

discontinued operating activities was $0 for the three months ended March 31, 2013 and

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

ended March 31, 2012. The $150,000 cash provided by discontinued operations for the

three months ended March 31, 2012, was $150,000 in cash payments received from DDC

which  was  offset  by  a  decrease  in  accounts  receivable  included  in  the  Assets  from

Discontinued Operations.

Cash provided by investing activities was $2,850 for the three months ended March

31, 2013 and Cash used by investing activities was $(717) for the three months ended

March 31, 2012. For the three months ended March 31, 2013 the primary source of cash

provided by investing activities was from a decrease in deposits.   For the three months

ended March 31, 2012 the source of cash used in investing activities was $(1,147) from

the purchase of property and equipment and a decrease in deposits of $430.

Cash used by financing activities was $0 for the three months ended March 31, 2013

compared to $(3,125) for the three months ended March 31, 2012. The cash flows used

by financing activities for the three months ended March 31, 2012 was a repayment of

loans payable to related party.

Supplemental Cash Flow Activity

In the three months ended March 31, 2013 the company paid income taxes of $0

and interest of $638 compared to income taxes of $4,125 and interest of $924 in the three

months ended March 31, 2013.

Item 3. Quantitative and Qualitative Disclosures about Market Risk.

Not Required.

Item 4. Controls and Procedures.

Conclusion Regarding the Effectiveness of Disclosure Controls and Procedures

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

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

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

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

20

15d-15(e) under the Exchange Act as of March 31, 2012. 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, 2013.

Change in Internal Controls

During the quarter ended March 31, 2013, there were no changes in our internal

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

materially affect, our internal control over financial reporting.

.

PART II — OTHER INFORMATION

Item 1. Legal Proceedings.

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

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

("Defendant")  for  monetary damages  arising from  the  Defendant's  breach  of  contract

regarding that certain Asset Purchase Agreement dated February 26, 2006 among the

parties, and to enforce payment of outstanding contingency payments due to the

Company pursuant to said agreement.

On or about December 3, 2012, Digi-Data filed its Answer, Affirmative Defenses

and Counterclaim against iGambit. The Counterclaim seeks damages against iGambit for

breach  of the Agreement for the alleged failure to indemnify Digi-Data for expenses

related to pending litigation between Verizon Communications, Inc. (one of Digi-Data's

customers) an unrelated third party, Titanide Ventures, LLC, concerning alleged patent

violations (hereinafter "Verizon Patent Litigation").

Upon  information  and  belief,  the  Verizon  Patent  Litigation  is  a  "patent  troll"

whereby Titanide seeks to extract settlement funds from alleged patent infringers without

seeking actual adjudication of its purported patent rights. iGambit has advised Digi-Data

of what iGambit believes is "prior art" related to the subject intellectual properly that is

at-issue in the Verizon Patent Litigation, a possible defense to the claims by Titanide.

A pre-trial order was issued by the Court with detailed deadlines. E.g., discovery

cut-off and status report (4/29/13) and dispositive motions (5/28/13). iGambit

propounded its initial discovery upon Digi-Data, responses to which were due on or about

March 8, 2013.

On April 4, 2013, Digi-Data provided discovery to iGambit. To date, no

depositions have been scheduled.   To date, we have not received any information from

DDC regarding any specific quantified “damages” directly resulting from this Order or

the settlement agreement between Verizon and the Plaintiff.

On April 4, 2013 an Order of Dismissal in the Verizon Patent Litigation was

filed.  The Dismissal is with prejudice with each party to bear its own costs and fees.

21

On  May 24,  2013  we  filed  a  Motion  for  Summary Judgment  with  the  Court

asking the Court to move in our favor against DDC for the entire outstanding balance due

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

Maryland Law.

One June 11, 2013,  Digi-Data filed  its  Response  to the  Motion  for Summary

Judgment and, for the first time, purported to liquidate certain alleged damages for which

Digi-Data seeks a set-off against the amounts admittedly owed by Digi-Data to iGambit

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

Response  relies  entirely  upon  the  Affidavit  of  a  Vice  President  of  Digi-Data  for  its

evidentiary support. Notwithstanding, Digi-Data failed to produce documentary support

for its alleged damages and to explain why it failed to disclose such information during

the discovery period or thereafter.

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

thereby, advised the Court of Digi-Data’s apparent litigation-by-ambush tactic such as

withholding allegations of damages until the end of discovery and attempting to use such

previously withheld information to defeat summary judgment, and the legal inadequacy

of same.  Pursuant the Maryland District Court’s Local Rules, Digi-Data is not authorized

to file a Surreply without Court order.

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

Item 6.

Exhibits

Exhibit No.

D escription

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.

22

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.)

23

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 July

23, 2013.

iGambit Inc.

/s/ John Salerno

John Salerno

Chief Executive Officer

/s/ Elisa Luqman

Elisa Luqman

Chief Financial Officer and

Principal Accounting Officer