NUTX 10-Q Quarter ended Sept. 30, 2015

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-Q

(Mark One)

þ

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

EXCHANGE ACT OF 1934

For the Quarterly period ended September 30, 2015



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

ACT

For the transition period from

to

Commission file number 000-53862

iGambit Inc.

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

Delaware

11-3363609

(State or other jurisdiction of

(I.R.S. Employer

incorporation or organization)

Identification No.)

1050 W. Jericho Turnpike, Suite A

Smithtown, New York 11787

(Address of Principal Executive Offices)(Zip Code)

(631) 670-6777

(Issuer’s Telephone Number, Including Area Code)

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

Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or

for such shorter period that the registrant was required to file such reports), and (2) has been

subject to such filing requirements for the past 90 days. Yes þ No 

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

corporate Web site, if any, every Interactive Data File required to be submitted and posted

pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding

12 months (or for such shorter period that the registrant was required to submit and post such

files). Yes þ No 

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

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

filer”, “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

(Check one):

Large accelerated     Accelerated filer

Non-accelerated filer 

Smaller reporting

filer 



company þ

(Do not check if a smaller reporting company)

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

Exchange Act). Yes  No þ

The Registrant had 39,683,990 shares of its common stock outstanding as of November 13, 2015.

iGambit Inc.

Form 10-Q

Part I — Financial Information

Item 1.

Financial Statements:

Consolidated Balance Sheets

1

Consolidated Statements of Income

2

Consolidated Statements of Cash Flows

3

Notes to Consolidated Financial Statements

4

Item 2.

Management’s Discussion and Analysis of Financial Condition and

Results of Operations

18

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

26

Item 4.

Controls and Procedures

26

Part II — Other Information

Item 1.

Legal Proceedings

26

Item 1A.

Risk Factors

27

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

28

Item 3.

Defaults upon Senior Securities

28

Item 4.

Removed and Reserved

28

Item 5.

Other Information

28

Item 6.

Exhibits

28

EX-31.1

EX-31.2

EX-32.1

EX-32.2

PART I — FINANCIAL INFORMATION

Item 1 — Financial Statements

IGAMBIT INC.

CONSOLIDATED BALANCE SHEETS

SEPTEMBER 30,

2015

DECEMBER 31,

(Unaudited)

2014

ASSETS

Current assets

Cash

$

18,754

$

133,436

Accounts receivable, net

145,160

81,671

Prepaid expenses

224,247

45,110

Total current assets

388,161

260,217

Property and equipment, net

9,546

8,436

Other assets

Deposits

12,133

12,133

$

409,840

$

280,786

LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIENCY)

Current liabilities

Accounts payable

$

315,389

$

285,277

Advances from stockholders

38,336

--

Total current liabilities

353,725

285,277

Commitments and contingencies

Stockholders' equity (deficiency)

Preferred stock, $.001 par value; authorized - 100,000,000 shares;

no shares  issued or outstanding in 2015 and 2014,

respectively

--

--

Common stock, $.001 par value; authorized - 200,000,000 shares;

issued and outstanding - 28,183,990 shares in 2015 and

26,583,990 shares in 2014, respectively

28,184

26,584

Additional paid-in capital

3,181,522

2,851,124

Accumulated deficit

(3,153,591)

(2,882,199)

Total stockholders' equity (deficiency)

56,115

(4,491)

$

409,840

$

280,786

The accompanying notes are an integral part of these condensed consolidated financial statements.

1

IGAMBIT INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(UNAUDITED)

THREE MONTHS

NINE MONTHS

ENDED

ENDED

SEPTEMBER 30,

SEPTEMBER 30,

2015

2014

2015

2014

Sales

$

312,148

$

269,166

$

960,262

$

819,803

Cost of sales

125,809

115,214

428,875

341,829

Gross profit

186,339

153,952

531,387

477,974

Operating expenses

General and administrative expenses

258,885

338,288

795,632

998,527

Loss from operations

(72,546)

(184,336)

(264,245)

(520,553)

Other income (expenses)

Gain on derivative liability

--

--

--

152,076

Amortization of debt discount

--

--

--

(63,250)

Interest expense

(2,303)

(1,429)

(7,147)

(8,417)

Total other income (expenses)

(2,303)

(1,429)

(7,147)

80,409

Loss from continuing operations

(74,849)

(185,765)

(271,392)

(440,144)

Income from discontinued operations

--

--

--

17,531

Net loss

$

(74,849)

$

(185,765)

$

(271,392)

$

(422,613)

Basic and fully diluted loss per common

share:

Continuing operations

$

(.00)

$

(.01)

$

(.01)

$

(.02)

Discontinued operations

$

.00

$

.00

$

.00

$

.00

Net loss per common share

$

(.00)

$

(.01)

$

(.01)

$

(.02)

Weighted average common shares

outstanding - basic

27,825,294

26,709,056

27,099,008

25,737,023

Weighted average common shares outstanding

- fully diluted

27,825,294

26,709,056

27,099,008

25,737,023

The accompanying notes are an integral part of these condensed consolidated

financial statements.

2

IGAMBIT INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

NINE MONTHS ENDED SEPTEMBER 30,

(UNAUDITED)

2015

2014

CASH FLOWS FROM OPERATING ACTIVITIES:

Net loss

$

(271,392)

$

(422,613)

Adjustments to reconcile net loss to net

cash provided (used) by operating activities

Income from discontinued operations

--

(17,531)

Depreciation

3,916

3,574

Debt discount amortization

--

63,250

Stock-based compensation

331,998

21,106

Uncollectible portion of due from rescission agreement

--

50,779

Gain on derivative liability

--

(152,076)

Increase (Decrease) in cash flows as a result of

changes in asset and liability account balances:

Accounts receivable

(63,489)

34,902

Prepaid expenses

(179,137)

(31,113)

Due from rescission agreement

--

189,000

Accounts payable

30,112

(30,277)

Net cash used by continuing operating activities

(147,992)

(290,999)

Net cash provided by discontinued operating activities

--

655,746

NET CASH PROVIDED (USED) BY OPERATING ACTIVITIES

(147,992)

364,747

CASH FLOWS FROM INVESTING ACTIVITIES:

Purchases of property and equipment

(5,026)

(2,026)

Increase in deposits

--

(2,712)

NET CASH USED BY INVESTING ACTIVITIES

(5,026)

(4,738)

CASH FLOWS FROM FINANCING ACTIVITIES:

Advances from stockholders

58,880

3,600

Repayments of advances from stockholders

(20,544)

(3,600)

Repayments of convertible note payable

--

(54,500)

NET CASH PROVIDED (USED) BY FINANCING ACTIVITIES

38,336

(54,500)

NET INCREASE (DECREASE) IN CASH

(114,682)

305,509

CASH - BEGINNING OF PERIOD

133,436

26,870

CASH - END OF PERIOD

$

18,754

$

332,379

SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:

Cash paid during the period for:

Interest

$

7,147

$

8,417

NON-CASH INVESTING AND FINANCING ACTIVITIES

Note payable converted to common stock

$

--

$

(49,000)

The accompanying notes are an integral part of these condensed consolidated financial statements.

3

IGAMBIT INC.

Notes to Condensed Consolidated Financial Statements

Nine Months Ended September 30, 2015 and 2014

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, 2014, which

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

consolidated interim financial statements of the Company have been prepared in

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

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

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

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

been included. Operating results for the nine months ended September 30, 2015 are not

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

2015. 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, 2014 included in the Company’s Annual Report on Form 10-K, filed with

the Securities and Exchange Commission (“SEC”) on April 15, 2015.

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.

4

Accounts Receivable

Assets from discontinued operations, net includes accounts receivable which represents

50% of contingency payments earned for the previous quarters. The reserve for bad debts

of $250,000 charged to operations in 2010 was reversed in connection with the Summary

Judgment and Forbearance Agreement described in Note 11.   Also included is accrued

interest receivable of $85,156 recorded for interest granted on the balance due from Digi-

data through May 2014. The entire balance including accrued interest totaling $655,746

was repaid to the Company by Digi-data in the year ended December 31, 2014

Note 3 – Summary of Significant Accounting Policies

Principles of Consolidation

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

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

transactions have been eliminated.

Use of Estimates in the Preparation of Financial Statements

The preparation of financial statements in conformity with generally accepted accounting

principles requires management to make estimates and assumptions that affect the reported

amounts of assets and liabilities and disclosure of contingent assets and liabilities at the

date of the consolidated financial statements and the reported amounts of revenues and

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

Fair Value of Financial Instruments

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

accounts receivable, prepaid expenses, deposits, accounts payable, and advances from

stockholders, the carrying amounts approximate fair value due to their short maturities.

Additionally, there are no assets or liabilities for which fair value is remeasured on a

recurring basis.

Revenue Recognition

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

rendered to real estate brokers. The Company recognizes revenues when the services or

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

Company and its customers understand the specific nature and terms of the agreed upon

transactions, and collectability is reasonably assured.

Advertising Costs

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

months ended September 30, 2015 and 2014 were $3,352 and $1,657, 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. Allowance for doubtful accounts was $5,426 and $17,865 at September

30, 2015 and December 31, 2014, respectively.  There was no bad debt expense charged to

operations for the nine months ended September 30, 2015 and 2014, respectively.

Property and Equipment

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 $3,916 and $3,574 was charged to operations for the nine months

ended September 30, 2015 and 2014, respectively.

Stock-Based Compensation

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

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

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

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

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

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

6

to forfeitures of such grants.  Changes in these subjective input assumptions can materially

affect the fair value estimate of the Company’s stock options and warrants.

Income Taxes

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

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

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

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

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

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

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

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

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

statement recognition and measurement of a tax position.

Recent Accounting Pronouncements

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

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

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

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

guidance requires an entity to recognize revenue on contracts with customers to depict the

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

consideration to which the entity expects to be entitled in exchange for those goods or

services. The guidance requires that an entity depict the consideration by applying the

following steps:

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

Step 2: Identify the performance obligations in the contract.

Step 3: Determine the transaction price.

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

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

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

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

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

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

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

is  not  expected  to  have  a  material  impact  on  the  Company's  consolidated  financial

statements.

FASB ASC 718 ASU 2014-12 – Compensation – Stock Compensation:

7

In June 2014, the FASB issued ASU No. 2014-12, "Compensation - Stock Compensation

(Topic 718): Accounting for Share-Based Payments When the Terms of an Award Provide

that a Performance Target Could be Achieved after the Requisite Service Period," ("ASU

2014-12"). The amendments in ASU 2014-12 require that a performance target that affects

vesting  and  that  could  be  achieved  after  the  requisite  service  period  be  treated  as  a

performance condition.  A reporting entity  should apply  existing  guidance in ASC Topic

No. 718, "Compensation - Stock Compensation" as it relates to awards with performance

conditions that affect  vesting to account for such awards.  The amendments in ASU 2014-

12  are  effective  for  annual  periods  and  interim  periods  within  those  annual  periods

beginning after December 15, 2015. Early adoption is permitted. Entities may apply the

amendments in ASU 2014-12 either: (a) prospectively to all awards granted or modified

after the effective date; or (b) retrospectively to all awards with performance targets that

are outstanding as of the beginning of the earliest annual period presented in the financial

statements and to all new or modified awards thereafter. The Company does not anticipate

that the adoption of

ASU 2014-12 will have a material impact on its consolidated financial statements.

Note 4 - Earnings (Loss) Per Common Share

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

260 “ Earnings Per Share ” (“ASC 260”). Basic and diluted net earnings (loss) per common

share was determined by dividing net earnings (loss) applicable to common stockholders

by the weighted average number of common shares outstanding during the period. The

Company’s potentially dilutive shares, which include outstanding common stock options

and common stock warrants, have not been included in the computation of diluted net

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

Three Months Ended

Nine Months Ended

Septemb er 30,

S eptember 30,

2015

2014

2015

2014

Stock options

1,718,900

1,518,900

1,718,900

1,518,900

Stock warrants

275,000

275,000

275,000

275,000

Total shares excluded from

calculation

1,993,900

1,793,900

1,993,900

1,793,900

Note 5 – Stock Based Compensation

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

of stock options  and  warrants, is  recorded in  accordance  with  " Compensation—Stock

Compensation ", Topic 718 of the FASB ASC. Stock-based compensation expense, which

is calculated net of estimated forfeitures, is computed using the grant date fair-value and

amortized over the requisite service period for all stock awards that are expected to vest.

The grant date fair value for stock options and warrants is calculated using the Black-

Scholes option pricing model. Determining the fair value of options at the grant date

8

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

September 30, 2015, there was no unrecognized compensation cost related to non-vested

share-based compensation arrangements granted under the 2006 plan.

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

common  stock.  8,146,900  options  have  been  issued  under  the  plan  to  date  of  which

7,157,038 have been exercised and 692,962 have expired to date.  There were 296,900

options outstanding under the 2006 Plan on its expiration date of December 31, 2009. All

options issued subsequent to this date were not issued pursuant to any plan.

Stock option activity during the nine months ended September 30, 2015 and 2014

Weighted

Average

Weighted

Remaining

Weighted

Average

Average

Contractual

Options

Grant-Date

Life

Outstanding

Exercise Price

Fair Value

(Years)

Options outstanding at

December 31, 2013

668,900

$

0.06

$

0.10

4.44

Options granted

850,000

$

0.04

$

0.09

7.19

Options outstanding at

September 30, 2014

1,518,900

0.06

0.10

5.02

Options outstanding at

December 31, 2014

1,518,900

$

0.03

$

0.10

4.51

Options granted

200,000

0.01

0.40

4.48

September 30, 2015

1,718,900

$

0.03

$

0.13

4.07

follows:

9

Options outstanding at September 30, 2015 consist of:

Date

Number

Number

Exercise

Expiration

Issued

Outstanding

Exercisable

Price

Date

May 1, 2006

100,000

100,000

$0.01

May 1, 2016

May 1, 2006

100,000

100,000

$0.01

May 1, 2016

May 1, 2006

50,000

50,000

$0.01

May 1, 2016

May 1, 2006

46.900

46,900

$0.01

May 1, 2016

June 9, 2014

213,000

213,000

$0.03

June 9, 2024

June 9, 2014

159,000

159,000

$0.03

June 9, 2024

June 9, 2014

600,000

600,000

$0.03

June 9, 2024

June 6, 2014

250,000

250,000

$0.05

June 6, 2019

March 24,  2015

200,000

200,000

$0.01

March 24, 2020

Total

1,718,900

1,718,900

Warrants

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

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

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

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

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

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

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

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

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

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

Warrant activity during the nine months ended September 30, 2015 and 2014 follows:

Weighted

(1)Weighted

Weighted

Average Grant-

Average

Date

Remaining

Warrants

Average

Contractual

Outstanding

Exercise Price

Fair Value

Life (Years)

Warrants outstanding at

December 31, 2013

275,000

$

0.94

$

0.10

5.17

No warrant activity

--

--

--

Warrants outstanding at

September 30, 2014

275,000

$

0.94

$

0.10

4.67

Warrants outstanding at

December 31, 2014

275,000

0.94

0.10

4.17

No warrant activity

--

--

--

Warrants outstanding at

September 30, 2015

275,000

$

0.94

$

0.10

3.67

10

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

Warrants outstanding at September 30, 2015 consist of:

Date

Number

Number

Exercise

Expiration

Issued

Outstanding

Exercisable

Price

Date

April 1, 2000

25,000

25,000

$3.00

2 years after IPO

June 1, 2009

100,000

100,000

$0.50

June 1, 2019

June 1, 2009

50,000

50,000

$0.65

June 1, 2019

June 1, 2009

50,000

50,000

$0.85

June 1, 2019

June 1, 2009

50,000

50,000

$1.15

June 1, 2019

Total

275,000

275,000

Note 6 – Convertible Note Payable

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

principal amount of $103,500, convertible into shares of the Company’s common stock.

The Note, including accrued interest was due June 18, 2014 and was convertible any time

after 180 days at the option of the holder into shares of the Company’s common stock at

55% of the average stock price of the lowest 3 closing bid prices during the 10 trading day

period ending on the latest complete trading day prior to the conversion date.   Interest

expense on the convertible note of $3,242 was recorded for the year ended December 31,

2014.

Initially the Company had anticipated repaying the obligation prior to the effective date of

the holder electing to convert. Since the effective date of the election to convert has passed

the Company recorded a debt discount related to identified embedded derivatives relating

to conversion features and a reset provisions (see Note 7) based fair values as of the

inception date of the Note. The calculated debt discount equaled the face of the note and

was amortized over the term of the note. During the year ended December 31, 2014, the

Company amortized $63,250 of debt discount. During the year ended December 31, 2014,

the noteholder converted $49,000 of the principal balance to 1,539,934 shares of common

stock, and the Company repaid the remaining note balance of $54,500 and accrued interest

of $5,646 on June 18, 2014.

Note 7 - Derivative Liability

Convertible Note

During the year ended December 31, 2013, the Company issued a convertible note (see

Note 6 above).

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

market price of the Company’s common stock. The Company has identified embedded

derivatives included in these notes as a result of certain anti-dilutive (reset) provisions,

related to certain conversion features. The accounting treatment of derivative financial

instruments requires that the Company record the fair value of the derivatives as of the

11

inception date of the convertible note and debt discount amortization to fair value as of

each subsequent reporting date. This resulted in a fair value of derivative liability of

$152,076 in which to the extent of the face value of convertible note was treated as debt

discount with the remainder treated as interest expense.

The fair value of the embedded derivatives at  December 31, 2013, in  the amount of

$152,076, was determined using the Binomial Option Pricing Model based on the

following assumptions: (1) dividend yield of 0%; (2) expected volatility of 243.00%, (3)

weighted average risk-free interest rate of 0.09%, (4) expected lives of 0.72 to 0.75 years,

and (5) estimated fair value of the Company’s common stock of $0.51 per share. The

Company recorded interest expense from the excess of the derivative liability over the

convertible  note  of  $48,576  during  the  year  ended  December  31,  2013.    A  gain  on

derivative liability of $152,076 was recorded during the year ended December 31, 2014 for

the satisfaction of the convertible note.

Based upon ASC 840-15-25 (EITF Issue 00-19, paragraph 11) the Company has adopted

a sequencing approach regarding the application of ASC 815-40 to its outstanding

convertible note. Pursuant to the sequencing approach, the Company evaluates its contracts

based upon earliest issuance date.

Note 8 – Stock Transactions

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

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

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

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

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

Amendments”).  The  Capitalization  Amendments  create  provisions  in  the  Company’s

Articles of Incorporation, which allows the voting powers, designations, preferences and

other  special  rights,  and  qualifications,  limitations  and  restrictions  of  each  series  of

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

stockholders. No dividend, voting, conversion, liquidation or redemptions rights as well as

redemption or sinking fund provisions are yet established with respect to the Company’s

preferred stock.  On October 3, 2014, the Majority Stockholders executed and delivered to

the Company a written consent approving the Current Action.

Common Stock Issued

The Company issued 1,000,000 and 600,000 common shares for services, valued at $.20

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

In  connection  with  the  convertible  note  payable  (see  Note  6 above)  the  noteholder

converted $49,000 of the principal balance to 1,539,934 shares of common stock during

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

of the convertible note.

12

Note 9 - Income Taxes

Quarter Ended September 30,

2015

2014

Effective tax rate

0.0 %

0.0 %

A full valuation allowance was recorded against the Company’s net deferred tax assets. A

valuation allowance must be established if it is more likely than not that the deferred tax

assets  will  not  be  realized.  This  assessment  is  based  upon  consideration  of  available

positive and negative evidence, which includes, among other things, the Company’s most

recent results of operations and expected future profitability. Based on the Company’s

cumulative  losses  in  recent  years,  a  full  valuation  allowance  against  the  Company’s

deferred tax assets has been established as Management believes that the Company will

not realize the benefit of those deferred tax assets.

Note 10 - Retirement Plan

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

substantially all employees. Participating employees may elect to contribute, on a tax-

deferred basis, a portion of their compensation in accordance with Section 408 (a) of the

Internal Revenue Code. The Company matches up to 3% of employee contributions.  The

Company's contributions to the plan for the nine months ended September 30, 2015 and

2014 were $3,678 and $5,179, respectively.

Note 11 – Concentrations and Credit Risk

Sales and Accounts Receivable

Gotham had sales to one customer which accounted for approximately 64% of Gotham’s

total sales for the nine months ended September 30, 2015. The customer accounted for

approximately 71% of accounts receivable at September 30, 2015.

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

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

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

Cash

Cash  is  maintained  at  a  major  financial  institution.  Accounts  held  at  U.S.  financial

institutions are insured by the FDIC up to $250,000. Cash balances could exceed insured

amounts at any given time, however, the Company has not experienced any such losses.

The Company did not have any interest-bearing accounts at September 30, 2015 and

December 31, 2014, respectively.

Note 12 - Fair Value Measurement

13

The Company adopted the provisions of Accounting Standards Codification subtopic 825-

10, Financial Instruments (“ASC 825-10”) on January 1, 2008. ASC 825-10 defines fair

value as the price that would be received from selling an asset or paid to transfer a liability

in an orderly transaction between market participants at the measurement date. When

determining the fair value measurements for assets and liabilities required or permitted to

be recorded at fair value, the Company considers the principal or most advantageous

market in which it would transact and considers assumptions that market participants

would use when pricing the asset or liability, such as inherent risk, transfer restrictions, and

risk of nonperformance. ASC 825-10 establishes a fair value hierarchy that requires an

entity to maximize the use of observable inputs and minimize the use of unobservable

inputs when measuring fair value. ASC 825-10 establishes three levels of inputs that may

be used to measure fair value:

Level 1 – Quoted prices in active markets for identical assets or liabilities.

Level 2 – Observable inputs other than Level 1 prices such as quoted prices for similar

assets  or  liabilities;  quoted  prices  in  markets  with  insufficient  volume  or  infrequent

transactions (less active markets); or model-derived valuations in which all significant

inputs are observable or can be derived principally from or corroborated by observable

market data for substantially the full term of the assets or liabilities.

Level 3 – Unobservable inputs to the valuation methodology that are significant to the

measurement of fair value of assets or liabilities.

All items required to be recorded or measured on a recurring basis consist of derivative

liabilities and are based upon level 3 inputs.

To the extent that valuation is based on models or inputs that  are less observable or

unobservable in the market, the determination of fair value requires more judgment. In

certain cases, the inputs used to measure fair value may fall into different levels of the fair

value hierarchy. In such cases, for disclosure purposes, the level is the fair value hierarchy

within which the fair value measurement is disclosed and is determined based on the lowest

level input that is significant to the fair value measurement.

Upon adoption of ASC 825-10, there was no cumulative effect adjustment to beginning

retained earnings and no impact on the consolidated financial statements.

The carrying value of the Company’s cash and cash equivalents, accounts receivable,

accounts payable, short-term borrowings (including convertible note payable), and other

current assets and liabilities approximate fair value because of their short-term maturity.

As of September 30, 2015 and December 31, 2014, the Company did not have any items

that would be classified as level 1 or 2 disclosures.

14

The Company recognizes its derivative liabilities as level 3 and values its derivatives using

the methods discussed in Note 7. While the Company believes that its valuation methods

are appropriate and consistent with other market participants, it recognizes that the use of

different methodologies or assumptions to determine the fair value of certain financial

instruments could result in a different estimate of fair value at the reporting date. The

primary assumptions that would significantly affect the fair values using the methods

discussed in Note 7 are that of volatility and market price of the underlying common stock

of the Company.

As  of  September  30,  2015  and  December  31,  2014,  the  Company did  not  have  any

derivative instruments that were designated as hedges.

Fluctuations in the Company’s stock price are a primary driver for the changes in the

derivative valuations during each reporting period. As the stock price decreases for each of

the related derivative instruments, the value to the holder of the instrument generally

decreases, therefore decreasing the liability on the Company’s balance sheet. Additionally,

stock price volatility is one of the significant unobservable inputs used in the fair value

measurement of each of the Company’s derivative instruments. The simulated fair value

of these liabilities is sensitive to changes in the Company’s expected volatility. A 10%

change in pricing inputs and changes in volatilities and correlation factors would currently

not result in a material change in value for the level 3 financial liability.

Note 13 - Related Party Transactions

Note Payable – Related Party

Gotham was provided a loan which was due on December 31, 2013 from an entity that was

previously a related party.   The balance of $6,263 has not been paid and is accordingly

included in accounts payable at September 30, 2015 and December 31, 2014.

Advances From Stockholders

Two stockholders/officers of the Company made cash advances totaling $38,336 on behalf

of the Company.  These advances do not bear interest and will be repaid by December 31,

2015.

Note 14 – Commitments and Contingencies

Lease Commitment

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

Smithtown, New York commencing on March 1, 2012 at a monthly rent of $1,500 with

2% annual increases.

15

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

August  2,  2012  at  a  monthly license  fee  of  $4,025.    The  license  agreement  may be

terminated upon 30 days’ notice.

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

December 31 are as follows:

2015

$   4,830

2016

19,440

2017

3,240

$ 27,510

Rent expense of $50,963 and $51,209 was charged to operations for the nine months ended

September 30, 2015 and 2014, 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.

Note 15 – Subsequent Events

Acquisition

On November 4, 2015, the Company consummated the acquisition of Wala, Inc. doing business as

ArcMail Technology (a Louisiana corporation) in accordance with a Stock Purchase Agreement

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

(“ArcMail”), Rory T. Welch (the “Seller”) and the Company.

Arcmail

is engaged in the business of creating and providing email archiving and management

solutions to customers throughout the United States.

Pursuant to the Stock Purchase, the total consideration to be paid for the outstanding capital stock

of ArcMail is 11,500,000 shares of iGambit Common stock composed of:

(1) 10,500,000  shares  of iGambit  Common  stock to  the  Seller,  and/or  Seller’s

designees at Closing and;

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

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

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

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

indemnification against the Seller under the Purchase Agreement, Purchaser shall continue

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

fully and finally resolve such claims.

Sale of Assets

16

On  November  5,  2015,  pursuant  to  an  asset  purchase  agreement  Gotham  sold  assets

consisting of fixed assets, client and supplier lists, trade names, software, social media

accounts and websites, and domain names to VHT, Inc., a Delaware corporation for a

purchase price of $600,000. Gotham received $400,000 and commencing on January 29,

2016, VHT, Inc. shall pay twelve equal monthly installments of $16,666.67 on the last

business day  of each month  (the “ Installment Payments” and each, an “ Installment

Payment” ), each Installment Payment to consist of (1) an earn-out payment of $10,000 (the

“ Earn-Out Payments” and each, an “ Earn-Out Payment” ), and (2) an additional payment

of $6,666.67 (the “ Additional Payments” and each, an “ Additional Payment” ); provided

that VHT, Inc. shall only be required to make the Earn-Out Payments for as long as it

maintains its relationship with Gotham’s major client, unless it is dissatisfied with VHT,

Inc.

17

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.

18

Revenue Recognition

Our revenues from continuing operations consist of revenues derived

primarily from sales of products and services rendered to real estate brokers. We recognize

revenues when the services or products have been provided or delivered, the fees we charge

are fixed or determinable, we and our customers understand the specific nature and terms

of the agreed upon transactions, and collectability is reasonably assured.

Contingency payment income was recognized quarterly from a percentage of Digi-

Data’s vaulting service revenue, and is included in discontinued operations.

Cash and Cash Equivalents

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

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

maturity of three months or less.

Accounts Receivable

We analyze the collectability of accounts receivable from continuing operations

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

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

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

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

when we become aware of information indicating that a customer may not be able to meet

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

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

expense charged to operations for nine months ended September 30, 2015 and 2014,

respectively.

Assets from discontinued operations, net includes accounts receivable which

represents 50% of contingency payments earned for the previous quarters. The reserve for

bad debts of $250,000 charged to operations in 2010 was reversed in connection with the

Summary Judgment and Forbearance Agreement described in Note 11. Also included is

accrued interest receivable of $85,156 recorded for interest granted on the balance due from

Digi-data  through  May  2014.    The  entire  balance  including  accrued  interest  totaling

$655,746 was repaid to the Company by Digi-Data in the nine months ended September

30, 2014.

Property and Equipment

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

19

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 $3,916 and $3,574 was charged to operations for the nine

months ended September 30, 2015 and 2014, respectively.

Stock-Based Compensation

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

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

requires  the  measurement  of  compensation  expense  for  all  share-based  compensation

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

recognition of compensation expense over the related service period for awards expected

to vest.  We use the Black-Scholes option valuation model to estimate the fair value of our

stock options and warrants. The Black-Scholes option valuation model requires the input

of  highly  subjective  assumptions  including  the  expected  stock  price  volatility  of  the

Company’s common stock.  Changes in these subjective input assumptions can materially

affect the fair value estimate of our stock options and warrants.

Income Taxes

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

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

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

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

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

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

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

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

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

statement recognition and measurement of a tax position. Management has determined that

the Company has no significant uncertain tax positions requiring recognition and

measurement under ASC 740-10.

Convertible Note

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

principal amount of $103,500, convertible into shares of the Company’s common stock.

The Note, including accrued interest was due June 18, 2014 and was convertible any time

after 180 days at the option of the holder into shares of the Company’s common stock at

55% of the average stock price of the lowest 3 closing bid prices during the 10 trading day

period ending on the latest complete trading day prior to the conversion date.   Interest

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

September 30, 2014.

20

Initially we anticipated repaying the obligation prior to the effective date of the

holder electing to convert. Since the effective date of the election to convert passed we

recorded a debt discount related to identified embedded derivatives relating to conversion

features and a reset provisions (see Note 7) based fair values as of the inception date of the

Note. The calculated debt discount equaled the face of the note and was amortized over

the term of the note.   During the nine months ended September30, 2014, we amortized

$63,250 of debt discount.   During the nine months ended September30, 2014, the note

holder converted $49,000 of the principal balance to 1,539,934 shares of common stock,

and we repaid the remaining note balance of $54,500 and accrued interest of $5,646 on

June 18, 2014.

Derivative Liability

Convertible Note

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

Convertible Note above).

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

the market price of the Company’s common stock. We identified embedded derivatives

included in these notes as a result of certain anti-dilutive (reset) provisions, related to

certain conversion features. The accounting treatment of derivative financial instruments

requires that we record the fair value of the derivatives as of the inception date of the

convertible  note  and  debt  discount  amortization  to  fair  value  as  of  each  subsequent

reporting date. This resulted in a fair value of derivative liability of $152,076 in which to

the extent of the face value of convertible note was treated as debt discount with the

remainder treated as interest expense.

The fair value of the embedded derivatives at  December 31, 2013, in  the amount of

$152,076, was determined using the Binomial Option Pricing Model based on the

following assumptions: (1) dividend yield of 0%; (2) expected volatility of 243.00%, (3)

weighted average risk-free interest rate of 0.09%, (4) expected lives of 0.72 to 0.75 years,

and (5) estimated fair value of the Company’s common stock of $0.51 per share. We

recorded interest expense from the excess of the derivative liability over the convertible

note of $48,576 during the year ended December 31, 2013.A gain on derivative liability of

$152,076 was recorded during  the  nine months ended September  30, 2014 for the

satisfaction of the convertible note.

Based  upon  ASC  840-15-25  (EITF  Issue  00-19,  paragraph  11)  we  adopted  a

sequencing approach regarding the application of ASC 815-40 to its outstanding

convertible note. Pursuant to the sequencing approach, we evaluate our contracts based

upon earliest issuance date.

21

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS

INTRODUCTION

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

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

services to the real estate industry.

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

ArcMail  Technology  (the  “ArcMial”)  in  accordance  with  a  Stock  Purchase  Agreement  (the

“Purchase Agreement”) by and among ArcMail,  Rory T. Welch (the “Seller”) and the Company.

Pursuant to the Stock Purchase, the total consideration to be paid for the outstanding capital stock

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

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

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

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

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

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

indemnification against the Seller under the Purchase Agreement, Purchaser shall continue

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

fully and finally resolve such claims.

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

Form 8-K filed on November 10, 2015.

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

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

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

between Gotham and VHT.      Pursuant  to the Purchase Agreement  we received  $600,000 in

consideration, $400,000 of the consideration was received at closing and the remaining $200,000

portion of the consideration is subject to twelve (12) equal monthly payments beginning January

2016. The sale included certain of the assets of the Gotham, including the Elliman customer

agreement, all customer accounts, all vendor agreements and all the intellectual property.

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

8-K filed on November 11, 2015.

Assets. At September 30, 2015, we had $409,840 in total assets, compared to

$280,786 at December 31, 2014. The increase in total assets was primarily due to the

increase in accounts receivable and prepaid expenses.

Liabilities. At September 30, 2015, our total liabilities were $353,725 compared

to $285,277 at December 31, 2014. Liabilities consist of accounts payable of $315,389,

and   advances   from   shareholders   of   $38,336,   whereas   our   total   liabilities   as   of

December 31, 2014 consisted of accounts payable of $285,277. The increase in liabilities

was primarily due to an increase in accounts payable and a loan from stockholders.  We do

not have any long term liabilities.

22

Stockholders’ Equity. Our stockholders’ equity increased to $56,115 at September

30, 2015 from a deficit of ($4,491) at December 31, 2014. This increase was primarily due

to an increase in assets for the nine months ended September 30, 2015.

THREE MONTHS ENDED SEPTEMBER 30, 2015 AS COMPARED TO THREE

MONTHS ENDED SEPTEMBER 30, 2014

Revenues and Cost of Sales . We had $312,148 of revenue during the three months

ended September 30, 2015 compared to revenue of $269,166 during the three months ended

September 30, 2014.  The increase in revenue was due primarily to an increase in revenue

generated by our Gotham subsidiary.  Our cost of goods sold increased to $125,809 for the

three months ended September 30, 2015 as opposed to $115,214 for the three months

ending September 30, 2014 as a direct result of increased sales

General  and  Administrative  Expenses . General  and  Administrative  Expenses

decreased to $258,885 for the three months ended September 30, 2015 from $338,288 for

the three months ended September 30, 2014. For the three months ended September 30,

2015  our  General  and  Administrative  Expenses  consisted  of  corporate  administrative

expenses of $60,654, rent expense of $16,845, legal and accounting fees of $16,222,

employee benefits expense of $15,350, directors and officers insurance of $6,716, payroll

expenses of $100,598, finder’s fees and commissions of $17,500 and investor relations

expenses of $25,000. For the three months ended September 30, 2014 our General and

Administrative Expenses consisted of corporate administrative expenses of $51,116, rent

expense of $16,756, legal and accounting fees of $24,225, employee benefits expense of

$15,933, directors and officers insurance of $11,075 and payroll expenses of $219,183.

The decreases from the three months ended September 30, 2014 to the three months ended

September 30, 2015 relate primarily to a decrease in payroll expenses and a decrease in

general and administrative costs associated with the operation of our Gotham subsidiary.

Costs associated with our general and administrative expenses are likely to increase as a

result of the sale of the assets of our Gotham subsidiary and the acquisition of Wala, Inc.

doing business as ArcMail Technology (‘ArcMail”) in the fourth quarter of fiscal year

2015.

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

months ended September 30, 2015 and 2014 respectively. We had interest expense of

$(2,303) for the three months ended September 30, 2015 compared to interest expense of

$(1,429) for the three months ended September 30, 2014.

NINE MONTHS ENDED SEPTEMBER 30, 2015 AS COMPARED TO NINE

MONTHS ENDED SEPTEMBER 30, 2014.

Revenues and Cost of Sales . We had $960,262 of revenue during the nine months ended

September 30, 2015, as compared to $819,803 of revenue during the nine months ended

September 30, 2014.  The increase in revenue was due primarily to an increase in revenue

generated by our Gotham subsidiary.  Our cost of goods sold increased to $428,875 for the

23

three months ended September 30, 2015 as opposed to $341,829 for the three months

ending September 30, 2014 as a direct result of increased sales

General   and   Administrative   Expenses . General   and   Administrative   Expenses

decreased to $795,632 for the nine months ended September 30, 2015 from $998,527 for

the nine months ended September 30, 2014. For the nine months ended September 30, 2015

our General and Administrative Expenses consisted of corporate administrative expenses

of $187,514, rent expense of $50,963, legal and accounting fees of $80,870, employee

benefits expense of $42,405, directors and officers insurance of $27,249, payroll expenses

of $336,982, finder’s fees and commissions of $35,000 and investor relation expenses of

$34,649. For the nine months ended September 30, 2014 our General and Administrative

Expenses consisted of corporate administrative expenses of $189,645, rent expense of

$51,209, employee benefits expense of $53,271, legal and accounting fees of $73,189,

directors and officers insurance expense of $32,328, payroll expenses of $548,106 and a

bad debt write off of $50,779 as part of a settlement for the receivable balance on the IGX

rescission agreement. The decreases from the nine months ended September 30, 2014 to

the  nine  months  ended  September  30,  2015  relate  primarily  to a  decrease  in  payroll

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

of our Gotham subsidiary. Costs associated with our general and administrative expenses

are likely to  increase as a result of the sale of the assets of our Gotham subsidiary and the

acquisition of Wala, Inc. doing business as ArcMail Technology in the fourth quarter of

fiscal year 2015.

Other Income (Expense) and Taxes . We had no other income for the nine months ended

September 30, 2015 as opposed to other income of $80,409 primarily due to the gain on

derivative liability for the nine months ended September 30, 2014.

LIQUIDITY AND CAPITAL RESOURCES

General

As reflected in the accompanying consolidated financial statements, at September

30, 2015, we had $18,754 of cash and stockholders’ equity of $56,115 as compared to

$133,436 of cash and stockholders’ deficiency of $(4,491) at December 31, 2014. At

September 30, 2015 we had $409,840 in total assets, compared to $280,786 at December

31, 2014.

Our primary capital requirements in 2015 are likely to arise from the expansion of

our new acquired ArcMail operations in fourth quarter 2015, and, in the event we effectuate

an acquisition, from: (i) the amount of the purchase price payable in cash at closing, if any

(ii) professional  fees associated with the  negotiation,  structuring, and closing  of  the

transaction; and (iii) post-closing costs. It is not possible to quantify those costs at this point

in time, in that they depend on ArcMail’s business opportunities, the state of the overall

economy, the relative size of any target company we identify and the complexity of the

related acquisition transaction(s). We anticipate raising capital in the private markets to

cover any such costs, though there can be no guaranty we will be able to do so on terms

24

we deem to be acceptable. We do not have any plans at this point in time to obtain a line

of credit or other loan facility from a commercial bank.

While we believe in the viability of our strategy to improve ArcMail’s sales volume and

to acquire companies, and in our ability to raise additional funds, there can be no assurances

that we will be able to fully effectuate our business plan.

We  believe  we  will  continue  to  increase  our  cash  position  and  liquidity  for  the

foreseeable future. We believe we have enough capital to fund our present operations.

Cash Flow Activity

Net cash used by operating activities was $147,992 for the nine months ended

September 30, 2015, compared to net cash provided by operating activities of $364,747 for

the  nine  months  ended  September  30,  2014.  Net  cash  used  by  continuing  operating

activities was $147,992 for the nine months ended September 30, 2015, compared to net

cash  used  by  continuing  operating  activities  of  $290,999  for  the  nine  months  ended

September 30, 2014. Our primary source of operating cash flows from continuing operating

activities for the nine months ended September 30, 2015 was from our Gotham subsidiary’s

revenues  of  $960,262  and  $819,903 for the  nine  months  ended  September 30,  2014.

Additional contributing factors to the change were from an increase in accounts receivable

of $63,489, an increase in prepaid expenses of $179,137 and an increase in accounts

payable of $30,112. Net cash provided by discontinued operating activities was $0 for the

nine months ended September 30, 2015 and $655,746 for the nine months ended September

30, 2014

Cash used by investing activities was $5,026 for the nine months ended September

30, 2015 compared to cash used by investing activities of $4,738 for the nine months ended

September 30, 2014. For the nine months ended September 30, 2015 the primary use of

cash from investing activities was from purchases of property and equipment of $5,026.

For the nine months ended September 30, 2014 the primary use of cash from investing

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

deposits of $2,712.

Cash  provided  by  financing  activities  was $38,336  for  the  nine months  ended

September 30, 2015 compared to cash used by financing activities of $(54,500) for the nine

months ended September 30, 2014. The cash flows provided by financing activities for the

nine months ended September 30, 2015 was from advances from stockholders. The cash

flows used by financing activities for the nine months ended September 30, 2014 was

primarily from repayment of the convertible note payable.

Supplemental Cash Flow Activity

In the nine months ended September 30, 2015 the company paid interest of $7,147

compared to interest of $8,417 in the nine months ended September 30, 2014.

25

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 September 30, 2012. Based upon that evaluation,

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

controls and procedures were effective as of September 30, 2015.

Change in Internal Controls

During the nine months ended September 30, 2015, there were no changes in our

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

materially affect, our internal control over financial reporting.

PART II — OTHER INFORMATION

Item 1. Legal Proceedings.

Digi-Data Corporation

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

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

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

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

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

pursuant to said agreement.

On December 13, 2013 the  Court Granted Summary Judgment in iGambit’s favor

against Digi-Data in the amount of $570,590, plus interest at the Maryland legal rate of 6%

per annum from August 31, 2012, and post judgment interest at the Federal statutory

Rate.   Furthermore, Digi-Data’s Counterclaim was dismissed.

On February 24, 2014 we entered into a Forbearance Agreement with Digi-Data

pursuant to which Digi-Data shall pay to iGambit Six Hundred Forty-Six Thousand, Six

Hundred Sixty-Eight Dollars and Sixty-Seven Cents ($646,668.67) (the “Settlement

Amount”) in full satisfaction of the Judgment based upon the following terms:

Initial Payment: Digi-Data shall pay the Settlement Amount by delivering Twenty-

Five Thousand Dollars and No Cents ($25,000.00) to iGambit upon the execution of this

26

Agreement (“Initial Payment”), and delivering the remaining Six Hundred Twenty-One

Thousand, Six Hundred Sixty-Eight Dollars and Sixty-Seven Cents ($621,668.67), plus

interest at a rate of 6% per annum (calculated at Actual/360) (the “Remaining Balance”) to

iGambit.

Monthly Payments: C ommencing thirty (30) calendar days after the Effective Date,

and continuing for the three following months, Digi-Data shall make monthly payments of

Twelve Thousand, Five Hundred Dollars and No Cents ($12,500.00) to iGambit (each, an

“Initial Monthly Payment”).   Thirty (30) calendar days after the fourth Initial Monthly

Payment is made, Digi-Data shall commence making a monthly payment of Twenty-Five

Thousand Dollars and No Cents ($25,000.00) to iGambit until the Remaining Balance is

paid in full (each, a “Subsequent Monthly Payment”).  Such Initial Monthly Payments and

Subsequent Monthly Payments shall be credited to payment of the Settlement Amount and

Remaining  Balance,  with  payment  being  first  applied  to  accrued  and/or  outstanding

interests, then to principal.

Line of Credit Payments: In the event that Digi-Data obtains a new line of credit

subsequent to the Effective Date under terms acceptable to Digi-Data in the amount of

Three Million Dollars and No Cents ($3,000,000.00) or greater it shall, within fifteen (15)

calendar days upon obtaining such funding, pay the full Remaining Balance to iGambit

(the “LOC Payment”).  In the event that Digi-Data obtains a new line of credit subsequent

to the Effective Date under terms acceptable to Digi-Data for any amount less than Three

Million Dollars and No Cents ($3,000,000.00) that is secured by its receivables it shall,

within fifteen (15) calendar days of obtaining such funding, pay Twenty-Five Thousand

Dollars  and  No  Cents  ($25,000.00)  to  iGambit  (the  “Receivables  Payment”).    Such

Receivables Payment shall be credited to payment of the Settlement Amount and

Remaining  Balance,  with  payment  being  first  applied  to  accrued  and/or  outstanding

interests, then to principal.

Digi-Data Sale :   In the event of a Digi-Data Sale, iGambit shall be paid the Remaining

Balance at closing of any such Digi-Data Sale as provided in paragraph 2, below.  iGambit

acknowledges that, if the Digi-Data Sale is a sale or sales of the Digi-Data Assets, there

may be insufficient proceeds to pay the Remaining Balance in full. If the Digi-Data Sale

is a sale or sales of the stock of Digi-Data and there are insufficient proceeds at closing to

pay the Remaining Balance in full, iGambit shall continue to receive the Subsequent

Monthly Payment until the full Remaining Balance is paid.

On May 12, 2014, Digi-Data paid the full balance due on the judgment plus all accrued

interest upon the sale of Digi-Data.

Item 1A. Risk Factors.

Not required

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.

27

In connection with the convertible note payable (see Note 6), on April 1, 2014, the note

holder elected to convert $10,000 principal amount of the Note into 90,909 shares of

common stock at a conversion price of $.11 per share.  On April 24, 2014, the note holder

elected to convert an additional $12,000 principal amount of the Note into 112,888 shares

of common stock at a conversion price of $.1063 per share. On June 2, 2014, the note

holder elected to convert an additional $12,000 principal amount of the Note into 427,046

shares of common stock at a conversion price of $.0281 per share.  On June 11, 2014, the

note holder elected to convert an additional $15,000 principal amount of the Note into

909,091 shares of common stock at a conversion price of $.0165 per share.  We repaid the

remaining note balance of $54,500 and accrued interest of $5,646 on June 18, 2014.

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.

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.)

28

SIGNATURES

In accordance with the requirements of the Exchange Act, the registrant caused this

report to be signed on its behalf by the undersigned, thereunto duly authorized, on

November 16, 2015.

iGambit Inc.

/s/ John Salerno

John Salerno

Chief Executive Officer

/s/ Elisa Luqman

Elisa Luqman

Chief Financial Officer

29

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.)

30