NUTX 10-Q Quarter ended March 31, 2017

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-Q

(Mark One)

þ

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

SECURITIES EXCHANGE ACT OF 1934

For the Quarterly period ended March 31, 2017

o

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

EXCHANGE ACT

For the transition period from

to

Commission file number 000-53862

iGambit Inc.

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

Delaware

11-3363609

(State or other jurisdiction of

(I.R.S. Employer

incorporation or organization)

Identification No.)

1050 W. Jericho Turnpike, Suite A

Smithtown, New York 11787

(Address of Principal Executive Offices) (Zip Code)

(631) 670-6777

(Issuer’s Telephone Number, Including Area Code)

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

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

12 months (or for such shorter period that the registrant was required to file such reports),

and (2) has been subject to such filing requirements for the past 90 days. Yes þ No o

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

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

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

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

and post such files). Yes þ No o

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

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

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

the Exchange Act. (Check one):

Large

Accelerated

Non-accelerated filer o

Smaller

accelerated

filer o

reporting

filer o

company þ

(Do not check if a smaller reporting company)

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

2 of the Exchange Act). Yes o No þ 

The Registrant had 117,868,990 shares of its common stock outstanding as of May 22,

2017.

iGambit Inc.

Form 10-Q

Page

No.

Part I — Financial Information

Item 1.

Financial Statements:

Condensed Consolidated Balance Sheets

2

Condensed Consolidated Statements of Income

4

Condensed Consolidated Statements of Cash Flows

5

Notes to Condensed Consolidated Financial Statements

7

Item 2.

Management’s Discussion and Analysis of Financial Condition and

Results of Operations

24

Item 3 .

Quantitative and Qualitative Disclosures About Market Risk

27

Item 4.

Controls and Procedures

28

Part II — Other Information

Item 1.

Legal Proceedings

28

Item 1A.

Risk Factors

28

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

1

PART I – FINANCIAL INFORMATION

Item 1 – Financial Statements

IGAMBIT INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

MARCH

31,

DECEMBER

2017

31,

(Unaudited)

2016

ASSETS

Current assets

Cash

$

73,527

$

10,522

Accounts receivable, net

3,500

--

Prepaid expenses and other current assets

91,449

108,941

Note receivable

--

15,000

Assets from discontinued operations, net

420,751

373,469

Total current assets

589,227

507,932

Property and equipment, net

4,770

1,183

Other assets

Intangible assets, net

849,945

--

Goodwill

277,176

--

Deposits

1,720

1,720

Total other assets

1,128,841

1,720

$

1,722,838

$

510,835

LIABILITIES AND STOCKHOLDERS' DEFICIENCY

Current liabilities

Accounts payable and accrued expenses

$

374,371

$

356,005

2

Accrued interest on notes payable

1,801

--

Amounts due to related parties

1,000

508

Notes payable

60,500

--

Convertible debentures, net

69,634

50,000

Derivative liability

83,773

--

Liabilities from discontinued operations

6,086,635

5,973,747

Total liabilities

6,677,714

6,380,260

Stockholders' deficiency

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

shares;

issued and outstanding - 0 shares in 2017 and 2016,

respectively

--

--

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

shares;

issued and outstanding at March 31, 2017- 56,718,990

shares and

39,708,990 shares at December 31, 2016

56,719

39,709

Additional paid-in capital

5,461,110

4,321,497

(10,472,705

Accumulated deficit

)

(10,230,631)

Total stockholders' deficiency

(4,954,876)

(5,869,425)

$

1,722,838

$

510,835

See accompanying notes to the condensed consolidated financial statements.

3

IGAMBIT INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

THREE MONTHS ENDED MARCH 31,

(UNAUDITED)

2017

2016

Sales

$

4,350

$

--

Cost of sales

180

--

Gross profit

4,170

--

Operating expenses

General and administrative expenses

167,380

161,936

Loss from operations

(163,210)

(161,936)

Other income (expenses)

Interest expense

(11,927)

(601)

Loss from continuing operations

(175,137)

(162,537)

Loss from discontinued operations

(66,937)

(76,333)

Net loss

$

(242,074)

$

(238,870)

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

Continuing operations

$

(.00)

$

(.01)

Discontinued operations

$

(.00)

$

(.00)

Net income (loss) per common share

$

(.00)

$

(.01)

Weighted average common shares outstanding - basic and fully diluted

48,807,434

39,683,990

See accompanying notes to the condensed consolidated financial statements.

4

IGAMBIT INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

THREE MONTHS ENDED MARCH 31,

(UNAUDITED)

2017

2016

CASH FLOWS FROM OPERATING ACTIVITIES:

Net loss

$ (242,074)

$ (238,870)

Loss from discontinued operations

66,937

76,333

Net earnings from continuing operations

(175,137)

(162,537)

Adjustments to reconcile net loss to net

cash used in operating activities

Depreciation

213

118

Amortization

12,745

--

Non cash interest expense

9,230

--

Stock-based compensation expense

800

--

Increase (Decrease) in cash flows as a result of

changes in asset and liability account balances:

Accounts receivable

(1,250)

--

Prepaid expenses and other current assets

17,492

45,262

Accounts payable and accrued expenses

18,366

104,158

Accrued interest on notes payable

1,801

--

Net cash used in continuing operating activities

(115,740)

(12,999)

Net cash used in discontinued operating activities

(8,975)

(269,436)

NET CASH USED IN OPERATING ACTIVITIES

(124,715)

(282,435)

CASH FLOWS FROM INVESTING ACTIVITIES:

Preacquisition loans to subsidiary

(50,000)

--

Cash acquired from acquisition of subsidiary

29,584

--

Net cash used in continuing investing activities

(20,416)

--

Net cash provided by discontinued investing activities

31,636

14,946

NET CASH PROVIDED BY INVESTING ACTIVITIES

11,220

14,946

5

CASH FLOWS FROM FINANCING ACTIVITIES:

Proceeds from issuance of convertible debentures

100,000

--

Proceeds from sale of common stock

100,000

--

Increase in amounts due to related parties

492

2,300

Net cash provided by continuing financing activities

200,492

2,300

Net cash provided by (used in) discontinued financing activities

(23,992)

158,686

NET CASH PROVIDED BY FINANCING ACTIVITIES

176,500

160,986

NET INCREASE (DECREASE) IN CASH

63,005

(106,503)

CASH - BEGINNING OF PERIOD

10,522

122,291

CASH - END OF PERIOD

$

73,527

$

15,788

SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:

Cash paid during the period for:

Interest

$

896

$

601

Non-cash investing and financing activities:

Debt discount

$

80,822

$

--

See accompanying notes to the condensed consolidated financial statements.

6

IGAMBIT INC.

Notes to Condensed Consolidated Financial Statements

Three Months Ended March 31, 2017 and 2016

(Unaudited)

Note 1 - Organization and Basis of Presentation

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

“Company”) and its wholly-owned subsidiaries, HealthDatix, Inc. (“HealthDatix”), Wala,

Inc. doing business as Arcmail Technology (“ArcMail”) and 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.  HealthDatix,

Inc. is engaged in the business of streamlining the process of managing information in the

document-intensive medical field for customers throughout the United States.   ArcMail

provides email archive solutions to domestic and international businesses through

hardware and software sales, support, and maintenance. Gotham was 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, 2016, which

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

consolidated interim financial statements of the Company have been prepared in

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

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

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

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

been included. Operating results for the three  months ended March  31, 2017 are not

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

2017. 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, 2016 included in the Company’s Annual Report on Form 10-K, filed with

the Securities and Exchange Commission (“SEC”) on April 17, 2017.

Business Acquisition

On  February  14,  2017,  the  Company  acquired  Healthdatix,  Inc.,  formally  known  as

HubCentrix, Inc. in accordance with a stock purchase agreement. Previously, the Company

was focused on the technology markets. The Company has tailored its strategy to focus on

7

pursuing specific medical technology strategies and objectives. The acquisition of

HealthDatix, provides the Company  with its first medical  technology, WellDatix, a

proprietary  platform  that enables physicians to identify  patients eligible  for Annual

Wellness Visits which is reimbursed by Medicare. This technology positions the Company

to participate in the anticipated accelerated market needs of the physician community

throughout the country.  Pursuant to the stock purchase agreement, the total consideration

paid for the outstanding capital stock of HealthDatix was 15,000,000 shares of iGambit

restricted common stock, valued at $.07 per share.

The following table presents the

preliminary allocation of the value of the common shares issued for HealthDatix to the

acquired identifiable assets, liabilities assumed and goodwill:

Fair Value

Cash

$

29,584

Accounts receivable, net

2,250

Fixed assets

3,800

Workforce

60,919

Software

156,925

Customer contracts

644,846

Notes payable

(60,500)

Loan payable

(65,000)

Goodwill

277,176

Purchase price

$

1,050,000

The results of operations of HealthDatix for the period February 14, 2017 to March 31,

2017 have been included in the consolidated statements of operations for the three months

ended March 31, 2017. The following table presents pro forma results of operations of the

Company and HealthDatix as if the acquisition had occurred at January 1, 2016. The pro

forma condensed combined financial information is presented for informational purposes

only. The unaudited pro forma results of operations are not necessarily indicative of results

that would have occurred had the acquisition taken place at the beginning of the earliest

period presented, or of future results.

March 31,

March 31,

2017

2016

Pro forma revenue

$

7,600

$

15,750

Pro forma gross profit

$

7,413

$

9,215

Pro forma loss from operations

$

(187,172)

$

(163,460)

Pro forma net loss

$

(199,099)

$

(164,061)

8

Note 2 – Discontinued Operations

Sale of Business

Effective October 1, 2016, management decided to dispose of its subsidiary Arcmail and

entered into a letter of intent on March 1, 2017 to sell Arcmail in a stock exchange to the

CEO of Arcmail.

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 $16,667 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 $6,667 (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. The

terms of the installment payments were fulfilled as of December 31, 2016.

The assets and liabilities of the discontinued operations are presented in the consolidated

balance sheets under the captions “Assets from discontinued operations” and “Liabilities

from discontinued operations”, respectively. The underlying assets and liabilities of the

discontinued operations as of March 31, 2017 and December 31, 2016 are presented as

follows:

2017

2016

Assets:

Cash (overdraft)

$

(15,959)

$

17,323

Accounts receivable, net

387,368

321,033

Inventory

16,640

1,160

Prepaid expenses

16,940

15,300

Property and equipment

15,762

18,653

Total assets

$

420,751

$

373,469

Liabilities:

Accounts payable and accrued expenses

364,681

359,996

Accrued interest on notes payable

622,160

558,183

Amounts due to related party

28,570

64,509

Deferred revenue

1,160,606

1,092,388

Notes payable

3,119,001

3,119,001

Notes payable - other

165,351

153,404

Note payable - related party

626,266

626,266

$ 6,086,635

$ 5,973,747

9

The  components  of  loss  from  discontinued  operations  presented  in  the  consolidated

statements of operations for the three months ended March 31, 2017 and 2016 are presented

as follows:

2017

2016

Sales

$

386,157

$

403,750

Cost of sales

(29,462)

(3,191)

General and administrative expenses

(326,247)

(384,660)

Depreciation and amortization

(4,537)

(6,172)

Interest expense

(92,848)

(86,060)

Loss from discontinued operations

$

(66,937)

$

(76,333)

Note 3 – Summary of Significant Accounting Policies

Principles of Consolidation

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

owned subsidiaries, HealthDatix, Inc., Wala, Inc. and Gotham Innovation Lab, Inc.  All

intercompany accounts and transactions have been eliminated.

Use of Estimates in the Preparation of Financial Statements

The preparation of financial statements in conformity with generally accepted accounting

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

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

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

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

Fair Value Measurements

The Company adopted the provisions of ASC Topic 820, Fair Value Measurements and

Disclosures, which defines fair value as used in numerous accounting pronouncements,

establishes a framework for measuring fair value and expands disclosure of fair value

measurements.

The estimated fair value of certain financial instruments, including cash and cash

equivalents, accounts receivable, accounts payable and accrued expenses are carried at

historical cost basis, which approximates their fair values because of the short-term nature

of these instruments. The carrying amounts of our short and long term credit obligations

approximate fair value because the effective yields on these obligations, which include

contractual interest rates taken together with other features such as concurrent issuances of

warrants  and/or  embedded conversion  options,  are  comparable to  rates  of returns  for

instruments of similar credit risk.

ASC 820 defines fair value as the exchange price that would be received for an asset or

paid to transfer a liability (an exit price) in the principal or most advantageous market for

10

the asset or liability in an orderly transaction between market participants on the

measurement date. ASC 820 also establishes a fair value hierarchy, which requires an entity

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

when measuring fair value. ASC 820 describes 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 – quoted prices for similar assets and liabilities in active markets or inputs that

are observable

Level 3 – inputs that are unobservable (for example cash flow modeling inputs based

on assumptions)

The derivative liability in connection with the conversion feature of the convertible debt,

classified as a Level 3 liability, is the only financial liability measure at fair value on a

recurring basis.

The change in the Level 3 financial instrument is as follows:

Balance, January 1, 2017

$

—

·

Issued during the Period

75,000

·

Converted during the Period

—

·

Change in fair value recognized in operations

8,773

Balance, March 31, 2017

$

83,773

Revenue Recognition

iGambit is a holding company and has no sources of revenue.

HealthDatix’s  revenues  are  derived  primarily  from  its  Software  as  a  Service  (SaaS)

offerings that are rendered to healthcare providers. HealthDatix  recognizes revenues when

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

determinable, HealthDatix and its customers understand the specific nature and terms of

the agreed upon transactions, and collectability is reasonably assured.

Arcmail recognizes revenue from product sales when the following four revenue

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

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

collectability  is  reasonably  assured.    Revenues  from  maintenance  contracts  covering

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

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

of the contracts.

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

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

been provided or delivered, the fees charged are fixed or determinable, Gotham and its

customers understood the specific nature and terms of the agreed upon transactions, and

collectability was reasonably assured.

11

Advertising Costs

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

months ended March 31, 2017 and 2016 were $299 and $0, respectively.

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 $8,345 at March 31, 2017 and

December  31,  2016,  respectively.    Bad  debt  expense  of  $0  and  $63  was  charged  to

operations for the three months ended March 31, 2017 and 2016, respectively.

Inventories

Inventories consisting of finished products are stated at the lower of cost or market and are

presented in assets from discontinued operations. Cost is determined on an average cost

basis.

Property and equipment and depreciation

Property and equipment are stated at cost. Maintenance and repairs are charged to expense

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

related cost and accumulated depreciation are removed from the respective accounts and

any gain or loss is credited or charged to income.  Depreciation for both financial reporting

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

accelerated methods over the estimated lives of the respective assets as follows:

Office equipment and fixtures

5 - 7 years

Computer hardware

5 years

Computer software

3 years

Development equipment

5 years

12

Amortization

Intangible assets are amortized using the straight line method over the estimated lives of

the respective assets as follows:

Software

5 years

Workforce

10 years

Customer contracts

10 years

Goodwill

Goodwill represents the excess of liabilities assumed over assets acquired of HealthDatix

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

of HealthDatix. In accordance with ASC Topic No. 350 “Intangibles – Goodwill and

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

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

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

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

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

carrying amount, an impairment loss is charged to expense in the period identified. No

impairment was recorded during the three months ended March 31, 2017.

Long-Lived Assets

The Company assesses the valuation of components of its property and equipment and

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

might not be recoverable. The Company bases its evaluation on indicators such as the

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

profitability measurements and other external market conditions or factors that may be

present. If such factors indicate that the carrying amount of an asset or asset group may not

be recoverable, the Company determines whether an impairment has occurred by analyzing

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

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

of the asset is less than the carrying value of the asset, the Company recognizes a loss for

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

measured by the present value of the estimated cash flows.

Deferred Revenue

Deposits from customers included in discontinued operations are  not  recognized as

revenues, but as liabilities, until the following conditions are met: revenues are realized

when cash or claims to cash (receivable) are received in exchange for goods or services or

when assets received in such exchange are readily convertible to cash or claim to cash or

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

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

are  generated  from  the  Company’s  support  and  maintenance  services,  the  Company

recognizes such revenues when services are completed and billed. The  Company has

received deposits from its various customers that have been recorded as deferred revenue

13

and presented as discontinued liabilities in the amount of $1,160,606 and $1,092,388 as of

March 31, 2017 and December 31, 2016, 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

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.

Note 4 – Going Concern

The  accompanying  consolidated  financial  statements  have  been  prepared  on  a  going

concern basis, which contemplates the realization of assets and the satisfaction of liabilities

in the normal course of business. The Company is in the process of disposing of its

operating subsidiary, Arcmail and has stockholders’ deficiency of $4,954,876 at March 31,

2017. These factors, among others, raise substantial doubt about the ability of the Company

to continue as a going concern for a reasonable period of time.  The Company’s

continuation as a going concern is dependent upon its ability to obtain necessary equity

financing and ultimately from generating revenues from its newly acquired subsidiaries to

continue operations. The Company  expects that working capital requirements will

continue to be funded through a combination of its existing funds and further issuances of

securities. Working capital requirements are expected to increase in line with the growth

of the business. Existing working capital, further advances and debt instruments, and

anticipated cash flow are expected to be adequate to fund operations over the next twelve

14

months. The Company has no lines of credit or other bank financing arrangements. The

Company has financed operations to date through the proceeds of a private placement of

equity   and   debt   instruments.    In   connection   with   the   Company’s   business   plan,

management anticipates additional increases in operating expenses and capital

expenditures relating to: (i) developmental expenses associated with a start-up business

and (ii) marketing expenses. The Company intends to finance these expenses with further

issuances of securities, and debt issuances. Thereafter, the Company expects it will need

to raise additional capital and generate revenues to meet long-term operating requirements.

Additional issuances of equity or convertible debt securities will result in dilution to current

stockholders. Further, such securities might have rights, preferences or privileges senior to

common stock. Additional financing may not be available upon acceptable terms, or at all.

If adequate funds are not available or are not available on acceptable terms, the Company

may not be able to take advantage of prospective new business endeavors or opportunities,

which could significantly and materially restrict business operations

The  consolidated  financial  statements  do  not  include  any adjustments  relating  to  the

recoverability   and   classification   of   recorded   asset   amounts   or   the   amounts   and

classification  of liabilities  that  might  be  necessary should the  Company be unable to

continue as a going concern.

Note 5 – Property and Equipment

Property and equipment are carried at cost and consist of the following at March 31, 2017

and December 31, 2016:

Continuing operations:

2017

2016

Office equipment and fixtures

$

10,964

$

7,164

Less: Accumulated depreciation

6,194

5,981

$

4,770

$

1,183

Discontinued operations:

2017

2016

Office equipment and fixtures

$

131,842

$

131,842

Computer hardware

93,846

92,200

Computer software

77,700

77,700

Development equipment

35,318

35,318

338,706

337,060

Less: Accumulated depreciation

322,944

318,407

$

15,762

$

18,653

15

Depreciation expense of $213 and $118 was charged to continuing operations for the three

months ended March 31, 2017 and 2016, respectively.

Depreciation expense of $4,538 and $6,172 was charged to discontinued operations for the

three months ended March 31, 2017 and 2016, respectively.

Note 6 – Intangible Assets

Intangible assets from the acquisition of HealthDatix are carried at cost and consist of the

following at March 31, 2017:

Life

Workforce

$

60,919

10 years

Software

156,925

5 years

Customer contracts

644,846

10 years

862,690

Less: Accumulated amortization

12,745

$

849,945

Amortization  expense  of  $12,745  was  charged  to  continuing operations  for  the  three

months ended March 31, 2017.

Note 7 - 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

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

Three Months Ended

Mar ch 31,

2017

2016

Stock options

663,000

1,718,900

Stock warrants

400,000

275,000

Total shares excluded from calculation

1,063,000

1,993,900

Note 8 – Stock Based Compensation

Options

16

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 March

31, 2016, 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 three months ended March 31, 2017 and 2016 follows:

Weighted

Average

Weighted

Remaining

Weighted

Average

Average

Contractual

Options

Grant-Date

Life

Outstanding

Exercise Price

Fair Value

(Years)

Options outstanding at

December 31, 2015

1,718,900

$

0.03

$

0.13

3.82

No option activity

--

--

--

Options outstanding at

March 31, 2016

1,718,900

$

0.03

0.13

3.57

Options outstanding at

December 31, 2016

1,422,000

$

0.03

0.13

5.60

Options cancelled

(759,000)

$

0.03

--

Options outstanding at

March 31, 2017

663,000

$

0.03

$

0.13

4.12

Options outstanding at March 31, 2017 consist of:

Date

Number

Number

Exercise

Expiration

Issued

Outstanding

Exercisable

Price

Date

June 9, 2014

213,000

213,000

$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

663,000

663,000

17

Warrants

In addition to our 2006 Long Term Incentive Plan, we have issued and have 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 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 three months ended March 31, 2017 and 2016 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, 2015

275,000

$

0.94

$

0.10

3.42

No warrant activity

--

--

--

Warrants outstanding

at March 31, 2016

275,000

$

0.94

$

0.10

3.17

Warrants outstanding

at December 31, 2016

275,000

$

0.94

$

0.10

2.42

Warrant granted

125,000

0.40

--

Warrants outstanding

at March 31, 2017

400,000

$

0.62

$

0.10

4.03

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

Warrants outstanding at March 31, 2017 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

January 1, 2017

50,000

50,000

$0.25

October 10, 2021

January 1, 2017

50,000

50,000

$0.50

November 7, 2021

January 5, 2017

25,000

25,000

$0.50

January 5, 2022

Total

400,000

400,000

18

Note 9 – Deferred Revenue

Deferred revenue included in liabilities from discontinued operations represents sales of

maintenance contracts that extend to and will be realized in future periods. Deferred

revenue at March 31, 2017 will be realized in the following years ended December 31,

2017

$

651,327

2018

317,274

2019

128,758

2020

58,368

2021

4,779

2022

100

$

1,160,606

Note 10 – Convertible Debt

Convertible Note Payable

On March 30, 2017, the Company issued an 8% convertible note in the aggregate principal

amount of $75,000, convertible into shares of the Company’s common stock. The Note,

including accrued interest is due January 15, 2018 and is convertible any time after 180

days at the option of the holder into shares of the Company’s common stock at 65% 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. The Company

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

features and a reset provisions (see Note 11) based fair values as of the inception date of

the Note.  The calculated debt discount equaled the face of the note and is being amortized

over the term of the note.

Convertible Debentures

The Company issued convertible debentures to an individual during the three months ended

March 31, 2017 and to two individuals during the year ended December 31, 2016.

The debentures are convertible into 75,000 shares of common stock for up to 5 years, at

the holders’ option, at an exercise price of $.50 and $.25, respectively. The debentures

mature on the earlier of the closing of a subsequent financing event by the Company

resulting in gross proceeds of at least $10,000,000 or three years from the date of issuance.

The debentures bear interest at a rate of 10%.   A beneficial conversion feature was not

recorded as the fair market value of the Company’s common stock was less than the

exercise prices at the dates of issuance and through the end of the period.  Interest expense

on the convertible debentures of $1,801 was recorded for the three months ended March

31, 2017.

Note 11 – Derivative Liability

19

Convertible Note

During the three months ended March 31, 2017, the Company issued a convertible note

(see Note 10 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

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

$83,773 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 March 31, 2017, in the amount of $83,773,

was determined using the Binomial Option Pricing Model based on the following

assumptions: (1) dividend yield of 0%; (2) expected volatility of 211.00%, (3) weighted

average risk-free interest rate of 0.12%, (4) expected life of 0.80 years, and (5) estimated

fair value of the Company’s common stock of $0.09 per share. The Company recorded

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

$8,773 during the three months ended March 31, 2017.

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 12 – Notes Payable

Notes payable from continuing operations at March 31, 2017 consists of loans to

HealthDatix from 3 individuals totaling $60,500. The loans do not bear interest and there

are no specific terms for repayment.

Notes payable at March 31, 2017 are presented in liabilities from discontinued operations

and consist of various notes payable in annual installments totaling $779,750 through

September 2019. The notes include interest at 7% and are secured by the assets of ArcMail.

Principal amounts due on notes payable for the years ended December 31, are as follows:

2017

$

779,750

2018

779,750

2019

779,750

2020

779,751

$

3,119,001

20

During the three months ended March 31, 2017, Arcmail entered into merchant financing

agreements with various lenders for proceeds totaling $182,474 payable in daily amounts

based on various percentages of future collections of accounts receivable, which were

assigned to the lenders.  The obligations will be satisfied upon total payments of $228,120

and will mature in June 2017. The outstanding balance of notes payable - other was

$165,351 and is presented in liabilities from discontinued operations at March 31, 2017.

Note 13 – Stock Transactions

Common Stock Issued

In connection with the acquisition of HealthDatix the Company issued 15,000,000

common shares valued at $.07 per share to the shareholders of HealthDatix on February

14, 2017.

The Company sold 2 million shares of common stock to an investor valued at $.05 per

share on January 27, 2017.

The Company issued 10,000 common shares for services, valued at $.08 per share on

January 5, 2017.

Note 14 - Income Taxes

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 15 - Retirement Plan

ArcMail has a defined contribution 401(k) plan, which covers substantially all employees.

Under  the  terms of  the  Plan,  Arcmail  is currently  not  required to  match  employee

contributions.  The Company did not make any employer contributions to the Plan during

the three months ended March 31, 2017.

Note 16 – Concentrations and Credit Risk

Sales and Accounts Receivable

HealthDatix had sales to two customers which accounted for approximately 80% and 11%,

respectively of HealthDatix’s total sales for the three months ended March 31, 2017.  One

customer accounted for 100% of accounts receivable at March 31, 2017.

21

No customer accounted for more than 10% of sales included in discontinued operations for

the three months ended March 31, 2017 and 2016, respectively.

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 March 31, 2017 and December

31, 2016, respectively.

Note 17 - Related Party Transactions

Note Payable – Related Party

ArcMail issued a promissory note to the president of ArcMail on June 30, 2015 for funds

advanced. The note is payable in annual installments of $155,566 through December 2019

and is presented in liabilities from discontinued operations. The notes include interest at

6% and are subordinated to the notes payable (see Note 12).

Principal amounts due on notes payable for the years ended December 31, are as follows:

2017

$

155,566

2018

155,566

2019

155,567

2020

155,567

$

626,266

Amounts Due to Related Parties

Amounts due to related parties with balances of $1,000 and $508 at March 31, 2017 and

December 31, 2016, respectively, consist of cash advances from an officer/stockholder.

These advances do not bear interest and are payable on demand.

Amounts due to related parties with balances of $28,570 and $64,509 at March 31, 2017

and December 31, 2016, respectively, consist of cash advances from the president of

Arcmail, and is presented in liabilities from discontinued operations. These advances do

not bear interest and are payable on demand.

Note 18 – Commitments and Contingencies

Lease Commitment

22

The Company is obligated under two operating leases for its premises that expire at various

times through February 28, 2019.

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

December 31 are as follows:

2017

$  47,429

2018

56,743

2019

3,380

$107,552

Rent expense of $5,591 and $4,800 was charged to continuing operations for the three

months ended March 31, 2017 and 2016, respectively.

Rent expense of $10,807 and $8,635 was charged to discontinued operations for the three

months ended March 31, 2017 and 2016, respectively.

Note 19 – Subsequent Events

Business Acquisition

On April 5, 2017, the Company, through its wholly-owned subsidiary HealthDatix, Inc.

consummated the acquisition of certain assets of the CyberCare Health Network Division

from  EncounterCare  Solutions  Inc.  (“ECSL”)  in  accordance  with  an  Asset  Purchase

Agreement by and among, HealthDatix, Inc., ECSL and the Company.   Pursuant to the

Agreement, ECSL will sell, convey, transfer and assign to HealthDatix, Inc. certain assets,

and HealthDatix, Inc. will purchase and accept from ECSL all rights, title and interest in

and to the Assets in exchange for 60,000,000 shares of restricted common stock of the

Company.

Equity Financing Transaction

On April 3, 2017, the Company entered into a Convertible Promissory Note with an

accredited investor pursuant to an exemption under section 4(a)(2) of the securities act of

1933 , pursuant to which the investor agreed to lend and the Company agreed to repay the

investors the aggregate principal amount of $125,000. The convertible note is due 12

months after issuance and bears interest at a rate of 12%.   The Note is convertible into

shares of common stock of the Company 180 days following the date of funding and

thereafter. The conversion price shall be subject to a discount of 50%. The conversion

price shall be determined on the basis of the lowest VWAP (Volume Weighted Average

Price) of the Common Stock during the prior twenty (20) trading day period.  The Investor

will be limited to convert no more than 4.99% of the issued and outstanding Common

Stock at the time of conversion at any one time. At any time during the period beginning

on the date of the Note and ending on the date which is 180 days thereafter, the Company

may repay the Note by paying an amount equal to the then outstanding amount multiplied

by 135%.

23

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.

INTRODUCTION

iGambit is a company focused on the medical technology markets. Our primary

focus is the expansion of our newly acquired medical technology business HealthDatix Inc.

HealthDatix is an end to end Software-as-a-Service solution that manages, reports,

and analyzes critical data, enabling healthcare organizations to deliver positive patient

outcomes. We offer a fully-hosted cloud service for healthcare providers to conduct the

Medicare Annual Wellness Visit (AWV) program to their Medicare patients providing the

patient with a 5-10 year Personalized Preventive Plan and physician reports that meet all

Medicare audit requirements. The AWV is a program that allows a physician to identify

those  patients  that  have  2+  chronic  conditions  that  require  additional  screening  and

management.

24

Assets. At  March  31,  2017,  we  had  $1,722,838  in  total  assets,  compared  to

$510,835 at December 31, 2016. The increase in total assets was primarily due to the

increase in cash and the increase in intangible assets from the acquisition of our

HealthDatix subsidiary.

Liabilities. At March 31, 2017, our total liabilities were $6,677,714 compared to

$6,380,260 at December 31, 2016. Our current liabilities at March 31, 2017 consisted of

accounts payable and accrued expenses of $374,371, accrued interest on notes payable of

$1,801, amounts due to related parties of $1,000, notes payable of $60,500, convertible

debentures of $69,634, derivative liability of $83,773 and liabilities from discontinued

operations of $6,086,635, whereas our total liabilities at December 31, 2016 consisted of

current liabilities including accounts payable and accrued expenses of $356,005,  amounts

due to related parties of $508, convertible debentures of $50,000 and liabilities from

discontinued operations of $5,973,747.

Stockholders’ Deficiency. Our Stockholders’ Deficiency decreased to $(4,954,876)

at March 31, 2017 from $(5,869,425) at December 31, 2016. This decrease was primarily

due to an increase in Common Stock and Additional paid-in capital from the HealthDatix

acquisition during the three months ended March 31, 2017.

THREE MONTHS ENDED MARCH 31, 2017 AS COMPARED TO THREE

MONTHS ENDED MARCH 31, 2017

Revenues  and Net  Loss . We  had $4,350  of  revenue  from  our  HealthDatix

subsidiary and a net loss of $242,074 during the three months ended March 31, 2017,

compared to revenue of $0 and a net loss of $238,870 for the three months ended March

31, 2016.   The increase in revenue was due primarily to the revenue generated by our

HealthDatix subsidiary acquired in February 2017. In addition to HealthDatix’s

operations, we had a loss from discontinued operations of $(66,937) compared to $(76,333)

for the three months ended March 31, 2017 and March 31, 2016, respectively.

General  and  Administrative  Expenses . General  and  Administrative  Expenses

increased to $167,380 for the three months ended March 31, 2017 from $161,936 for the

three months ended March 31, 2016. For the three months ended March 31, 2017 our

General and Administrative Expenses consisted of corporate administrative expenses of

$40,324, legal and accounting fees of $36,600, employee benefits expenses (health and life

insurance) of $12,665, marketing expenses of $16,666, payroll expenses of $34,483,

consulting expenses of $8,025, commissions and fees expenses of $11,000, and exchange

filing fees of $7,617.    For the  three  months ended March 31, 2016 our General  and

Administrative Expenses consisted of corporate administrative expenses of $34,754, legal

and accounting fees of $28,935 employee benefits (health and life insurance) expenses of

$5856, directors and officers insurance expenses of $11,136, payroll expenses of $56,258,

finders fees and commissions expenses of $17,500 and exchange filing fees of $7,500. The

increases from the three months ended March 31, 2016 to the three months ended March

31, 2017 relate primarily due to: (i) an increase in employee benefits expenses; ( (ii) an

increase in marketing expenses; and (iii) an increase in general and administrative costs

25

associated with the operation of our HealthDatix subsidiary. Costs associated with our

officers’ salaries and the operation of our HealthDatix subsidiary are expected to increase

going forward, as we expand the business operations of HealthDatix which would likely

increase our corporate administrative expenses.

Other Income (Expense) . We reported interest expense of $11,927 and $601 for

the three months ended March 31, 2017 and March 31, 2016, respectively. Amortization

of debt discount of $457 for the convertible note payable was reported for the three months

ended March 31, 2017.

LIQUIDITY AND CAPITAL RESOURCES

General

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

2017, we had $73,527 of cash and stockholders’ deficiency of $(4,954,867).  At December

31, 2016, we had $10,522 of cash and stockholders’ deficiency of $(5,869,425).

Our primary capital requirements in 2017 are likely to arise from the expansion of

our HealthDatix operations. It is not possible to quantify those costs at this point in time,

in that they depend on HealthDatix’s business opportunities and the state of the overall

economy. 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 HealthDatix’s sales

volume, 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 in operating activities was $174,715, for the three months ended

March 31, 2017, compared to $282,435 for the three months ended March 31, 2016. Net

cash used in continuing operating activities was $115,740 for the three months ended

March 31, 2017, compared to $12,999 for the three months ended March 31, 2017. Our

primary use of operating cash flows from continuing operating activities was from net

losses of $242,074 and $238,870 for the three months ended March 31, 2017 and 2016,

respectively. Additional  contributing factors  to the change were from  an increase  in

accounts receivable of $1,250, decrease in prepaid expenses of $17,492, an increase in

accounts payable and accrued expenses of $18,366, and an increase in accrued interest on

notes payable of $1,801.  Net cash used in discontinued operating activities was $8,975 for

the three months ended March 31, 2017 and $269,436 for the three months ended March

31, 2016.  Cash used in discontinued operations was primarily from net losses of $66,937

26

and $76,333 from our ArcMail subsidiary for the three months ended March 31, 2017 and

2016, respectively.

Net cash provided by continuing investing activities was $20,416 for the three months

ended March 31, 2017 and $0 for the three months ended March 31, 2016. For the three

months ended March 31, 2017 the primary source of cash flows from investing activities

was from cash received from the acquisition of our HealthDatix subsidiary. Net cash

provided by discontinued investing activities was $31,636 for the three months ended

March 31, 2017 and $14,946 for the three months ended March 31, 2016.

Net Cash provided by financing activities was $176,500 for the three months ended

March 31, 2017 compared to $160,986 for the three months ended March 31, 2016. The

cash flows provided by continuing financing activities for the three months ended March

31, 2017 was primarily from $100,000 in proceeds from the sale of stock, $100,000 in

proceeds from convertible debentures and $492 in advances from related parties. The cash

flows provided by continuing financing activities for the three months ended March 31,

2016  consisted  of  amounts  due  to  related  parties  of  $2,300.  The  cash  flows  used  in

discontinued financing activities for the three months ended March 31, 2017 was $23,992

compared to $158,686 in cash flows provided by discontinued financing activities for the

three months ended March 31, 2016.

Plan of Operation and Funding

We expect that working capital requirements will continue to be funded through a

combination of our existing funds and further issuances of securities. Our working capital

requirements are expected to increase in line with the growth of our business. Existing

working capital, further advances and debt instruments, and anticipated cash flow are

expected to be adequate to fund our operations over the next twelve months. We have no

lines of credit or other bank financing arrangements. Generally, we have financed

operations  to  date  through  the  proceeds  of  the  private  placement  of  equity  and  debt

instruments. In connection with our business plan, management anticipates additional

increases in operating expenses and capital expenditures relating to: (i) developmental

expenses associated with a start-up business and (ii) marketing expenses. We intend to

finance these expenses with further issuances of securities, and debt issuances. Thereafter,

we expect we will need to raise additional capital and generate revenues to meet long-term

operating requirements. Additional issuances of equity or convertible debt securities will

result in dilution to our current shareholders. Further, such securities might have rights,

preferences or privileges senior to our common stock. Additional financing may not be

available upon acceptable terms, or at all. If adequate funds are not available or are not

available on acceptable terms, we may not be able to take advantage of prospective new

business endeavors or opportunities, which could significantly and materially restrict our

business operations.

Item 3. Quantitative and Qualitative Disclosures about Market Risk.

Not Required.

27

Item 4. Controls and Procedures.

Evaluation of Disclosure Controls and Procedures

Our management, with  the participation  of our chief executive  officer and chief

financial officer, evaluated the effectiveness of our disclosure controls and procedures

pursuant to Rule 13a-15 under the Exchange Act, as of the end of the period covered by

this Quarterly Report on Form 10-Q.

Based  on this  evaluation,  our  chief  executive  officer  and  chief  financial  officer

concluded that, as of March 31, 2017, our disclosure controls and procedures are designed

at a reasonable assurance level and are effective to provide reasonable assurance that

information we are required to disclose in reports that we file or submit under the Exchange

Act is recorded, processed, summarized, and reported within the time periods specified in

the SEC’s rules and forms, and that such information is accumulated and communicated to

our  management,  including our  chief  executive  officer and  chief  financial  officer,  as

appropriate, to allow timely decisions regarding required disclosure.

Changes in Internal Control over Financial Reporting

There were no changes in our internal control over financial reporting that occurred

during the quarter ended March 31, 2017 that have materially affected, or are reasonably

likely to materially affect, our internal control over financial reporting

.

Limitations on Effectiveness of Controls and Procedures

In designing and  evaluating the disclosure controls and procedures, management

recognizes that any controls and procedures, no matter how well designed and operated,

can provide only reasonable assurance of achieving the desired  control objectives. In

addition, the design of disclosure controls and procedures must reflect the fact that there

are resource constraints and that management is required to apply its judgment in

evaluating the benefits of possible controls and procedures relative to their costs.

PART II — OTHER INFORMATION

Item 1. Legal Proceedings.

From time-to-time, the Company is involved in various civil actions as part of its normal

course of business. The Company is not a party to any litigation that is material to ongoing

operations as defined in Item 103 of Regulation S-K as of the period ended March 31,

2017.

Item 1A.

Risk Factors.

Not required

28

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

None

Item 3. Defaults upon Senior Securities.

None

Item 4. Removed and Reserved.

Item 5. Other Information.

None

Item 6.

Exhibits

Exhibit No.

D escription

31.1 Certification of the Chief Executive Officer Pursuant to Section 302 of the

Sarbanes-Oxley Act of 2002.

31.2 Certification of the Chief Financial Officer Pursuant to Section 302 of the

Sarbanes-Oxley Act of 2002.

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.)

29

SIGNATURES

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

to be signed on its behalf by the undersigned, thereunto duly authorized, on May 22, 2017.

iGambit Inc.

/s/ John Salerno

John Salerno

Chief Executive Officer

/s/ Elisa Luqman

Elisa Luqman

Chief Financial Officer and

Principal Accounting Officer

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.)