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EX-31.1 - IGAMBIT EXHIBIT - iGambit, Inc.exhibit311.htm
EX-31.2 - IGAMBIT EXHIBIT - iGambit, Inc.exhibit312.htm
EX-32.1 - IGAMBIT EXHIBIT - iGambit, Inc.exhibit321.htm
EXCEL - IDEA: XBRL DOCUMENT - iGambit, Inc.Financial_Report.xls
EX-32.2 - IGAMBIT EXHIBIT - iGambit, Inc.exhibit322.htm

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-Q

(Mark One)

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

EXCHANGE ACT OF 1934

For the Quarterly period ended September 30, 2013

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

ACT

For the transition period from

to

Commission file number 000-53862

iGambit Inc.

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

Delaware

11-3363609

(State or other jurisdiction of

(I.R.S. Employer

incorporation or organization)

Identification No.)

1050 W. Jericho Turnpike, Suite A

Smithtown, New York 11787

(Address of Principal Executive Offices)(Zip Code)

(631) 670-6777

(Issuer’s Telephone Number, Including Area Code)

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

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

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

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

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

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

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

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

files). Yes þ     No

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

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

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

(Check one):

Large accelerated      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 25,044,056 shares of its common stock outstanding as of November 13, 2013.



iGambit Inc.

Form 10-Q

Part I — Financial Information

1

Item 1.

Financial Statements:

1

Consolidated Balance Sheets

1

Consolidated Statements of Income

2

Consolidated Statements of Cash Flows

3

Notes to Consolidated Financial Statements

5

Item 2.

Management’s Discussion and Analysis of Financial Condition and

Results of Operations

17

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

23

Item 4.

Controls and Procedures

23

Part II — Other Information

24

Item 1.

Legal Proceedings

24

Item 1A.

Risk Factors

25

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

25

Item 3.

Defaults upon Senior Securities

25

Item 4.

Removed and Reserved

25

Item 5.

Other Information

25

Item 6.

Exhibits

25

EX-31.1

EX-31.2

EX-32.1

EX-32.2



PART I — FINANCIAL INFORMATION

Item 1 — Financial Statements

IGAMBIT INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

SEPTEMBER 30,

DECEMBER

2013

31,

(Unaudited)

2012

ASSETS

Current assets

Cash

$

216,618

$

104,721

Accounts receivable, net

181,417

158,441

Prepaid expenses

45,273

133,077

Due from rescission agreement

272,223

--

Assets from discontinued operations, net

320,590

320,590

Total current assets

1,036,121

716,829

Property and equipment, net

12,985

17,870

Other assets

Deposits

9,420

11,220

$

1,058,526

$

745,919

LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities

Accounts payable

$

415,060

$

433,958

Convertible note payable

103,500

--

Note payable - related party

6,263

6,263

Total current liabilities

524,823

440,221

Stockholders' equity

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

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

25,044

25,044

Additional paid-in capital

2,729,000

2,729,000

Accumulated deficit

(2,220,341)

(2,448,346)

Total stockholders' equity

533,703

305,698

$

1,058,526

$

745,919

1



IGAMBIT INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(UNAUDITED)

THREE MONTHS

NINE MONTHS

ENDED

ENDED

SEPTEMBER 30,

SEPTEMBER 30,

2013

2012

2013

2012

Sales

$

397,081

$

416,429

$      1,171,621

$

1,325,945

Cost of sales

134,014

163,308

399,392

640,919

Gross profit

263,067

253,121

772,229

685,026

Operating expenses

General and administrative

expenses

421,298

438,058

1,299,224

1,368,293

Loss from operations

(158,231)

(184,937)

(526,995)

(683,267)

Other income

Income from rescission

agreement

--

--

755,000

--

Interest income

--

257

--

12,978

Total other income

0

257

755,000

12,978

Income (loss) from operations

before income tax

(158,231)

(184,680)

228,005

(670,289)

Income tax (benefit)

--

(70,218)

--

(254,691)

Net income (loss)

$

(158,231)

$

(114,462)

$

228,005

$

(415,598)

Basic and fully diluted

earnings (loss) per common

share:

$

(.01)

$

(.00)

$

.01

$

(.02)

Weighted average common

shares outstanding

25,044,056

23,954,056

25,044,056

23,954,056

2



IGAMBIT INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

NINE MONTHS ENDED SEPTEMBER 30,

(UNAUDITED)

2013

2012

CASH FLOWS FROM OPERATING ACTIVITIES:

Net income (loss)

$

228,005

$    (415,598)

Adjustments to reconcile net income (loss) to net

cash provided (used) by operating activities

Depreciation

4,885

6,373

Deferred income taxes

--

(254,691)

Increase (Decrease) in cash flows as a result of

changes in asset and liability account balances:

Accounts receivable

(22,976)

110,905

Prepaid expenses

87,804

30

Due from rescission agreement

(272,223)

--

Accounts payable

(18,898)

39,754

Net cash provided (used) by continuing operating activities

6,597

(513,227)

Net cash provided by discontinued operating activities

--

250,000

NET CASH PROVIDED (USED) BY OPERATING ACTIVITIES

6,597

(263,227)

CASH FLOWS FROM INVESTING ACTIVITIES:

Purchases of property and equipment

--

(6,447)

Decrease (increase) in deposits

1,800

(6,920)

Proceeds from repayments of notes receivable

--

434,512

NET CASH PROVIDED BY INVESTING ACTIVITIES

1,800

421,145

CASH FLOWS FROM FINANCING ACTIVITIES:

Proceeds from convertible note payable

103,500

--

Repayment of loans from shareholders

--

(19,127)

NET CASH PROVIDED (USED) BY FINANCING ACTIVITIES

103,500

(19,127)

NET INCREASE IN CASH

111,897

138,791

CASH - BEGINNING OF PERIOD

104,721

224,800

3



CASH - END OF PERIOD

$

216,618

$

363,591

SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:

Cash paid during the period for:

Interest

$

2,644

$

1,478

Income taxes

--

4,125

Non-cash investing and financing activities:

Property and equipment purchased through loan from stockholder

$

--

$

5,300

4



IGAMBIT INC.

Notes to Condensed Consolidated Financial Statements

Nine Months Ended September 30, 2013 and 2012

Note 1 - Organization and Basis of Presentation

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

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

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

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

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

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

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

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

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

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

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

and brokers in the New York metropolitan area.

Interim Financial Statements

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

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

consolidated   interim   financial   statements   of   the   Company   have   been   prepared   in

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

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

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

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

have  been  included.  Operating results  for  the  nine  months  ended  September  30,  2013  are

not  necessarily  indicative  of  results  that  may  be  expected  for  the  year  ending  December

31,   2013.   These   condensed   consolidated   financial   statements   should   be   read   in

conjunction  with  the  audited  consolidated  financial  statements  and  notes  thereto  for  the

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

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

Note 2 – Discontinued Operations

Sale of Business

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

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

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

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

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

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

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

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

5



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

31, 2011, the last year of payments.

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

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

discontinued  operations  consist  of  accounts  receivable  of  $320,590  as  of  September  30,

2013 and December 31, 2012, respectively.

Accounts Receivable

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

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

Note 3 – Summary of Significant Accounting Policies

Principles of Consolidation

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

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

transactions have been eliminated.

Use of Estimates in the Preparation of Financial Statements

The preparation of financial statements in conformity with generally accepted accounting

principles   requires   management   to   make   estimates   and   assumptions   that   affect   the

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

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

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

Fair Value of Financial Instruments

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

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

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

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

Revenue Recognition

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

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

services.

Advertising Costs

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

months ended September 30, 2013 and 2012 were $4,292 and $23,946, respectively.

6



Cash and Cash Equivalents

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

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

of three months or less.

Accounts Receivable

The   Company   analyzes   the   collectability   of   accounts   receivable   from   continuing

operations   each   accounting   period   and   adjusts   its   allowance   for   doubtful   accounts

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

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

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

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

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

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

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

months ended September 30, 2013 and 2012, respectively.

Property and equipment and depreciation

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

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

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

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

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

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

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

charged to income.

Depreciation  expense  of  $4,885  and  $6,373  was  charged  to  operations  for  the  nine

months ended September 30, 2013 and 2012, respectively.

Goodwill

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

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

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

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

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

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

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

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

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

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

7



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

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

goodwill was written off.

Stock-Based Compensation

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

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

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

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

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

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

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

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

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

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

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

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

and warrants.

Income Taxes

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

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

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

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

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

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

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

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

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

financial statement recognition and measurement of a tax position.

Recent Accounting Pronouncements

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

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

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

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

Note 4 - Earnings Per Common Share

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

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

8



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

September 30,

September 30,

2013

2012

2013

2012

Stock options

668,900

2,768,900

668,900

2,768,900

Stock warrants

275,000

275,000

275,000

275,000

Total shares excluded from calculation

943,900

3,043,900

943,900

3,043,900

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

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,

2013,  there  was  no  unrecognized  compensation  cost  related  to  non-vested  share-based

compensation arrangements granted under the 2006 plan.

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

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

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

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.

9



Stock option activity during the nine months ended September 30, 2013 and 2012

follows:

Weighted

Average

Weighted

Remaining

Weighted

Average

Average

Contractual

Options

Grant-Date

Life

Outstanding

Exercise Price

Fair Value

(Years)

Options outstanding at

December 31, 2011

2,768,900

$

0.04

$

0.10

6.85

No option activity

--

--

--

Options outstanding at

September 30, 2012

2,768,900

$

0.04

$

0.10

6.10

Options outstanding at

December 31, 2012

1,268,900

$

0.08

$

0.10

6.16

Expired

(600,000)

0.10

--

Options outstanding at

September 30, 2013

668,900

$

0.06

$

0.10

4.94

Options outstanding at September 30, 2013 consist of:

Date

Number

Number

Exercise

Expiration

Issued

Outstanding

Exercisable

Price

Date

May 1, 2006

100,000

100,000

$0.01

May 1, 2016

May 1, 2006

100,000

100,000

$0.01

May 1, 2016

May 1, 2006

50,000

50,000

$0.01

May 1, 2016

May 1, 2006

46.900

46,900

$0.01

May 1, 2016

July 21, 2010

113,000

113,000

$0.10

July 21, 2020

July 21, 2010

59,000

59,000

$0.10

July 21, 2020

July 11, 2011

100,000

100,000

$0.10

July 11, 2021

July 11, 2011

100,000

100,000

$0.10

July 11, 2021

Total

668,900

668,900

Warrants

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

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

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

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

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

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

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

10



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, 2013 and 2012 follows:

(1)Weighted

Average

Weighted

Remaining

Weighted

Average

Average

Contractual

Warrants

Grant-Date

Outstanding

Exercise Price

Fair Value

Life (Years)

Warrants outstanding

at December 31, 2011

275,000

$

0.94

$

0.10

7.42

No warrant activity

--

--

--

Warrants outstanding

at September 30, 2012

275,000

$

0.94

$

0.10

6.92

Warrants outstanding

at December 31, 2012

275,000

$

0.94

$

0.10

6.42

No warrant activity

--

--

--

Warrants outstanding

at September 30, 2013

275,000

$

0.94

$

0.10

5.67

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

Warrants outstanding at September 30, 2013 consist of:

Date

Number

Number

Exercise

Expiration

Issued

Outstanding

Exercisable

Price

Date

April 1, 2000

25,000

25,000

$3.00

2  years after IPO

June 1, 2009

100,000

100,000

$0.50

June 1, 2019

June 1, 2009

50,000

50,000

$0.65

June 1, 2019

June 1, 2009

50,000

50,000

$0.85

June 1, 2019

June 1, 2009

50,000

50,000

$1.15

June 1, 2019

Total

275,000

275,000

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  is  due  June  18,  2014  and  is  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  trading  prices  during  the  10  trading  day

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

11



Note 7 - Income Taxes

Nine Months Ended September 30,

2013

2012

Effective tax rate

0.0 %

38.0 %

The  decrease  in  the  effective  tax  rate  for  the  nine  months  ended  September  30,  2013  is

due to the establishment of a full valuation allowance against the Company’s net deferred

tax   assets   which   was   initially  recorded   in   the   fourth   quarter   of   2012.   A   valuation

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

not  be  realized.  This  assessment  is  based  upon  consideration  of  available  positive  and

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

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

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

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

not realize the benefit of those deferred tax assets.

Note 8 - Retirement Plan

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

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

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

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

Company's  contributions  to  the  plan  for  the  nine  months  ended  September  30,  2013  and

2012 were $12,690 and $5,476, respectively.

Note 9 – Concentrations and Credit Risk

Sales and Accounts Receivable

Gotham  had  sales  to  two  customers  which  accounted  for  approximately  44%  and  25%,

respectively of Gotham’s  total  sales  for the  nine  months  ended  September  30,  2013.   The

two  customers  accounted  for  approximately  61%  and  11%,  respectively  of  accounts

receivable at September 30, 2013.

Gotham  had  sales  to  three  customers  which  accounted  for  approximately  38%,  15%  and

11%, respectively of Gotham’s total sales for the nine months ended September 30, 2012.

The   three   customers   accounted   for   approximately   27%,   14%   and   5%   of   accounts

receivable at September 30, 2012.

Cash

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

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

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

September  30,  2013.  As  of  December  31,  2012,  the  Company had  no  amounts  of  cash  or

12



cash  equivalents  in  financial  institutions  in  excess  of  amounts  insured  by  agencies  of  the

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

interest-bearing accounts at September 30, 2013 and December 31, 2012, respectively.

Note 10 - Related Party Transactions

Note Payable – Related Party

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

such  amounts  outstanding  were  $6,263  at  September  30,  2013  and  December  31,  2012,

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

Note 11 – Commitments and Contingencies

Lease Commitment

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

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

with 2% annual increases.

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

August  2,  2012  at  a  monthly  license  fee  of  $4,900.    The  license  agreement  may  be

terminated upon 30 days notice.

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

December 31 are as follows:

2013

$   4,590

2014

18,720

2015

19,080

2016

19,440

2017

3,240

$ 65,070

Rent  expense  of  $55,673  and  $69,642  was  charged  to  operations  for  the  nine  months

ended September 30, 2013 and 2012, respectively.

Contingencies

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

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

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

13



Litigation

Digi-Data Corporation

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

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

owed  to  the  Company  totaling  $570,590  at  June  30,  2013,  exclusive  of  an  allowance  for

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

Affirmative  Defenses  and  Counterclaim  against  the  Company.  The  Counterclaim  seeks

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

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

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

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

Patent  Litigation").   The  Verizon  Patent  Litigation  is  a  result  of  a  "patent  troll"  whereby

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

actual  adjudication  of its  purported  patent  rights.  The  Company has  advised  Digi-Data of

what  it  believes  is  "prior  act"  related  to  the  subject  intellectual  property that  is  at-issue  in

the  Verizon  Patent  Litigation,  a  possible  defense  to  the  claims  by  Titanide.   A  pre-trial

order  was  issued  by  the  Court  with  detailed  deadlines  regarding  among  other  items,

discovery  cut-off   and  status   report  deadline  date  of  April  29,  2013   and   dispositive

motions  deadline  date  of  May  28,  2013.  The  Company  propounded  its  initial  discovery

upon  Digi-Data,  responses  to  which  were  due  on  or  about  March  8,  2013.  On  April  4,

2013,   Digi-Data   provided   discovery   to   the   Company.   No   depositions   have   been

scheduled  as  of  the  date  of  this  report,  nor  has  the  Company  received  any  information

from  Digi-data  regarding  any  specific  quantified  “damages”  directly  resulting  from  this

Order  or  the  settlement  agreement  between  Verizon  and  the  Plaintiff.   On  April  4,  2013,

an  Order  of  Dismissal  in  the  Verizon  Patent  Litigation  was  filed.   The  Dismissal  is  with

prejudice with each party to bear its own costs and fees.   On  May 24, 2013, the Company

filed  a  Motion  for  Summary  Judgment  with  the  Court  asking  the  Court  to  move  in  its

favor  against  DDC  for  the  entire  outstanding  balance  due  along  with  attorney’s  fees  and

post  and  pre-judgment  interest  as  applicable  under  Maryland  Law.   On  June  11,  2013,

Digi-Data filed its Response to the Motion for Summary Judgment  and, for the first time,

purported to liquidate certain alleged damages for which Digi-Data seeks a set-off against

the  amounts  admittedly  owed  by  Digi-Data  to  iGambit  and  alludes  the  existence  of

additional  although  not  yet  quantified  damages.   The  Response  relies  entirely  upon  the

Affidavit  of  a  Vice  President  of  Digi-Data  for  its  evidentiary  support.   Notwithstanding,

Digi-Data  failed  to  produce  documentary  support  for  its  alleged  damages  and  to  explain

why it failed to disclose such information during the discovery period or thereafter.

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

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

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

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

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

authorized to file a Surreply without Court order.

14



Allied Airbus, Inc.

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

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

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

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

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

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

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

Financial Advisor Contract

Brooks, Houghton & Company, Inc. (BHC)

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

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

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

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

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

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

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

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

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

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

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

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

Note 12 – Rescission of Purchase Agreement for Acquisition of IGX Global Inc. and

IGX Global UK Limited

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

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

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

Global   Inc.(“IGXUS”),   IGX   Global   UK   Limited   (“IGXUK”)   and   Tomas   Duffy

(“DUFFY”) the sole shareholder of both IGXUK and IGXUS.

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

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

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

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

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

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

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

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

certain liabilities of IGXUS.

15



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

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

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

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

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

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

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

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

upon  the  effective  date  of  the  rescission,  an  additional  payment  of  $275,000,  and  will

receive  an  additional  $350,000  payable  in  equal  monthly  installments  over  18  months.

The   consideration   from   IGX   totaling  $755,000   is   reported   as   Other   Income   in   the

Statements  of  Operations.   The  balance  due  from  IGX  was  $272,223  at  September  30,

2013.

16



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.

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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.

Revenue Recognition

Our  revenues  from  continuing  operations  consist  of  revenues  derived  primarily

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

recognized upon delivery of the products or services.

Contingency  payment  income  was  recognized  quarterly  from  a  percentage  of

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

Cash and Cash Equivalents

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

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

maturity of three months or less.

Accounts Receivable

We  analyze  the  collectability  of  accounts  receivable  from  continuing  operations

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

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

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

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

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

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

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

was  no  bad  debt  expense  charged  to  operations  for  nine  months  ended  September  30,

2013 and 2012, respectively.

Property and equipment and depreciation

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

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

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

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

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

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

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

charged to income.

Goodwill

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

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

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

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

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

reviewed   more   frequently   if   current   events   and   circumstances   indicate   a   possible

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

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

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

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

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

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

goodwill was written off.

Stock-Based Compensation

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

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

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

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

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

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

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

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

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

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

warrants.

Income Taxes

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

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

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

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

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

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

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

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

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

financial  statement  recognition  and  measurement  of  a  tax  position.  Management  has

determined   that   the   Company   has   no   significant   uncertain   tax   positions   requiring

recognition and measurement under ASC 740-10.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL

CONDITION AND RESULTS OF OPERATIONS

INTRODUCTION

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

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

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

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

Assets.  At  September  30,  2013,  we  had  $1,058,526  in  total  assets,  compared  to

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

increase   in   accounts   receivable   and   the   receivable   due   from   the   IGX   Rescission

Agreement.

Liabilities.  At  September  30,  2013,  our  total  liabilities  were  $524,823  compared

to  $440,221  at  December  31,  2012.  The  increase  in  liabilities  was  primarily  due  to  the

issuance  of  a  convertible  note  payable  to  an  unrelated  party.  We  do  not  have  any  long

term liabilities.

Stockholders’   Equity.   Our   stockholders’   equity   increased   to   $533,703   at

September  30,  2013  from  $305,698  at  December  31,  2012.   This  increase  was  primarily

due  to  a  decrease  in  accumulated  deficit  from  $(2,448,346)  at  December  31,  2012  to

$(2,220,341)  at  September  30,  2013,  resulting  from  income  from  operations  of  $228,005

for the nine months ended September 30, 2013.

THREE  MONTHS  ENDED  SEPTEMBER  30,  2013  AS  COMPARED  TO  THREE

MONTHS ENDED SEPTEMBER 30, 2012

Revenues  and  Cost  of  Sales.    We  had  $397,081  of  revenue  during  the  three

months  ended  September  30,  2013  compared  to  revenue  of  $416,429  during  the  three

months  ended  September  30,  2012.  The  decrease  in  revenue  was  due  primarily  to  a

decrease  in  revenue  generated  by  our  Gotham  subsidiary.  The  decrease  in  our  cost  of

goods  sold  for  the  three  months  ended  September  30,  2013  was  due  to  a  decrease  in  the

cost of the outsourced photography vendors utilized by our Gotham subsidiary.

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General  and  Administrative  Expenses.  General  and  Administrative  Expenses

decreased to $421,298 for the three  months ended September 30, 2013 from $438,058 for

the  three  months  ended  September 30,  2012.    For  the  three  months  ended  September 30,

2013  our  General  and  Administrative  Expenses  consisted  of  corporate  administrative

expenses  of $86,338, legal  and accounting fees of $19,951, employee benefits  expense of

$28,640,  directors  and  officers  insurance  of  $10,326  and  payroll  expenses  of  $276,043.

For   the   three   months   ended   September   30,   2012   our   General   and   Administrative

expenses consisted of corporate administrative expenses of $96,829, legal and accounting

fees  of  $35,573,  payroll  expenses  of  $279,068,  employee  benefits  expense  of  $17,131

and  directors  and  officers  insurance  of  $9,457.      The  decreases  from  the  three  months

ended September 30, 2012 to the three months ended September 30, 2013 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

officers’  salaries  and  the  operation  of  our  Gotham  subsidiary  should  remain  level  going

forward,  subject  to  a  material  expansion  in  the  business  operations  of  Gotham  which

would likely increase our corporate administrative expenses.

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

months  ended  September  30,  2013  compared  to  interest  income  of  $257  for  the  three

months  ended  September  30,  2012.  There  was  no  income  tax  benefit  the  three  months

ended  September  30,  2013  compared  to  $(70,218)  for  the  three  months  ended  September

30, 2012.

NINE   MONTHS   ENDED   SEPTEMBER   30,   2013   AS   COMPARED   TO   NINE

MONTHS ENDED SEPTEMBER 30, 2012

Revenues  and  Net  Income.  We  had  $1,171,621  of  revenue  during  the  nine  months

ended September 30, 2013, as compared to $1,325,945 of revenue during the nine months

ended  September  30,  2012.    The  decrease  in  revenue  was  due  to  decrease  in  revenue

generated  by  our  acquired  subsidiary  Gotham.    In  addition,  we  had  other  income  of

$755,000  for  the  nine  months  ended  September  30,  2013,  compared  to  $0  for  the  nine

months  ended  September  30,  2012.   The  decrease  in  our  cost  of  goods  sold  for  the  nine

months  ended  September  30,  2013  was  due  to  a  decrease  in  the  cost  of  the  outsourced

photography vendors utilized by Gotham.

General   and   Administrative   Expenses.   General   and   Administrative   Expenses

decreased  to  $1,299,224  for the  nine  months  ended  September 30,  2013  from $1,368,293

for  the  nine  months  ended  September  30,  2012.   For  the  nine  months  ended  September

30,  2013  our  General  and  Administrative  Expenses  consisted  of  corporate  administrative

expenses  of  $225,092,  employee  benefits  expense  of  $89,504,  legal  and  accounting  fees

of   $102,655,   directors   and   officers   insurance   expense   of   $30,038,   finders   and

commission   fees   related   the   IGX   transaction   of   $30,175   and   payroll   expenses   of

$821,760.    For    the    nine    months    ended    September    30,    2012    our    General    and

Administrative  Expenses  consisted  of  corporate  administrative  expenses  of  $358,604,

legal  and  accounting  fees  of  $67,475,  payroll  expenses  of  $863,342,  employee  benefit

expenses  of  $51,820  and  directors  and  officers’  insurance  expense  of  $27,052.    The

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decreases  from  the  nine  months  ended  September  30,  2012  to  the  nine  months  ended

September 30,  2013  relate primarily to  a  decrease  in  payroll  and  corporate  administrative

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

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

business  operations  of  Gotham  which  would  likely  increase  our  corporate  administrative

expenses.

Other  Income  (Expense)  and  Taxes.  There  was  no  interest  income  for  the  nine  months

ended  September  30,  2013  compared  to  interest  income  of  $12,978  for  the  nine  months

ended  September  30,  2012.  There  was  no  income  tax  benefit  the  nine  months  ended

September 30, 2013 compared to $(254,691) for the nine ended September 30, 2012.

LIQUIDITY AND CAPITAL RESOURCES

General

As  reflected  in the  accompanying  consolidated  financial  statements,  at  September

30,  2013,  we  had  $216,618  of  cash  and  stockholders’  equity of  $533,703  as  compared  to

$104,721   and   $305,698   at   December   31,   2012.     At   September   30,   2013   we   had

$1,058,526 in total assets, compared to $745,919 at December 31, 2012.

Our primary capital requirements in 2013 are likely to arise from the expansion of

our  Gotham  operations,  and,  in  the  event  we  effectuate  an  acquisition,  from:  (i) the

amount  of  the  purchase  price  payable  in  cash  at  closing,  if  any;  (ii) professional  fees

associated  with  the  negotiation,  structuring,  and  closing  of  the  transaction;  and  (iii) post-

closing  costs.  It  is  not  possible  to  quantify  those  costs  at  this  point  in  time,  in  that  they

depend on Gotham’s business opportunities, the state of the overall economy, the relative

size  of  any  target  company  we  identify  and  the  complexity  of  the  related  acquisition

transaction(s).  We  anticipate  raising  capital  in  the  private  markets  to  cover  any  such

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

acceptable.  We  do  not  have  any  plans  at  this  point  in  time  to  obtain  a  line  of  credit  or

other loan facility from a commercial bank.

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

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

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

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

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

Cash Flow Activity

Net  cash  provided  by  operating  activities  was  $6,597  for  the  nine  months  ended

September  30,  2013,  compared  to  net  cash  used  by  operating  activities  of  $(263,227)  for

the  nine  months  ended  September  30,  2012.  Our  primary  source  of  operating  cash  flows

from  continuing  operating  activities  for  the  nine  months  ended  September  30,  2013  was

from  our  Gotham subsidiary’s  revenues  of $1,171,621 and  $1,325,945  for  the  nine  months ended

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September  30,  2012.    Additional  contributing  factors  to  the  change  were  from  a  decrease  in

prepaid  expenses  of  $87,804,  net  income  of  $228,005  and  no  change  in  deferred  income  taxes.

Net   cash   provided   by  discontinued   operating  activities   was   $0   for   the   nine  months   ended

September 30, 2013 and $250,000 for the nine months ended September 30, 2012.  Cash provided by discontinued operations for the nine months ended September 30, 2012 consists of $250,000 in cash payments received from DDC which was offset by a decrease in accounts receivable included in the Assets from Discontinued Operations.

Cash  provided  by investing  activities  was  $1,800  for  the  nine  months  ended  September  30,

2013 compared to  $421,145 for the  nine months ended September 30, 2012.   For the nine months

ended September 30, 2013 the primary source of cash provided by investing activities was from a

decrease in deposits.   For the  nine months ended September 30, 2012 the source of cash provided

by  investing  activities  was  primarily  from  the  repayment  of  notes  receivable  from  Allied  Airbus

Inc. of $434,512.

Cash  provided  by  financing  activities  was  $103,500  for  the  nine  months  ended  September

30,  2013  compared  to  cash  used  in  financing  activities  of  $(19,127)  for  the  nine  months  ended

September  30,  2012.   The  cash  flows  provided  by financing  activities  for  the  nine  months  ended

September  30, 2013  was from the issuance of a Convertible  note  payable to at an unrelated party.

The  cash  flows  used  by  financing  activities  for  the  nine  months  ended  September  30,  2012  was

from a repayment of loans payable to a related party.

Supplemental Cash Flow Activity

In  the  nine  months  ended  September  30,  2013  the  company paid  income  taxes  of  $0  and

interest  of  $2,644  compared  to  income  taxes  of  $4,125  and  interest  of  $1,478  in  the  nine  months

ended September 30, 2012.

Item 3. Quantitative and Qualitative Disclosures about Market Risk.

Not Required.

Item 4. Controls and Procedures.

Conclusion Regarding the Effectiveness of Disclosure Controls and Procedures

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

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

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

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

of  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, 2013.

Change in Internal Controls

During the nine months ended  September 30,  2013, there were  no changes in our internal

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

affect, our internal control over financial reporting.

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PART II — OTHER INFORMATION

Item 1.   Legal Proceedings.

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

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

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

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

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

Company pursuant to said agreement.

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

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

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

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

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

violations (hereinafter "Verizon Patent Litigation").

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

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

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

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

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

A pre-trial order was issued by the Court with detailed deadlines regarding among

other  items,  discovery  cut-off  and  status  report  deadline  date  of  April  29,  2013  and

dispositive  motions  deadline  date  of  May  28,  2013.    iGambit  propounded  its  initial

discovery upon Digi-Data, responses to which were due on or about March 8, 2013.

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

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

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

the settlement agreement between Verizon and the Plaintiff.

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

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

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

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

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

Maryland Law.

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

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

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

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

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

24



support.    Notwithstanding,  Digi-Data  failed  to  produce  documentary  support  for  its  alleged

damages  and  to  explain  why it  failed  to  disclose  such  information  during  the  discovery period  or

thereafter.

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

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

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

information  to  defeat  summary  judgment,  and  the  legal  inadequacy  of  same.    Pursuant  the

Maryland  District  Court’s  Local  Rules,  Digi-Data  is  not  authorized  to  file  a  Surreply  without

Court order.

Item 1A.    Risk Factors.

Not required

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

None

Item 3.   Defaults upon Senior Securities.

None

Item 4.   Removed and Reserved.

Item 5.   Other Information.

None

Item 6.

Exhibits

Exhibit No.

Description

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

Sarbanes-Oxley Act of 2002.

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

Sarbanes-Oxley Act of 2002.

32.1    Certification of the Chief Executive Officer Pursuant to Section 906 of the

Sarbanes-Oxley Act of 2002. (This exhibit shall not be deemed “filed” for the

purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or

otherwise subject to the liability of that section. Further, this exhibit shall not be

deemed to be incorporated by reference into any filing under the Securities Act of

1933, as amended, or the Securities Exchange Act of 1934, as amended.)

32.2    Certification of the Interim Chief Financial Officer Pursuant to Section 906 of the

Sarbanes-Oxley Act of 2002. (This exhibit shall not be deemed “filed” for the

purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or

otherwise subject to the liability of that section. Further, this exhibit shall not be

deemed to be incorporated by reference into any filing under the Securities Act of

1933, as amended, or the Securities Exchange Act of 1934, as amended.)

25



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 13, 2013.

iGambit Inc.

/s/ John Salerno

John Salerno

Chief Executive Officer

/s/ Elisa Luqman

Elisa Luqman

Chief Financial Officer

26



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.)

27