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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
(Mark One)
QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the Quarterly period ended June 30, 2013
TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE
EXCHANGE ACT
For the transition period from
to
Commission file number 000-53862
iGambit Inc.
(Exact name of small business issuer as specified in its charter)
Delaware
11-3363609
(State or other jurisdiction of
(I.R.S. Employer
incorporation or organization)
Identification No.)
1050 W. Jericho Turnpike, Suite A
Smithtown, New York 11787
(Address of Principal Executive Offices)(Zip Code)
(631) 670-6777
(Issuer’s Telephone Number, Including Area Code)
Indicate by check mark whether the registrant (1) has filed all reports required to be filed
by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding
12 months (or for such shorter period that the registrant was required to file such reports),
and (2) has been subject to such filing requirements for the past 90 days. Yes þ No
Indicate by check mark whether the registrant has submitted electronically and posted on
its corporate Web site, if any, every Interactive Data File required to be submitted and
posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the
preceding 12 months (or for such shorter period that the registrant was required to submit
and post such files). Yes þ No
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated
filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large
accelerated filer”, “accelerated filer” and “smaller reporting company” in Rule 12b-2 of
the Exchange Act. (Check one):
Large
Accelerated
Non-accelerated filer
Smaller reporting
accelerated filer
filer
company þ
(Do not check if a smaller reporting company)
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-
2 of the Exchange Act). Yes No
The Registrant had 25,044,056 shares of its common stock outstanding as of August 14,
2013.
iGambit Inc.
Form 10-Q
Part I — Financial Information
1
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
5
Item 2 .
Management’s Discussion and Analysis of Financial Condition and
Results of Operations
16
Item 3 .
Quantitative and Qualitative Disclosures About Market Risk
22
Controls and Procedures
22
Part II — Other Information
22
Item 1 .
Legal Proceedings
22
Risk Factors
24
Unregistered Sales of Equity Securities and Use of Proceeds
24
Item 3 .
Defaults upon Senior Securities
24
Item 4 .
Removed and Reserved
24
Other Information
24
Item 6 .
Exhibits
24
EX-31.1
EX-31.2
EX-32.1
EX-32.2
Item 1 — Financial Statements
IGAMBIT INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
JUNE 30,
DECEMBER
2013
31,
(Unaudited)
2012
ASSETS
Current assets
Cash
$
102,020
$
104,721
Accounts receivable, net
207,181
158,441
Prepaid expenses
106,741
133,077
Due from rescission agreement
331,000
--
Assets from discontinued operations, net
320,590
320,590
Total current assets
1,067,532
716,829
Property and equipment, net
14,659
17,870
Other assets
Deposits
8,370
11,220
$
1,090,561
$
745,919
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Accounts payable
$
392,364
$
433,958
Note payable - related party
6,263
6,263
Total current liabilities
398,627
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
(2,062,110)
(2,448,346)
Total stockholders' equity
691,934
305,698
1
$
1,090,561
$
745,919
IGAMBIT INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
UNAUDITED
THREE MONTHS
SIX MONTHS
ENDED
ENDED
JUNE 30,
JUNE 30,
2013
2012
2013
2012
Sales
$
411,719
$
429,168
$
774,540
$
909,516
Cost of sales
149,608
222,573
265,378
477,611
Gross profit
262,111
206,595
509,162
431,905
Operating expenses
General and administrative
expenses
428,261
433,294
877,926
930,235
Loss from operations
(166,150)
(226,699)
(368,764)
(498,330)
Other income
Income from rescission agreement
755,000
--
755,000
--
Interest income
--
5,881
--
12,721
Total other income
755,000
5,881
755,000
12,721
Income (loss) from operations before
income tax
588,850
(220,818)
386,236
(485,609)
Income tax (benefit)
--
(83,217)
--
(184,473)
Net income (loss)
$
588,850
$ (137,601)
$
386,236
$ (301,136)
Basic and fully diluted earnings
(loss) per common share:
$
.02
$
(.01)
$
.02
$
(.01)
Weighted average common shares
outstanding
25,044,056
23,954,056
25,044,056
23,954,056
2
IGAMBIT INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
SIX MONTHS ENDED JUNE 30,
(UNAUDITED)
2013
2012
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss)
$
386,236
$ (301,136)
Adjustments to reconcile net income (loss) to net
cash (used) provided by operating activities
Depreciation
3,211
4,249
Deferred income taxes
--
(184,473)
Increase (Decrease) in cash flows as a result of
changes in asset and liability account balances:
Accounts receivable
(48,740)
108,003
Prepaid expenses
26,336
31,694
Due from rescission agreement
(331,000)
--
Accounts payable
(41,594)
117,155
Net cash used by continuing operating activities
(5,551)
(224,508)
Net cash provided by discontinued operating activities
--
225,000
NET CASH (USED) PROVIDED BY OPERATING
ACTIVITIES
(5,551)
492
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment
--
(1,147)
Decrease in deposits
2,850
430
Proceeds from repayments of notes receivable
--
434,512
NET CASH PROVIDED BY INVESTING
ACTIVITIES
2,850
433,795
NET CASH USED BY FINANCING ACTIVITIES:
Repayment of loans from shareholders
--
(5,625)
NET (DECREASE) INCREASE IN CASH
(2,701)
428,662
3
CASH - BEGINNING OF PERIOD
104,721
224,800
CASH - END OF PERIOD
$
102,020
$
653,462
SUPPLEMENTAL DISCLOSURES OF CASH FLOW
INFORMATION:
Cash paid during the period for:
Interest
$
1,548
$
1,368
Income taxes
--
4,125
Non-cash investing and financing activities:
Property and equipment purchased through loan from
stockholder
$
--
$
5,300
4
IGAMBIT INC.
Notes to Condensed Consolidated Financial Statements
Six Months Ended June 30, 2013 and 2012
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 six months ended June 30, 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.
Sale of Business
On February 28, 2006, the Company entered into an asset purchase agreement with Digi-
Data Corporation (“Digi-Data”), whereby Digi-Data acquired the Company’s assets and
its online digital vaulting business operations in exchange for $1,500,000, which was
deposited into an escrow account for payment of the Company’s outstanding liabilities.
In addition, as part of the sales agreement, the Company received payments from Digi-
Data based on 10% of the net vaulting revenue payable quarterly over five years. The
Company was also entitled to an additional 5% of the increase in net vaulting revenue
over the prior year’s revenue. These adjustments to the sales price were included in the
5
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 June 30, 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.
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 six
months ended June 30, 2013 and 2012 were $3,018 and $14,767, respectively.
6
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 six
months ended June 30, 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 $3,211 and $4,249 was charged to operations for the six months
ended June 30, 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
7
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.
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
8
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
Six Months Ended
June 30,
June 3 0,
2013
2012
2013
2012
Stock options
668,900
2,768,900
668,900
2,768,900
Stock warrants
275,000
275,000
275,000
275,000
Total shares excluded from
calculation
943,900
3,043,900
943,900
3,043,900
Stock-based compensation expense for all stock-based award programs, including grants
of stock options and warrants, is recorded in accordance with " Compensation—Stock
Compensation ", Topic 718 of the FASB ASC. Stock-based compensation expense, which
is calculated net of estimated forfeitures, is computed using the grant date fair-value and
amortized over the requisite service period for all stock awards that are expected to vest.
The grant date fair value for stock options and warrants is calculated using the Black-
Scholes option pricing model. Determining the fair value of options at the grant date
requires judgment, including estimating the expected term that stock options will be
outstanding prior to exercise, the associated volatility of the Company’s common stock,
expected dividends, and a risk-free interest rate. Stock-based compensation expense is
reported under general and administrative expenses in the accompanying consolidated
statements of operations.
Options
In 2006, the Company adopted the 2006 Long-Term Incentive Plan (the "2006 Plan").
Awards granted under the 2006 Plan have a ten-year term and may be incentive stock
options, non-qualified stock options or warrants. The awards are granted at an exercise
price equal to the fair market value on the date of grant and generally vest over a three or
four year period. The Plan expired on December 31, 2009, therefore as of June 30, 2013,
there was no unrecognized compensation cost related to non-vested share-based
compensation arrangements granted under the 2006 plan.
The 2006 Plan provided for the granting of options to purchase up to 10,000,000 shares
of common stock. 8,146,900 options have been issued under the plan to date of which
7,157,038 have been exercised and 692,962 have expired to date. There were 296,900
9
options outstanding under the 2006 Plan on its expiration date of December 31, 2009. All
options issued subsequent to this date were not issued pursuant to any plan.
Stock option activity during the six months ended June 30, 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
June 30, 2012
2,768,900
$
0.04
$
0.10
6.35
Options outstanding at
December 31, 2012
1,268,900
$
0.08
$
0.10
6.16
Expired
(600,000)
0.10
--
Options outstanding at
June 30, 2013
668,900
$
0.06
$
0.10
5.19
Options outstanding at June 30, 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 11, 2011
100,000
100,000
$0.10
July 11, 2021
July 11, 2011
100,000
100,000
$0.10
July 11, 2021
Total
668,900
668,900
Warrants
In addition to our 2006 Long Term Incentive Plan, we have issued and outstanding
compensatory warrants to two consultants entitling the holders to purchase a total of
275,000 shares of our common stock at an average exercise price of $0.94 per share.
Warrants to purchase 25,000 shares of common stock vest upon 6 months after the
Company engages in an IPO, have an exercise price of $3.00 per share, and expire 2
years after the Company engages in an IPO. Warrants to purchase 250,000 shares of
10
common stock vest 100,000 shares on issuance (June 1, 2009), and 50,000 shares on each
of the following three anniversaries of the date of issuance, have exercise prices ranging
from $0.50 per share to $1.15 per share, and expire on June 1, 2019. The issuance of the
compensatory warrants was not submitted to our shareholders for their approval.
Warrant activity during the six months ended June 30, 2013 and 2012 follows:
(1)Weighted
Average
Weighted
Remaining
Weighted
Average
Average
Contractual
Warrants
G rant-Date
Outstanding
Exercise Price
Fair Value
Life (Years)
Warrants outstanding
at December 31, 2011
275,000
$
0.94
$
0.10
7.42
No warrant activity
--
--
--
Warrants outstanding
at June 30, 2012
275,000
$
0.94
$
0.10
6.92
Warrants outstanding
at December 31, 2012
275,000
$
0.94
$
0.10
6.42
No warrant activity
--
--
--
Warrants outstanding
at June 30, 2013
275,000
$
0.94
$
0.10
5.92
(1) Exclusive of 25,000 warrants expiring 2 years after initial IPO.
Warrants outstanding at June 30, 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
Six Months Ended June 30,
2013
2012
Effective tax rate
0.0 %
38.0 %
The decrease in the effective tax rate for the six months ended June 30, 2013 is due to the
establishment of a full valuation allowance against the Company’s net deferred tax assets
11
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.
Gotham has adopted the Gotham Innovation Lab, Inc. SIMPLE IRA Plan, which covers
substantially all employees. Participating employees may elect to contribute, on a tax-
deferred basis, a portion of their compensation in accordance with Section 408 (a) of the
Internal Revenue Code. The Company matches up to 3% of employee contributions. The
Company's contributions to the plan for the six months ended June 30, 2013 and 2012
were $9,744 and $5,476, respectively.
Sales and Accounts Receivable
Gotham had sales to two customers which accounted for approximately 44% and 21%,
respectively of Gotham’s total sales for the six months ended June 30, 2013. The two
customers accounted for approximately 46% and 17%, respectively of accounts
receivable at June 30, 2013.
Gotham had sales to three customers which accounted for approximately 38%, 14% and
13%, respectively of Gotham’s total sales for the six months ended June 30, 2012. The
three customers accounted for approximately 39%, 10% and 1% of accounts receivable at
June 30, 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
June 30, 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 June 30, 2013 and December 31, 2012, respectively.
Note Payable – Related Party
12
Gotham was provided a loan from an entity that is controlled by the officers of Gotham,
such amounts outstanding were $6,263 at June 30, 2013 and December 31, 2012,
respectively. The note bears interest at a rate of 5.5% and is due on December 31, 2013.
Lease Commitment
On February 1, 2012, iGambit entered into a 5 year lease for new executive office space
in Smithtown, New York commencing on March 1, 2012 at a monthly rent of $1,500
with 2% annual increases.
Gotham has a month to month license agreement for office space that commenced on
August 2, 2012 at a monthly license fee of $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
$ 9,180
2014
18,720
2015
19,080
2016
19,440
2017
3,240
$ 69,660
Rent expense of $37,258 and $49,900 was charged to operations for the six months ended
June 30, 2013 and 2012, respectively.
Contingencies
The Company provides accruals for costs associated with the estimated resolution of
contingencies at the earliest date at which it is deemed probable that a liability has been
incurred and the amount of such liability can be reasonably estimated.
Litigation
Digi-Data Corporation
In connection with the asset purchase agreement discussed in Note 2, the Company filed
a complaint against Digi-Data on October 1, 2012 for unpaid contingency payments
owed to the Company totaling $570,590 at June 30, 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
13
Communications, Inc. (one of Digi-Data's customers) and an unrelated third party,
Titanide Ventures, LLC, concerning alleged patent violations (hereinafter "Verizon
Patent Litigation"). The Verizon Patent Litigation is a result of "patent troll" whereby
Titanide seeks to extract settlement funds from alleged patent infringers without seeking
actual adjudication of its purported patent rights. The Company has advised Digi-Data of
what it believes is "prior act" related to the subject intellectual property that is at-issue in
the Verizon Patent Litigation, a possible defense to the claims by Titanide. A pre-trial
order was issued by the Court with detailed deadlines regarding among other items,
discovery cut-off and status report deadline date of April 29, 2013 and dispositive
motions deadline date of May 28, 2013. The Company propounded its initial discovery
upon Digi-Data, responses to which were due on or about March 8, 2013. On April 4,
2013, Digi-Data provided discovery to the Company. No depositions have been
scheduled as of the date of this report, nor has the Company received any information
from Digi-data regarding any specific quantified “damages” directly resulting from this
Order or the settlement agreement between Verizon and the Plaintiff. On April 4, 2013,
an Order of Dismissal in the Verizon Patent Litigation was filed. The Dismissal is with
prejudice with each party to bear its own costs and fees. On May 24, 2013, the Company
filed a Motion for Summary Judgment with the Court asking the Court to move in its
favor against DDC for the entire outstanding balance due along with attorney’s fees and
post and pre-judgment interest as applicable under Maryland Law. On June 11, 2013,
Digi-Data filed its Response to the Motion for Summary Judgment and, for the first time,
purported to liquidate certain alleged damages for which Digi-Data seeks a set-off against
the amounts admittedly owed by Digi-Data to iGambit and alludes the existence of
additional although not yet quantified damages. The Response relies entirely upon the
Affidavit of a Vice President of Digi-Data for its evidentiary support. Notwithstanding,
Digi-Data failed to produce documentary support for its alleged damages and to explain
why it failed to disclose such information during the discovery period or thereafter.
On July 9, 2013, the Company filed its Reply to Digi-Data’s Response and, thereby,
advised the Court of Digi-Data’s apparent litigation-by-ambush tactic such as
withholding allegations of damages until the end of discovery and attempting to use such
previously withheld information to defeat summary judgment, and the legal inadequacy
of same. Pursuant to the Maryland District Court’s Local Rules, Digi-Data is not
authorized to file a Surreply without Court order.
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.
14
Financial Advisor Contract
Brooks, Houghton & Company, Inc. (BHC)
The Company had entered into a contract with BHC in which BHC would provide
financial advisory services in connection with the Company’s proposed business
combinations and related fund raising transactions. As part of that agreement BHC would
be entitled to a “Business Combination Fee” equal to three percent of the amount of the
company’s total proceeds and other consideration paid or to be paid for the assets
acquired, inclusive of equity or any debt issued; however the fee was to be no less than
$300,000. As a result of the IGX transaction, as described in Note 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.
IGX Global UK Limited
On April 8, 2013, the Company and its wholly owned subsidiary, IGXGLOBAL, CORP.
entered into, and became obligated under, a transaction to rescind the Company’s
purchase agreement dated December 28, 2012 (the “Purchase Agreement”) with IGX
Global Inc.(“IGXUS”), IGX Global UK Limited (“IGXUK”) and Tomas Duffy
(“DUFFY”) the sole shareholder of both IGXUK and IGXUS.
Under the Purchase Agreement, the Company intended to purchase, as of December 31,
2012, substantially all of the assets of IGXUS and all of the issued and outstanding shares
of IGXUK and thereby the acquired business operated by IGXUS and IGXUK (the
“Acquired Business”). The original agreement called for a $500,000 payment at closing,
a $1,000,000 Promissory Note, assumption of certain liabilities of the IGXUS up to
$2,500,000 and 3.75 million shares of iGambit stock to be earned over a three year period
based upon certain revenue and earnings targets. The Company had arranged financing at
the original effective date of the purchase to pay the $500,000 payment and payoff
certain liabilities of IGXUS.
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, and
upon the effective date of the rescission, an additional payment of $275,000, and will
15
receive an additional $350,000 payable in equal monthly installments over 18 months.
The consideration from IGX totaling $755,000 is reported as Other Income in the
Statements of Operations. The balance due from IGX was $331,000 at June 30, 2013.
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
16
assumptions on financial condition or operating performance is material, except as
described below.
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.
Cash and Cash Equivalents
For purposes of reporting cash flows, cash and cash equivalents include checking
and money market accounts and any highly liquid debt instruments purchased with a
maturity of three months or less.
Accounts Receivable
We analyze the collectability of accounts receivable from continuing operations
each accounting period and adjust our allowance for doubtful accounts accordingly. A
considerable amount of judgment is required in assessing the realization of accounts
receivables, including the creditworthiness of each customer, current and historical
collection history and the related aging of past due balances. We evaluate specific
accounts when we become aware of information indicating that a customer may not be
able to meet its financial obligations due to deterioration of its financial condition, lower
credit ratings, bankruptcy or other factors affecting the ability to render payment. There
was no bad debt expense charged to operations for six months ended June 30, 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.
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
17
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. Management has
determined that the Company has no significant uncertain tax positions requiring
recognition and measurement under ASC 740-10.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
INTRODUCTION
18
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 June 30, 2013, we had $1,090,561 in total assets, compared to
$745,919 at December 31, 2012. The increase in total assets was primarily due to the
increase in accounts receivable and the receivable due from the IGX Rescission
Agreement.
Liabilities. At June 30, 2013, our total liabilities were $398,627 compared to
$440,221 at December 31, 2012. Liabilities consist of accounts payable and a note
payable to a related party. We do not have any long term liabilities. The decrease in
liabilities was primarily due to a decrease in accounts payable.
Stockholders’ Equity. Our stockholders’ equity increased to $691,934 at June 30,
2013 from $305,698 at December 31, 2012. This increase was primarily due to a
decrease in accumulated deficit from $(2,448,346) at December 31, 2012 to $(2,062,110)
at June 30, 2013, resulting from income from operations of $386,236 for the six months
ended June 30, 2013.
THREE MONTHS ENDED JUNE 30, 2013 AS COMPARED TO THREE
MONTHS ENDED JUNE 30, 2012
Revenues and Cost of Sales . We had $411,719 of revenue during the three
months ended June 30, 2013 compared to revenue of $429,168 during the three months
ended June 30, 2012. The decrease in revenue was due primarily to a decrease in revenue
generated by our Gotham subsidiary. We also earned other income of $755,000 from the
IGX Rescission Agreement for the three months ended June 30, 2013 compared to $0 for
the three months ended June 30, 2012. The decrease in our cost of goods sold for the
three months ended June 30, 2013 was due to a decrease in the cost of the outsourced
photography vendors utilized by our Gotham subsidiary.
General and Administrative Expenses . General and Administrative Expenses
decreased to $428,261 for the three months ended June 30, 2013 from $433,294 for the
three months ended June 30, 2012. For the three months ended June 30, 2013 our
General and Administrative Expenses consisted of corporate administrative expenses of $
$65,062, rent expense of $16,689, legal and accounting fees of $55,420, employee
benefits, consisting primarily of health insurance expense of $24,676, and payroll
expenses of $266,414. For the three months ended June 30, 2012 our General and
Administrative Expenses consisted of corporate administrative expenses of $102,331,
rent expense of $26,500, employee benefits, consisting primarily of health insurance
expense of $19,871, and payroll expenses of $284,592. The decreases from the three
months ended June 30, 2012 to the three months ended June 30, 2013 relate primarily to:
19
(i) a decrease in payroll expenses; (ii) a decrease in rent; and (iii) a decrease in general
and administrative costs associated with the operation of our Gotham subsidiary. Costs
associated with our officers’ salaries and the operation of our Gotham subsidiary should
remain level going forward, subject to a material expansion in the business operations of
Gotham which would likely increase our corporate administrative expenses.
Other Income (Expense) and Taxes . There was no interest income for the three
months ended June 30, 2013 compared to interest income of $5,881 for the three months
ended June 30, 2012. There was no income tax benefit the three months ended June 30,
2013 compared to $(83,217) for the three months ended June 30, 2012.
Six Months Ended June 30, 2013 as Compared to Six Months Ended June 30, 2012
Revenues and Net Income . We had $774,540 of revenue during the six months ended
June 30, 2013, as compared to $909,516 of revenue during the six months ended June 30,
2012. The decrease in revenue was due to decrease in revenue generated by our acquired
subsidiary Gotham. In addition, we had other income of $755,000 for the six months
ended June 30, 2013, compared to $0 for the six months ended June 30, 2012. The
decrease in our cost of goods sold for the six months ended June 30, 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 $877,926 for the six months ended June 30, 2013 from $930,235 for the six
months ended June 30, 2012. For the six months ended June 30, 2013 our General and
Administrative Expenses consisted of corporate administrative expenses of $141,828,
rent expense of $37,258, employee benefits, consisting primarily of health insurance
expense of $49,085, legal and accounting fees of $82,704, business insurance expenses of
$21,334, and payroll expenses of $545,717. For the six months ended June 30, 2012 our
General and Administrative Expenses consisted of corporate administrative expenses of
$198,284, rent expense of $49,900, employee benefits, consisting primarily of health
insurance expense of $41,881, legal and accounting fees of $31,902, business insurance
expenses of $23,898, and payroll expenses of $584,370. The decreases from the six
months ended June 30, 2012 to the six months ended June 30, 2013 relate primarily to a
decrease in rent expenses and corporate administrative expenses. Costs associated with
our officers’ salaries and the operation of our Gotham subsidiary should remain level
going forward, subject to a material expansion in the business operations of Gotham
which would likely increase our corporate administrative expenses.
Other Income (Expense) and Taxes . There was no interest income for the six months
ended June 30, 2013 compared to interest income of $12,721 for the six months ended
June 30, 2012. There was no income tax benefit the six months ended June 30, 2013
compared to $(184,473) for the six months ended June 30, 2012.
LIQUIDITY AND CAPITAL RESOURCES
General
20
As reflected in the accompanying consolidated financial statements, at June 30,
2013, we had $102,020 of cash and stockholders’ equity of $691,934 as compared to
$104,721 and $305,698 at December 31, 2012. At June 30, 2013 we had $1,090,561 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.
Cash Flow Activity
Net cash used by operating activities was $5,551 for the six months ended June
30, 2013, compared to net cash provided by operating activities of $492 for the six
months ended June 30, 2012. Our primary source of operating cash flows from
continuing operating activities for the six months ended June 30, 2013 was from our
Gotham subsidiary’s revenues of $774,540 and $909,516 for the six months ended June
30, 2012. Additional contributing factors to the change were from an decrease in
accounts receivable of $48,740, an increase in prepaid expenses of $26,336, a decrease in
accounts payable of $41,594 and income due from the IGX rescission agreement of
$331,000. Net cash provided by discontinued operating activities was $0 for the six
months ended June 30, 2013 and cash provided by discontinued operating activities was
$225,000 for the six months ended June 30, 2012. Cash provided by discontinued
operations for the six months ended June 30, 2012 consists of $225,000 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 six months ended June 30,
2013 compared to $433,795 for the six months ended June 30, 2012. For the six months
ended June 30, 2013 the primary source of cash provided by investing activities was from
a decrease in deposits. For the six months ended June 30, 2012 the source of cash
21
provided by investing activities was $(1,147) from the purchase of property and
equipment, a decrease in deposits of $430 and the repayment of notes receivable from
Allied Airbus Inc. of $434,512.
Cash used by financing activities was $0 for the six months ended June 30, 2013
compared to $(5,625) for the six months ended June 30, 2012. The cash flows used by
financing activities for the six months ended June 30, 2012 was a repayment of loans
payable to a related party.
Supplemental Cash Flow Activity
In the six months ended June 30, 2013 the company paid income taxes of $0 and
interest of $1,548 compared to income taxes of $4,125 and interest of $1,368 in the six
months ended June 30, 2012.
Item 3. Quantitative and Qualitative Disclosures about Market Risk.
Not Required.
Item 4. Controls and Procedures.
Conclusion Regarding the Effectiveness of Disclosure Controls and Procedures
We carried out an evaluation, as required by paragraph (b) of Rule 13a-15 and
15d-15 of the Exchange Act under the supervision and with the participation of our
management, including our Chief Executive Officer and Chief Financial Officer, of the
effectiveness of our disclosure controls and procedures, as defined in Rules 13a-15(e) and
15d-15(e) under the Exchange Act as of June 30, 2012. Based upon that evaluation, our
Chief Executive Officer and Chief Financial Officer concluded that our disclosure
controls and procedures were effective as of June 30, 2013.
Change in Internal Controls
During the six months ended June 30, 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.
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
22
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 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. 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.
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
23
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.
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.
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.)
24
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant caused this
report to be signed on its behalf by the undersigned, thereunto duly authorized, on August
15, 2013.
iGambit Inc.
/s/ John Salerno
John Salerno
Chief Executive Officer
/s/ Elisa Luqman
Elisa Luqman
Chief Financial Officer
25
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.)
26
Exhibit 31.1
I, John Salerno, certify that:
1. I have reviewed this quarterly report on Form 10-Q of iGambit Inc.;
2. Based on my knowledge, this report does not contain any untrue statement of a
material fact or omit to state a material fact necessary to make the statements made, in
light of the circumstances under which such statements were made, not misleading with
respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information
included in this report, fairly present in all material respects the financial condition,
results of operations and cash flows of the registrant as of, and for, the periods presented
in this report;
4. The registrant’s other certifying officer and I are responsible for establishing and
maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-
15(e) and 15d-15(e)) and internal controls over financial reporting (as defined in
Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
(a) Designed such disclosure controls and procedures, or caused such disclosure
controls and procedures to be designed under our supervision, to ensure that material
information relating to the registrant, including its consolidated subsidiaries, is made
known to us by others within those entities, particularly during the period in which this
report is being prepared;
(b) Designed such internal control over financial reporting, or caused such internal
control over financial reporting to be designed under our supervision, to provide
reasonable assurance regarding the reliability of financial reporting and the preparation of
financial statements for external purposes in accordance with generally accepted
accounting principles;
(c) Evaluated the effectiveness of the registrant’s disclosure controls and
procedures and presented in this report our conclusions about the effectiveness of the
disclosure controls and procedures, as of the end of the period covered by this report
based on such evaluation; and
(d) Disclosed in this report any change in the registrant’s internal control over
financial reporting that occurred during the registrant’s most recent fiscal quarter (the
registrant’s fourth fiscal quarter in the case of an annual report) that has materially
affected, or is reasonably likely to materially affect, the registrant’s internal control over
financial reporting; and
5. The registrant’s other certifying officer and I have disclosed, based on our most
recent evaluation of internal control over financial reporting, to the registrant’s auditors
and the audit committee of the registrant’s board of directors (or persons performing the
equivalent functions):
(a) All significant deficiencies and material weaknesses in the design or operation
of internal control over financial reporting which are reasonably likely to adversely affect
27
the registrant’s ability to record, process, summarize and report financial information;
and
(b) Any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant’s internal control over financial
reporting.
August 15, 2013
/s/ John Salerno
Chief Executive Officer
28
Exhibit 31.2
I, Elisa Luqman, certify that:
1. I have reviewed this quarterly report on Form 10-Q of iGambit Inc.;
2. Based on my knowledge, this report does not contain any untrue statement of a
material fact or omit to state a material fact necessary to make the statements made, in
light of the circumstances under which such statements were made, not misleading with
respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information
included in this report, fairly present in all material respects the financial condition,
results of operations and cash flows of the registrant as of, and for, the periods presented
in this report;
4. The registrant’s other certifying officer and I are responsible for establishing and
maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-
15(e) and 15d-15(e)) and internal controls over financial reporting (as defined in
Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
(a) Designed such disclosure controls and procedures, or caused such disclosure
controls and procedures to be designed under our supervision, to ensure that material
information relating to the registrant, including its consolidated subsidiaries, is made
known to us by others within those entities, particularly during the period in which this
report is being prepared;
(b) Designed such internal control over financial reporting, or caused such internal
control over financial reporting to be designed under our supervision, to provide
reasonable assurance regarding the reliability of financial reporting and the preparation of
financial statements for external purposes in accordance with generally accepted
accounting principles;
(c) Evaluated the effectiveness of the registrant’s disclosure controls and
procedures and presented in this report our conclusions about the effectiveness of the
disclosure controls and procedures, as of the end of the period covered by this report
based on such evaluation; and
(d) Disclosed in this report any change in the registrant’s internal control over
financial reporting that occurred during the registrant’s most recent fiscal quarter (the
registrant’s fourth fiscal quarter in the case of an annual report) that has materially
affected, or is reasonably likely to materially affect, the registrant’s internal control over
financial reporting; and
5. The registrant’s other certifying officer and I have disclosed, based on our most
recent evaluation of internal control over financial reporting, to the registrant’s auditors
and the audit committee of the registrant’s board of directors (or persons performing the
equivalent functions):
(a) All significant deficiencies and material weaknesses in the design or operation
of internal control over financial reporting which are reasonably likely to adversely affect
29
the registrant’s ability to record, process, summarize and report financial information;
and
(b) Any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant’s internal control over financial
reporting.
August 15, 2013
/s/ Elisa Luqman
Chief Financial Officer
30
Exhibit 32.1
WRITTEN STATEMENT OF THE CHIEF EXECUTIVE OFFICER
Pursuant to 18 U.S.C. Section 1350
As adopted pursuant to section 906 of the Sarbanes-Oxley act of 2002
Solely for the purposes of complying with 18 U.S.C. s.1350 as adopted pursuant to
section 906 of the Sarbanes-Oxley act of 2002, I, the undersigned Chief Executive
Officer of iGambit Inc. (the “Company”), hereby certify, based on my knowledge, that
the Quarterly Report on Form 10-Q of the Company for the quarter ended June 30, 2013,
(the “Report”) fully complies with the requirements of Section 13(a) of the Securities
Exchange Act of 1934 and that information contained in the Report fairly presents, in all
material respects, the financial condition and results of operations of the Company.
August 15, 2013
/s/ John Salerno
Chief Executive Officer
31
Exhibit 32.2
WRITTEN STATEMENT OF THE CHIEF FINANCIAL OFFICER
Pursuant to 18 U.S.C. Section 1350
As adopted pursuant to section 906 of the Sarbanes-Oxley act of 2002
Solely for the purposes of complying with 18 U.S.C. s.1350 as adopted pursuant to
section 906 of the Sarbanes-Oxley act of 2002, I, the undersigned Chief Financial Officer
of iGambit Inc. (the “Company”), hereby certify, based on my knowledge, that the
Quarterly Report on Form 10-Q of the Company for the quarter ended June 30, 2013, (the
“Report”) fully complies with the requirements of Section 13(a) of the Securities
Exchange Act of 1934 and that information contained in the Report fairly presents, in all
material respects, the financial condition and results of operations of the Company.
August 15, 2013
/s/ Elisa Luqman
Chief Financial Officer
32
No information found
* THE VALUE IS THE MARKET VALUE AS OF THE LAST DAY OF THE QUARTER FOR WHICH THE 13F WAS FILED.
| FUND | NUMBER OF SHARES | VALUE ($) | PUT OR CALL |
|---|
| DIRECTORS | AGE | BIO | OTHER DIRECTOR MEMBERSHIPS |
|---|
No information found
No Customers Found
No Suppliers Found
Price
Yield
| Owner | Position | Direct Shares | Indirect Shares |
|---|