Attached files
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EX-32.2 - IGAMBIT CERTIFICATION - Clinigence Holdings, Inc. | exhibit322.htm |
EX-32.1 - IGAMBIT CERTIFICATION - Clinigence Holdings, Inc. | exhibit321.htm |
EX-31.2 - IGAMBIT CERTIFICATION - Clinigence Holdings, Inc. | exhibit312.htm |
EX-31.1 - IGAMBIT CERTIFICATION - Clinigence Holdings, Inc. | exhibit311.htm |
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
(Issuers 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
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
Managements Discussion and Analysis of Financial Condition and
Results of Operations
24
Quantitative and Qualitative Disclosures About Market Risk
27
Controls and Procedures
28
Part II Other Information
Legal Proceedings
28
Risk Factors
28
Unregistered Sales of Equity Securities and Use of Proceeds
28
Defaults upon Senior Securities
28
Removed and Reserved
28
Other Information
28
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 Companys 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 Gothams 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.
HealthDatixs 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.
Gothams 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 assets
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 Companys 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 Companys 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 Companys 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
Companys 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 Companys
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 Companys 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
Companys 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
March 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 Companys 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 Companys 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 Companys 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 Companys 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 Companys 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 Companys 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 Companys most
recent results of operations and expected future profitability. Based on the Companys
cumulative losses in recent years, a full valuation allowance against the Companys
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 HealthDatixs 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 Managements 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 Companys 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 HealthDatixs
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 HealthDatixs 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 HealthDatixs 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 SECs 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.
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.)
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.)