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 June 30, 2011
o
TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE
EXCHANGE ACT
For the transition period from
to
Commission file number 000-53862
iGambit Inc.
(Exact name of small business issuer as specified in its charter)
Delaware
11-3363609
(State or other jurisdiction of
(I.R.S. Employer
incorporation or organization)
Identification No.)
1050 W. Jericho Turnpike, Suite A
Smithtown, New York 11787
(Address of Principal Executive Offices)(Zip Code)
(631) 670-6777
(Issuer’s Telephone Number, Including Area Code)
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or
15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period
that the registrant was required to file such reports), and (2) has been subject to such filing requirements for
the past 90 days. Yes þ No o
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web
site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of
Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that
the registrant was required to submit and post such files). Yes o 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 filer Accelerated filer
Non-accelerated filer o
Smaller reporting company
o
o
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 23,954,056 shares of its common stock outstanding as of August 7, 2012.
iGambit Inc.
Form 10-Q
Part I — Financial Information
1
Item 1.
Financial Statements:
1
1
Consolidated Statements of Income
2
Consolidated Statements of Cash Flows
3
Notes to Consolidated Financial Statements
4
Item 2.
Management’s Discussion and Analysis of Financial Condition and
Results of Operations
14
Item 3.
Quantitative and Qualitative Disclosures About Market Risk
20
Item 4.
Controls and Procedures
20
Part II — Other Information
21
Item 1.
Legal Proceedings
21
Item 1A.
Risk Factors
21
Item 2.
Unregistered Sales of Equity Securities and Use of Proceeds
21
Item 3.
Defaults upon Senior Securities
21
Item 4.
Removed and Reserved
21
Item 5.
Other Information
21
Item 6.
21
EX-31.1
EX-31.2
EX-32.1
EX-32.2
PART I — FINANCIAL INFORMATION
Item 1 — Financial Statements
IGAMBIT INC.
CONSOLIDATED BALANCE SHEETS
JUNE 30,
DECEMBER 31,
2012
2011
(Unaudited)
ASSETS
Current assets
Cash
$
653,462
$
224,800
Accounts receivable, net
161,350
269,353
Prepaid expenses
26,955
58,649
Notes receivable
--
434,512
Notes receivable - stockholder
17,000
17,000
Deferred income taxes
368,658
184,185
Assets from discontinued operations
345,590
570,590
Total current assets
1,573,015
1,759,089
Property and equipment, net
20,761
18,563
Other assets
Goodwill
111,026
111,026
Deposits
2,070
2,500
Total other assets
113,096
113,526
$
1,706,872
$
1,891,178
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Accounts payable
$
380,350
$
263,195
Note payable - related party
19,765
25,390
Loan payable - stockholder
5,300
--
Total current liabilities
405,415
288,585
Stockholders' equity
Common stock, $.001 par value; authorized - 75,000,000 shares;
issued and outstanding - 23,954,056 shares, respectively
23,954
23,954
Additional paid-in capital
2,403,090
2,403,090
Accumulated deficit
(1,125,587)
(824,451)
Total stockholders' equity
1,301,457
1,602,593
$
1,706,872
$
1,891,178
1
IGAMBIT INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
UNAUDITED
THREE MONTHS
SIX MONTHS
ENDED
ENDED
JUNE 30,
JUNE 30,
2012
2011
2012
2011
Sales
$
429,168
$
477,441
$
909,516
$
889,344
Cost of sales
222,573
221,592
477,611
351,813
Gross profit
206,595
255,849
431,905
537,531
Operating expenses
General and administrative expenses
433,294
450,662
930,235
903,061
Loss from operations
(226,699)
(194,813)
(498,330)
(365,530)
Other income
Interest income
5,881
6,935
12,721
14,170
Loss from continuing operations before
income tax benefit
(220,818)
(187,878)
(485,609)
(351,360)
Income tax benefit
83,217
65,643
184,473
114,860
Loss from continuing operations
(137,601)
(122,235)
(301,136)
(236,500)
Discontinued operations
Income from discontinued operations
Provision for income taxes
--
--
--
242,099
--
--
--
82,314
Income from discontinued operations, net
of taxes
--
--
--
159,785
Net loss
$
(137,601)
$
(122,235)
$
(301,136)
$
(76,715)
Basic and fully diluted earnings (loss) per
common share:
Continuing operations
Discontinued operations, net of tax
$
(.01)
$
(.01)
$
(.01)
$
(.01)
Net earnings per common share
$
.00
$
.00
$
.00
$
.01
$
(.01)
$
(.01)
$
(.01)
$
.00
Weighted average common shares
outstanding
23,954,056
23,954,056
23,954,056
23,954,056
2
IGAMBIT INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
SIX MONTHS ENDED JUNE 30,
(UNAUDITED)
2012
2011
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss
$ (301,136)
$
(76,715)
Adjustments to reconcile net loss to net
cash provided (used) by operating activities
Income from discontinued operations
--
(159,785)
Depreciation
4,249
2,894
Deferred income taxes
(184,473)
--
Increase (Decrease) in cash flows as a result of
changes in asset and liability account balances:
Accounts receivable
108,003
(154,163)
Prepaid expenses
31,694
197,475
Accounts payable
117,155
(68,561)
Net cash used by continuing operating activities
(224,508)
(258,855)
Net cash provided (used) by discontinued operating activities
225,000
(82,314)
NET CASH PROVIDED (USED) BY OPERATING ACTIVITIES
492
(341,169)
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment
(1,147)
(18,751)
Decrease in deposits
430
--
Proceeds from repayments of notes receivable
434,512
32,988
Net cash provided by continuing investing activities
433,795
14,237
Net cash provided by discontinued investing activities
--
330,000
NET CASH PROVIDED BY INVESTING ACTIVITIES
433,795
344,237
NET CASH USED BY FINANCING ACTIVITIES:
Repayment of loans from shareholders
(5,625)
--
NET INCREASE IN CASH
428,662
3,068
CASH - BEGINNING OF PERIOD
224,800
465,549
CASH - END OF PERIOD
$
653,462
$
468,617
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the period for:
Interest
$
1,368
$
1,372
Income taxes
4,125
13,940
Non-cash investing and financing activities:
Property and equipment purchased through loan from stockholder
$
5,300
$
--
3
IGAMBIT INC.
Notes to Consolidated Financial Statements
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 22, 2000
before changing to iGambit Inc. on July 18, 2006. Gotham was incorporated under the
laws of the state of New York on September 23, 2009.
In the opinion of management, the accompanying interim financial statements reflect all
adjustments (consisting of normal recurring accruals) necessary to present fairly the
financial position and the results of operations and cash flows for the interim periods
presented. The results of operations for these interim periods are not necessarily
indicative of the results to be expected for the year ending December 31, 2012.
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 receives payments from Digi-
Data based on 10% of the net vaulting revenue payable quarterly over five years. The
Company is 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 are included in the
discontinued operations line of the statements of operations.
The assets of the discontinued operations are presented in the balance sheets under the
captions “Assets of discontinued operations”. The underlying assets of the discontinued
operations consist of accounts receivable of $345,590 and $570,590 as of June 30, 2012
and December 31, 2011, respectively.
Accounts Receivable
Accounts receivable includes 50% of contingency payments earned for the previous
quarter. Reserve for bad debts of $250,000 was charged to operations for the year ended
December 31, 2010. No reserve for bad debts was charged to operations for the six
months ended June 30, 2012.
4
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 significant 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
reporting amounts of assets and liabilities and disclosure of contingent assets and
liabilities at the date of the 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.
Revenue Recognition
Contingency payment income was recognized quarterly from a percentage of Digi-Data’s
vaulting service revenue, and is included in discontinued operations.
The Company’s revenues from continuing operations consists of revenues primarily from
sales of products and services rendered to real estate brokers. Revenues are recognized
upon delivery of the products or services.
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 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
current 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
5
debt expense charged to operations for the six months ended June 30, 2012 and 2011,
respectively.
Prepaid Expenses
Prepaid expenses consist of the following:
June 30, December 31,
2012
2011
Prepaid state income taxes
$ 22,368
$ 31,758
Prepaid insurance
4,587
26,891
$ 26,955
$ 58,649
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. During the six months ended
June 30, 2012, the Company purchased furniture and computer equipment totaling
$6,447. 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 $4,249 and $2,894 was charged to operations for the six months
ended June 30, 2012 and 2011, respectively.
Goodwill
Goodwill represents the fair market value of the common shares issued and common
stock options granted by the Company for 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 being amortized, but instead will be subject to an annual
assessment of impairment by applying a fair-value based test, and will be reviewed more
frequently if current events and circumstances indicate a possible impairment. An
impairment loss is charged to expense in the period identified. If indicators of impairment
are present and future cash flows are not expected to be sufficient to recover the asset’s
carrying amount, an impairment loss is charged to expense in the period identified. A
lack of projected future operating results from Gotham’s operations may cause
impairment. At December 31, 2011, the Company performed an impairment study and
determined that there is no indication that present and future cash flows are not expected
to be sufficient to recover the carrying amount of goodwill. The Company has not
performed an impairment study during the six months ended June 30, 2012. Based on the
6
Company’s evaluation of goodwill, no impairment was recorded during the six months
ended June 30, 2012.
Stock-Based Compensation
The Company accounts for its stock-based 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 valuation model to estimate the fair value of its
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 the Company’s stock options and warrants.
Income Taxes
The Company accounts for income taxes using the asset and liability method in
accordance with ASC Topic No. 740, Income Taxes. Under this method, deferred tax
assets and liabilities are determined based on differences between financial reporting and
tax bases of assets and liabilities, and are measured using the enacted tax rates and laws
that are expected to be in effect when the differences are expected to reverse.
The Company applies the provisions of ASC Topic No. 740 for the financial statement
recognition, measurement and disclosure of uncertain tax positions recognized in the
Company’s financial statements. In accordance with this provision, tax positions must
meet a more-likely-than-not recognition threshold and measurement attribute for the
financial statement recognition and measurement of a tax position.
Note 4 – Notes Receivable
In connection with a letter of intent the Company entered into with Allied Airbus, Inc.
(“Allied”) on July 20, 2010 to which both parties were unable to reach a mutually
acceptable definitive agreement, the Company provided various loans to Allied totaling
$434,512 at December 31, 2011, for which promissory notes were issued. The notes,
which became past due during the period, were repaid in full including accrued interest
on June 27, 2012.
Accrued interest on the notes was $12,044 and $20,358 for the six months ended June 30,
2012 and 2011, respectively.
Note 5 - 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
7
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.
Six Months Ended
June 30,
2012
2011
SStock options
2,768,900 2,468,900
Common stock warrants
275,000 3,085,000
Total shares excluded from calculation
3,043,900 5,553,900
Note 6 – 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
method on a straight-line basis over the requisite service period for all stock awards that
vest during the period. The grant date fair value for stock options is calculated using the
Black-Scholes option valuation 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 and the expected dividends. Stock-
based compensation expense is reported under general and administrative expenses on
the accompanying consolidated statements of operations.
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. Effective January 1, 2006, the Company recognized compensation
expense ratably over the vesting period, net of estimated forfeitures. As of June 30, 2012,
there was no unrecognized compensation cost related to non-vested share-based
compensation arrangements granted under the 2006 plan.
The 2006 Plan provides for the granting of options to purchase up to 10,000,000 shares of
common stock. 8,822,000 options have been issued or exercised to date. There are
8,617,520 options outstanding under the 2006 Plan.
8
Warrant activity during the six months ended June 30, 2012 follows:
Weighted
Average
Weighted
Remaining
Average
Average
Contractual
Grant-Date
Life
Warrants
Exercise Price
Fair Value
(Years)
Warrants outstanding
at January 1, 2012
275,000
$
0.94
$
0.10
No warrant activity
--
--
--
Warrants outstanding
at June 30, 2012
275,000
$
0.94
$
0.10
0.99
Stock Option Plan activity during the six months ended June 30, 2012 follows:
Weighted
Average
Weighted
Remaining
Average
Average
Contractual
Grant-Date
Life
Options
Exercise Price
Fair Value
(Years)
Options outstanding at
January 1, 2012
2,768,900
$
0.04
$
0.10
No option activity
--
--
--
Options outstanding at
June 30, 2012
2,768,900
$
0.04
$
0.10
4.27
The fair value of warrants and options granted is estimated on the date of grant based on
the weighted-average assumptions in the table below. The assumption for the expected
life is based on evaluations of historical and expected exercise behavior. The risk-free
interest rate is based on the U.S. Treasury rates at the date of grant with maturity dates
approximately equal to the expected life at the grant date. The calculated value method
using the historical volatility of the Computer Services industry is used as the basis for
the volatility assumption.
Six months ended June 30,
__2012__
__2011__
Weighted average risk-free rate
0.64%
1.89%
Average expected life in years
5.0
4.6
Expected dividends
None
None
Volatility
44%
36%
Forfeiture rate
0%
0%
9
Note 7 - Income Taxes
The tax provision at June 30 consists of the following:
2012
2011
From operations:
Continuing operations:
Current tax expense (benefit):
Federal
$(148,524)
$ (114,860)
State and local
(35,949)
--
Total from continuing operations
(184,473)
(114,860)
Discontinued operations:
Current tax expense (benefit)
Federal
--
82,314
State and local
--
--
Total from discontinued operations
--
82,314
Total
$(184,473)
$ (32,546)
A reconciliation of the statutory federal income tax rate and the effective tax rate follows:
Six Months Ended
June 30,
2012
2011
Statutory tax rate
34.0%
34.0%
Effect of:
State income taxes, net of
federal income tax benefit
5.0%
0.0%
Tax effect of expenses that are not
deductible for income tax purposes
(1.0)%
(4.2)%
Effective tax rate
38.0%
29.8%
The Company recognizes deferred tax assets and liabilities based on the future tax
consequences of events that have been included in the financial statements or tax returns.
The differences relate primarily to net operating loss carryovers. Deferred tax assets and
liabilities are calculated based on the difference between the financial reporting and tax
bases of assets and liabilities using the currently enacted tax rates in effect during the
years in which the differences are expected to reverse. Deferred taxes are classified as
current or non-current, depending on the classification of the assets and liabilities to
which they relate.
The Company’s provision for income taxes differs from applying the statutory U.S.
federal income tax rate to income before income taxes. The primary differences result
from providing for state income taxes and from deducting certain expenses for financial
statement purposes but not for federal income tax purposes.
10
In accordance with ASC Topic No. 740, Income Taxes, a valuation allowance is
established based on the future recoverability of deferred tax assets. 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. Management has determined that no valuation allowance related to deferred
tax assets is necessary at June 30, 2012 and December 31, 2011.
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 six months ended June 30, 2012 and 2011
were $5,476 and $5,541, respectively.
Note 9 – Significant Customers
Sales of Gotham to three customers amounted to approximately 65% of Gotham’s total
sales for the six months ended June 30, 2012 at 38%, 14%, and 13%, respectively.
Note 10 – Risks and Uncertainties
Uninsured Cash Balances
Substantially all amounts of cash accounts held at financial institutions are insured by the
FDIC.
Note 11 - Related Party Transactions
Notes Receivable - Stockholders
The Company provided loans to a stockholder totaling $17,000 at June 30, 2012 and
December 31, 2011. The loans bear interest at a rate of 6% and are due on December 31,
2012.
Accrued interest on the note was $509 and $506 for the six months ended June 30, 2012
and 2011, respectively.
Note Payable – Related Party
Gotham was provided loans from an entity that is controlled by the officers of Gotham
totaling $19,765 and $25,390 at June 30, 2012 and December 31, 2011, respectively. The
note bears interest at a rate of 5.5% and is due on December 31, 2012.
11
Interest expense of $295 was charged to operations for the six months ended June 30,
2012 and 2011, respectively.
Loan Payable - Stockholder
A stockholder/officer of the Company paid for property and equipment totaling $5,300
on behalf of the Company. The loan does not bear interest and has been repaid as of the
date of this report.
Note 12 - 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.
Gotham has an operating lease for office space renewable annually on October 16 at a
monthly rent of $5,500.
Total future minimum annual lease payments under the lease for the years ending
December 31 are as follows:
2012
$ 9,000
2013
18,360
2014
18,720
2015
19,080
2016
19,440
$ 84,600
Rent expense of $49,900 and $48,600 was charged to operations for the six months ended
June 30, 2012 and 2011, respectively.
Note 13 - Litigation
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%.
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.
Note 14 – Recent Accounting Pronouncements
In May 2011, the FASB issued Accounting Standards Update No. 2011-04, Amendments
to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S.
GAAP and IFRSs (“ASU 2011-04”), which is intended to result in convergence between
12
U.S. GAAP and International Financial Reporting Standards requirements for
measurement of, and disclosures about, fair value. ASU 2011-04 clarifies or changes
certain fair value measurement principles and enhances the disclosure requirements
particularly for Level 3 fair value measurements. This pronouncement is effective for
reporting periods beginning after December 15, 2011, with early adoption prohibited for
public companies. The new guidance will require prospective application. The Company
adopted this pronouncement in the first quarter of 2012 and does not expect its adoption
to have a material effect on its financial position or results of operations.
In December 2010, the FASB issued authoritative guidance regarding when to perform
step 2 of the goodwill impairment test for reporting units with zero or negative carrying
amounts. The guidance modifies Step 1 of the goodwill impairment test so that for those
reporting units with zero or negative carrying amounts, an entity is required to perform
Step 2 of the goodwill impairment test if it is more likely than not based on an assessment
of qualitative indicators that a goodwill impairment exists. In determining whether it is
more likely than not that goodwill impairment exists, an entity should consider whether
there are any adverse qualitative factors indicating that an impairment may exist. This
guidance is effective for fiscal years, and interim periods within those years, beginning
after December 15, 2010. The Company adopted this standard beginning January 1,
2011, and the adoption did not have a material impact on the Company’s consolidated
financial statements.
In January 2010, the FASB issued ASU No. 2010-6, “Improving Disclosures About Fair
Value Measurements”, which provides amendments to ASC 820 Fair Value
Measurements and Disclosures, including requiring reporting entities to make more
robust disclosures about (1) the different classes of assets and liabilities measured at fair
value, (2) the valuation techniques and inputs used, (3) the activity in Level 3 fair value
measurements including information on purchases, sales, issuances, and settlements on a
gross basis and (4) the transfers between Levels 1, 2, and 3. The standard is effective for
annual reporting periods beginning after December 15, 2009, except for Level 3
reconciliation disclosures, which are effective for annual periods beginning after
December 15, 2010. The Company adopted this standard beginning January 1, 2011, and
the adoption did not have a material impact on the Company’s consolidated financial
statements.
Note 15 – Subsequent Events
In accordance with FASB ASC 855, Subsequent Events, the Company evaluates events
and transactions that occur after the balance sheet date for potential recognition in the
consolidated financial statements. The effect of all subsequent events that provide
additional evidence of conditions that existed at the balance sheet date are recognized in
the consolidated financial statements as of June 30, 2012. In preparing these consolidated
financial statements, the Company evaluated the events and transactions that occurred
through the date these consolidated financial statements were issued. There were no
material subsequent events that required recognition or additional disclosure in these
consolidated financial statements.
13
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of
Operations.
FORWARD LOOKING STATEMENTS
This Form 10-Q includes “forward-looking statements” within the meaning of
Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities
Exchange Act of 1934, as amended. All statements, other than statements of historical
facts, included or incorporated by reference in this Form 10-Q which address activities,
events or developments that the Company expects or anticipates will or may occur in the
future, including such things as future capital expenditures (including the amount and
nature thereof), finding suitable merger or acquisition candidates, expansion and growth
of the Company’s business and operations, and other such matters are forward-looking
statements. These statements are based on certain assumptions and analyses made by the
Company in light of its experience and its perception of historical trends, current
conditions and expected future developments as well as other factors it believes are
appropriate in the circumstances.
Investors are cautioned that any such forward-looking statements are not guarantees of
future performance and involve significant risks and uncertainties, and that actual results
may differ materially from those projected in the forward-looking statements. Factors that
could adversely affect actual results and performance include, among others, potential
fluctuations in quarterly operating results and expenses, government regulation,
technology change and competition. Consequently, all of the forward-looking statements
made in this Form 10-Q are qualified by these cautionary statements and there can be no
assurance that the actual results or developments anticipated by the Company will be
realized or, even if substantially realized, that they will have the expected consequence to
or effects on the Company or its business or operations. The Company assumes no
obligations to update any such forward-looking statements.
CRITICAL ACCOUNTING ESTIMATES
Our management’s discussion and analysis of our financial condition and results of
operations are based on our financial statements, which have been prepared in accordance
with accounting principles generally accepted in the United States of America. The
preparation of financial statements may require us to make estimates and assumptions
that may affect the reported amounts of assets and liabilities and the related disclosures at
the date of the financial statements. We do not currently have any estimates or
assumptions where the nature of the estimates or assumptions is material due to the levels
of subjectivity and judgment necessary to account for highly uncertain matters or the
susceptibility of such matters to change or the impact of the estimates and assumptions on
financial condition or operating performance is material, except as described below.
Fair Value of Financial Instruments
For certain of the our 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.
14
Revenue Recognition
Contingency payment income is recognized quarterly from a percentage of Digi-
Data’s vaulting service revenue, and is included in discontinued operations. Our revenues
from continuing operations consist of revenues primarily from sales of products and
services rendered to real estate brokers. Revenues are recognized upon delivery of the
products or services.
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 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 current
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.
As of December 31, 2011, accounts receivable included 50% of contingency payments
earned for the previous quarter. Reserve for bad debts of $250,000 was charged to
operations for the year ended December 31, 2010. No reserve for bad debts was charged
to operations for the six months ended June 30, 2012.
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. During the six
months ended June 30, 2012, the Company purchased computer equipment totaling
$6,447. 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 $4,249 and $2,894was charged to operations for the six
months ended June 30, 2012 and 2011, respectively.
Goodwill
Goodwill represents the fair market value of the common shares issued and common
stock options granted by the Company for 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 being amortized, but instead will be subject to an annual
15
assessment of impairment by applying a fair-value based test, and will be reviewed more
frequently if current events and circumstances indicate a possible impairment. An
impairment loss is charged to expense in the period identified. If indicators of impairment
are present and future cash flows are not expected to be sufficient to recover the asset’s
carrying amount, an impairment loss is charged to expense in the period identified. A
lack of projected future operating results from Gotham’s operations may cause
impairment.
At December 31, 2011, the Company performed an impairment study and determined
that there is no indication that present and future cash flows are not expected to be
sufficient to recover the carrying amount of goodwill. The Company has not performed
an impairment study during the six months ended June 30, 2012. Based on the
Company’s evaluation of goodwill, no impairment was recorded during the six months
ended June 30, 2012.
Stock-Based Compensation
We account for our stock-based employee compensation plan in accordance with ASC
Topic No. 718-20, Awards Classified as Equity, which requires the measurement of
compensation expense for all share-based compensation granted to employees and non-
employee directors at fair value on the date of grant and recognition of compensation
expense over the related service period for awards expected to vest. We use the Black-
Scholes option valuation model to estimate the fair value of our stock options and
warrants. The Black-Scholes option valuation model requires the input of highly
subjective assumptions including the expected stock price volatility of the Company’s
common stock. Changes in these subjective input assumptions can materially affect the
fair value estimate of our stock options and warrants.
Income Taxes
We account for income taxes using the asset and liability method in accordance with
ASC Topic No. 740, Income Taxes. Under this method, deferred tax assets and liabilities
are determined based on differences between financial reporting and tax bases of assets
and liabilities, and are measured using the enacted tax rates and laws that are expected to
be in effect when the differences are expected to reverse.
We apply the provisions of ASC Topic No. 740 for the financial statement
recognition, measurement and disclosure of uncertain tax positions recognized in the
Company’s financial statements. In accordance with this provision, tax positions must
meet a more-likely-than-not recognition threshold and measurement attribute for the
financial statement recognition and measurement of a tax position.
16
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. During the year ended December 31, 2011 and during the six
months ended June 30, 2012 Gotham produced approximately $1,623,654 and $852,272
of revenue, respectively. We are focused on expanding the operations of Gotham by
marketing the company to existing and potential new clients. Currently Gotham has
several proposals outstanding to franchisees of one of its main customers, as well as other
potential new clients. In addition to Gotham’s operations, during the year ended
December 31, 2011 and during the six months ended June 30, 2012 we earned $160,250
and $ 57,244 in technical consulting fees. We also received Quarterly Revenue Share
Payments and Annual Increase Payments from Digi-Data Corporation, which were
payable pursuant to the terms of an agreement under which we sold certain assets to DDC
in 2006. We earned $247,860 of Contingency Payments from DDC in the year ended
December 31, 2011. The agreement with DDC ended on February 28, 2011. We expect
the balance of the amounts due to be paid during 2012. We are also focused on
acquiring or partnering with additional technology companies.
Assets. At June 30, 2012, we had $1,706,872 in total assets, compared to $1,891,178 at
December 31, 2011. The decrease in total assets was primarily due to the decrease in cash
as a result of the receipt of decreased contingency payments from DDC.
Liabilities. At June 30, 2012, our total liabilities were $405,415 compared to $288,585
at December 31, 2011. Liabilities consist of accounts payable and a note payable to a
related party. We do not have any long term liabilities. The increase in liabilities was due
to an increase in accounts payable and a loan payable to stockholder.
Stockholders’ Equity. Our stockholders’ equity decreased to $1,301,457 at June 30,
2012 from $1,602,593 at December 31, 2011. This decrease was primarily due to an
increase in accumulated deficit from $(824,451) at December 31, 2011 to $(1,125,587) at
June 30, 2012, resulting from the end of the contingency payments from Digi-Data Corp.
Three Months Ended June 30, 2012 as Compared to Three Months Ended June 30,
2011
Revenues and Net Income. We had $429,168 of revenue during the three months
ended June 30, 2012, as compared to $477,441 of revenue during the three months ended
June 30, 2011. The decrease was due to a decrease in revenue generated by our acquired
subsidiary Gotham resulting from a transition of revenue focus away from custom
development and towards online real estate media In addition, we had a net loss of
(137,601) for the three months ended June 30, 2012, compared to a net loss of ($122,235)
for the three months ended June 30, 2011.
17
General and Administrative Expenses. General and Administrative Expenses
decreased to $433,294 for the three months ended June 30, 2012 from $450,662 for the
three months ended June 30, 2011. For the three months ended June 30, 2012 our General
and Administrative Expenses consisted of corporate administrative expenses of $102,331,
rent expense of $26,500, employee benefits, consisting primarily of health insurance
expense of $19,871, and payroll expenses of $284,592. For the three months ended June
30, 2011 our General and Administrative Expenses consisted of corporate administrative
expenses of $122,118, legal and accounting fees of $29,829 and payroll expenses of
$298,715. The decreases from the three months ended June 30, 2011 to the three months
ended June 30, 2012 relate primarily to: (i) the recoupment of legal fees as part of the
Allied lawsuits settlement, (ii) a decrease in professional costs associated with the
preparation and filing of a registration statement with the SEC; and (iii) leveling in costs
associated with the operation of our Gotham subsidiary. Costs associated with 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. Further, we anticipated an increase in legal and
accounting fees in 2012 as a result of having become a reporting company under the
Securities Exchange Act of 1934.
Six Months Ended June 30, 2012 as Compared to Six Months Ended June 30, 2011
Revenues and Net Income. We had $909,516 of revenue during the six months ended
June 30, 2012, as compared to $889,344 of revenue during the six months ended June 30,
2011. The increase in revenue was due to revenue generated by our acquired subsidiary
Gotham. In addition, we had no income from discontinued operations for the six
months ended June 30, 2012, compared to $242,099 for the six months ended June 30,
2011, and net loss of $(301,136) for the six months ended June 30, 2012, compared to net
loss of $(76,715) for the six months ended June 30, 2011.
General and Administrative Expenses. General and Administrative Expenses
increased to $930,235 for the six months ended June 30, 2012 from $903,061 for the six
months ended June 30, 2011. For the six months ended June 30, 2012 our General and
Administrative Expenses consisted of corporate administrative expenses of $198,284,
rent expense of $49,900, employee benefits, consisting primarily of health insurance
expense of $41,881, legal and accounting fees of $31,902, business insurance expenses of
$23,898, and payroll expenses of $584,370. For the six months ended June 30, 2011 our
General and Administrative Expenses consisted of corporate administrative expenses of
$231,439, legal and accounting fees of $92,651, initial public offering expenses of
$15,000, and payroll expenses of $563,971.
The increases from the six months ended
June 30, 2011 to the six months ended June 30, 2012 relate primarily to an increase in
insurance expenses, in particular health care premium increases and D&O insurance.
(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.
18
Liquidity and Capital Resources
As reflected in the accompanying consolidated financial statements, at June 30,
2012, we had $653,462 of cash and stockholders’ equity of $1,301,457 compared to
$224,800 of cash and $1,602,593 of stockholders’ equity at December 31, 2011. At June
30, 2012 we had $1,706,872 in total assets, compared to $1,891,178 at December 31,
2011.
Our primary capital requirements in 2012 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 $492 for the six months ending
June 30, 2012, compared to net cash used by operating activities of $341,169 for the six
months ending June 30, 2011. Our primary source of operating cash flows from
continued operating activities for the six months ending June 30, 2012 was from our
Gotham subsidiary’s revenues of $852,273. Additional contributing factors to the change
were a decrease in accounts receivable of $108,003, prepaid expenses of $31,694, and an
increase in accounts payable of $117,115. Net cash provided by discontinued operating
activities was $225,000 for the six months ending June 30, 2012 and cash used by
discontinued operating activities was $82,314 for the six months ending June 30, 2011.
The $225,000 provided from discontinued operating activities for the six months ending
June 30, 2012 was a decrease in the DDC accounts receivable. For the six months ending
June 30, 2011, the primary source of cash flows from operating activities was revenue of
$889,344. For the six months ending June 30, 2011 we also had income from
discontinued operations of $163,588 (net of taxes of $82,314). The agreement with DDC
ended on February 28, 2011. Revenue earned from DDC totaled $242,099 during the
six months ending June 30, 2011 Of the $242,099 revenue earned from DDC in the six
months ending June 30, 2011 we received $330,000 in cash payments from DDC all of
which was for the second and third quarter 2010 Contingency Payments. Additionally
19
$92,099 was offset by an increase in the accounts receivable included in Assets from
Discontinued Operations.
Cash provided by investing activities was $433,795 and $344,237 respectively, for
the first six months ending June 30, 2012 and June 30, 2011. For the six month ending
June 30, 2012 the primary source of cash provided by continuing investing activities was
from the repayment of notes receivable due from Allied Airbus Inc. For the six months
ending June 30, 2011 the entire source of cash provided by discontinued investing
activities is the DDC contingency payments and the cash provided by continuing
investing activities was from the repayment of notes receivable due from Allied Airbus
Inc.
Cash used by financing activities was $(5,625) and $0 for the six months ending
June 30, 2012 and June 30, 2011 respectively. The cash flows used by financing
activities in the first six months of fiscal year 2012 were from repayment of loans payable
to a related party from our subsidiary Gotham.
Supplemental Cash Flow Activity
In the six months ending June 30, 2012 the company paid income taxes of $4,125
compared to $13,940 for the six months ending June 30, 2011. The decrease in taxes was
due to tax overpayments in 2011. The Company also paid interest of $1,368 during the
first six months of fiscal year 2012 compared to $1,372 during the first six months of
fiscal year 2011.
Item 3. Quantitative and Qualitative Disclosures about Market Risk.
Not Required.
Item 4. Controls and Procedures.
Evaluation of disclosure controls and procedures. Under the supervision and with the
participation of the Company’s management, including the Company’s principal
executive officer and principal financial officer, the Company conducted an evaluation of
the effectiveness of its disclosure controls and procedures, as such term is defined in
Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended
(the “Exchange Act”), as of June 30, 2011. Based on their evaluation, our principal
executive officer and principal financial officer concluded that our disclosure controls
and procedures were effective.
Changes in internal controls. There were no changes in our internal controls over
financial reporting during the second fiscal quarter of 2011 that have materially affected,
or are reasonably likely to materially affect, our internal controls over financial reporting.
20
PART II — OTHER INFORMATION
Item 1. Legal Proceedings.
On November 1, 2011, we filed a lawsuit in the Circuit Court in and for Broward County,
Florida, asserting claims against Allied Airbus, Inc. (as "Borrower") and Michael Polo,
Kishore Taneja and Alberto Gonzalez (collectively, as "Guarantors") for monetary
damages arising from the breach of multiple promissory notes owed by Borrower to us
and to enforce guaranty agreements executed by Guarantors to secure payment of the
promissory notes. On or about January 20, 2012, we filed an Amended Complaint after
additional promissory notes owed by Borrower became due and following Borrower's
and Guarantors' default on payment of same. In response to the lawsuit, Borrower and
Guarantors Polo and Taneja, filed a counterclaim that was subsequently amended on or
about February 9, 2012. The Amended Counterclaim asserts claims against us for
alleged fraud and for alleged violations of Florida's deceptive and unfair trade practices
act for, amongst other things, the alleged failure to loan Allied $1,500,000.00 following
an alleged prior commitment to do so.
On June 12, 2012, the parties settled the lawsuit and entered into a settlement agreement
pursuant to which the Company was paid, on June 27, 2012, all principal and interest
owed under the notes, as well as all legal fees incurred.
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
21
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.)
22
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant caused this
report to be signed on its behalf by the undersigned, thereunto duly authorized, on August
8, 2012.
iGambit Inc.
/s/ John Salerno
John Salerno
Chief Executive Officer
/s/ Elisa Luqman
Elisa Luqman
Chief Financial Officer
23
Exhibit Index
Exhibit No.
Description
Certification of the Chief Executive Officer Pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002.
Certification of the Interim Chief Financial Officer Pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002.
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.)
Certification of the Interim Chief Financial Officer Pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002. (This exhibit shall not be
deemed “filed” for the purposes of Section 18 of the Securities Exchange
Act of 1934, as amended, or otherwise subject to the liability of that
section. Further, this exhibit shall not be deemed to be incorporated by
reference into any filing under the Securities Act of 1933, as amended, or
the Securities Exchange Act of 1934, as amended.)
24
Exhibit 31.1
I, John Salerno, certify that:
1. I have reviewed this quarterly report on Form 10-Q of iGambit Inc.;
2. Based on my knowledge, this report does not contain any untrue statement of a material
fact or omit to state a material fact necessary to make the statements made, in light of the
circumstances under which such statements were made, not misleading with respect to the period
covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included
in this report, fairly present in all material respects the financial condition, results of operations
and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrant’s other certifying officer and I are responsible for establishing and
maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and
15d-15(e)) and internal controls over financial reporting (as defined in Exchange Act Rules 13a-
15(f) and 15d-15(f)) for the registrant and have:
(a) Designed such disclosure controls and procedures, or caused such disclosure controls
and procedures to be designed under our supervision, to ensure that material information relating
to the registrant, including its consolidated subsidiaries, is made known to us by others within
those entities, particularly during the period in which this report is being prepared;
(b) Designed such internal control over financial reporting, or caused such internal control
over financial reporting to be designed under our supervision, to provide reasonable assurance
regarding the reliability of financial reporting and the preparation of financial statements for
external purposes in accordance with generally accepted accounting principles;
(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and
presented in this report our conclusions about the effectiveness of the disclosure controls and
procedures, as of the end of the period covered by this report based on such evaluation; and
(d) Disclosed in this report any change in the registrant’s internal control over financial
reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth
fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely
to materially affect, the registrant’s internal control over financial reporting; and
5. The registrant’s other certifying officer and I have disclosed, based on our most recent
evaluation of internal control over financial reporting, to the registrant’s auditors and the audit
committee of the registrant’s board of directors (or persons performing the equivalent functions):
(a) All significant deficiencies and material weaknesses in the design or operation of
internal control over financial reporting which are reasonably likely to adversely affect the
registrant’s ability to record, process, summarize and report financial information; and
(b) Any fraud, whether or not material, that involves management or other employees who
have a significant role in the registrant’s internal control over financial reporting.
August 8, 2012
/s/ John Salerno
Chief Executive Officer
Exhibit 31.2
I, Elisa Luqman, certify that:
1. I have reviewed this quarterly report on Form 10-Q of iGambit Inc.;
2. Based on my knowledge, this report does not contain any untrue statement of a material
fact or omit to state a material fact necessary to make the statements made, in light of the
circumstances under which such statements were made, not misleading with respect to the period
covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included
in this report, fairly present in all material respects the financial condition, results of operations
and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrant’s other certifying officer and I are responsible for establishing and
maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and
15d-15(e)) and internal controls over financial reporting (as defined in Exchange Act Rules 13a-
15(f) and 15d-15(f)) for the registrant and have:
(a) Designed such disclosure controls and procedures, or caused such disclosure controls
and procedures to be designed under our supervision, to ensure that material information relating
to the registrant, including its consolidated subsidiaries, is made known to us by others within
those entities, particularly during the period in which this report is being prepared;
(b) Designed such internal control over financial reporting, or caused such internal control
over financial reporting to be designed under our supervision, to provide reasonable assurance
regarding the reliability of financial reporting and the preparation of financial statements for
external purposes in accordance with generally accepted accounting principles;
(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and
presented in this report our conclusions about the effectiveness of the disclosure controls and
procedures, as of the end of the period covered by this report based on such evaluation; and
(d) Disclosed in this report any change in the registrant’s internal control over financial
reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth
fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely
to materially affect, the registrant’s internal control over financial reporting; and
5. The registrant’s other certifying officer and I have disclosed, based on our most recent
evaluation of internal control over financial reporting, to the registrant’s auditors and the audit
committee of the registrant’s board of directors (or persons performing the equivalent functions):
(a) All significant deficiencies and material weaknesses in the design or operation of
internal control over financial reporting which are reasonably likely to adversely affect the
registrant’s ability to record, process, summarize and report financial information; and
(b) Any fraud, whether or not material, that involves management or other employees who
have a significant role in the registrant’s internal control over financial reporting.
August 8, 2012
/s/ Elisa Luqman
Chief Financial Officer
Exhibit 32.1
WRITTEN STATEMENT OF THE CHIEF EXECUTIVE OFFICER
Pursuant to 18 U.S.C. Section 1350
As adopted pursuant to section 906 of the Sarbanes-Oxley act of 2002
Solely for the purposes of complying with 18 U.S.C. s.1350 as adopted pursuant to section 906
of the Sarbanes-Oxley act of 2002, I, the undersigned Chief Executive Officer of iGambit Inc.
(the “Company”), hereby certify, based on my knowledge, that the Quarterly Report on Form 10-
Q of the Company for the quarter ended June 30, 2011, (the “Report”) fully complies with the
requirements of Section 13(a) of the Securities Exchange Act of 1934 and that information
contained in the Report fairly presents, in all material respects, the financial condition and results
of operations of the Company.
August 8, 2012
/s/ John Salerno
Chief Executive Officer
Exhibit 32.2
WRITTEN STATEMENT OF THE CHIEF FINANCIAL OFFICER
Pursuant to 18 U.S.C. Section 1350
As adopted pursuant to section 906 of the Sarbanes-Oxley act of 2002
Solely for the purposes of complying with 18 U.S.C. s.1350 as adopted pursuant to
section 906 of the Sarbanes-Oxley act of 2002, I, the undersigned Chief Financial Officer
of iGambit Inc. (the “Company”), hereby certify, based on my knowledge, that the
Quarterly Report on Form 10-Q of the Company for the quarter ended June 30, 2011, (the
“Report”) fully complies with the requirements of Section 13(a) of the Securities
Exchange Act of 1934 and that information contained in the Report fairly presents, in all
material respects, the financial condition and results of operations of the Company.
August 8, 2012
/s/ Elisa Luqman
Chief Financial Officer
1
|
Note 2 - Discontinued Operations: Schedule of Accounts, Notes, Loans and Financing Receivable [Table Text Block] (Details) (USD $)
In Thousands, unless otherwise specified |
12 Months Ended |
|---|---|
|
Dec. 31, 2011
|
|
| Increase (Decrease) in Loss and Loss Adjustment Expense Reserve | $ 250,000 |