UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
(Mark
One)
þ
QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the Quarterly period ended September 30, 2012
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 o
Non-accelerated filer o
Smaller reporting
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 23,954,056 shares of its common stock outstanding as of November 14, 2012.
iGambit Inc.
Form 10-Q
Part I — Financial Information
Item 1.
Financial Statements:
3
3
Consolidated Statements of Income
4
Consolidated Statements of Cash Flows
5
Notes to Consolidated Financial Statements
6
Item 2.
Management’s Discussion and Analysis of Financial Condition and
Results of Operations
16
Item 3.
Quantitative and Qualitative Disclosures About Market Risk
22
Item 4.
22
Part II — Other Information
22
Item 1.
22
Item 1A.
22
Item 2.
Unregistered Sales of Equity Securities and Use of Proceeds
23
Item 3.
Defaults upon Senior Securities
23
Item 4.
23
Item 5.
23
Item 6.
23
EX-31.1
EX-31.2
EX-32.1
EX-32.2
2
PART I — FINANCIAL INFORMATION
IGAMBIT INC.
CONSOLIDATED BALANCE SHEETS
SEPTEMBER
DECEMBER
30,
31,
2012
2011
(Unaudited)
ASSETS
Current assets
Cash
$
363,591
$
224,800
Accounts receivable, net
158,448
269,353
Prepaid expenses
58,619
58,649
Notes receivable
--
434,512
Notes receivable - stockholder
17,000
17,000
Deferred income taxes
438,876
184,185
Assets from discontinued operations
320,590
570,590
Total current assets
1,357,124
1,759,089
Property and equipment, net
18,637
18,563
Other assets
Goodwill
111,026
111,026
Deposits
9,420
2,500
Total other assets
120,446
113,526
$
1,496,207
$
1,891,178
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Accounts payable
$
302,949
$
263,195
Note payable - related party
6,263
25,390
Total current liabilities
309,212
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
(1,240,049)
(824,451)
Total stockholders' equity
1,186,995
1,602,593
$
1,496,207
$
1,891,178
3
IGAMBIT INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
THREE MONTHS
NINE MONTHS
ENDED
ENDED
SEPTEMBER 30,
SEPTEMBER 30,
2012
2011
2012
2011
Sales
$
416,429
$
410,258
$ 1,325,945 $ 1,299,602
Cost of sales
163,308
191,056
640,919
542,869
Gross profit
253,121
219,202
685,026
756,733
Operating expenses
General and administrative expenses
438,058
458,574
1,368,293
1,361,635
Loss from operations
(184,937)
(239,372)
(683,267)
(604,902)
Other income
Interest income
257
8,110
12,978
22,280
Loss from continuing operations before income tax benefit
(184,680)
(231,262)
(670,289)
(582,622)
Income tax benefit
70,218
77,789
254,691
192,649
Loss from continuing operations
(114,462)
(153,473)
(415,598)
(389,973)
Discontinued operations
Income from discontinued operations
--
--
--
242,099
Provision for income taxes
--
--
--
82,314
Income from discontinued operations, net of taxes
--
--
--
159,785
Net loss
$ (114,462) $ (153,473) $ (415,598) $ (230,188)
Basic and fully diluted earnings (loss) per common share:
Continuing operations
$
(.00)
$
(.01)
$
(.02)
$
(.02)
Discontinued operations, net of tax
$
.00
$
.00
$
.00
$
.01
Net earnings per common share
$
(.00)
$
(.01)
$
(.02)
$
(.01)
Weighted average common shares outstanding
23,954,056
23,954,056
23,954,056
23,954,056
4
IGAMBIT INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
NINE MONTHS ENDED SEPTEMBER 30,
(UNAUDITED)
2012
2011
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss
$ (415,598)
$ (230,188)
Adjustments to reconcile net loss to net
cash provided (used) by operating activities
Income from discontinued operations
--
(159,785)
Depreciation
6,373
4,436
Stock-based compensation
--
815
Deferred income taxes
(254,691)
--
Increase (Decrease) in cash flows as a result of
changes in asset and liability account balances:
Accounts receivable
110,905
(131,682)
Prepaid expenses
30
150,809
Accounts payable
39,754
(95,231)
Net cash used by continuing operating activities
(513,227)
(460,826)
Net cash provided (used) by discontinued operating activities
250,000
(82,312)
NET CASH PROVIDED (USED) BY OPERATING ACTIVITIES
(263,227)
(543,138)
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment
(6,447)
(19,392)
Increase in deposits
(6,920)
--
Proceeds from repayments of notes receivable
434,512
35,488
Net cash provided by continuing investing activities
421,145
16,096
Net cash provided by discontinued investing activities
--
365,000
NET CASH PROVIDED BY INVESTING ACTIVITIES
421,145
381,096
NET CASH USED BY FINANCING ACTIVITIES:
Repayment of loans from shareholders
(19,127)
--
NET INCREASE IN CASH
138,791
(162,042)
CASH - BEGINNING OF PERIOD
224,800
465,549
CASH - END OF PERIOD
$
363,591
$
303,507
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the period for:
Interest
$
1,478
$
1,826
Income taxes
4,125
13,940
Non-cash investing and financing activities:
Property and equipment purchased through loan from stockholder
$
5,300
$
--
Stock-based compensation expense
--
815
5
IGAMBIT INC.
Notes to Consolidated Financial Statements
Nine Months Ended September 30, 2012 and 2011
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 received 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 $320,590 and $570,590 as of September 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 nine months ended September
30, 2012.
6
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
7
the ability to render payment. There was no bad debt expense charged to operations for the nine
months ended September 30, 2012 and 2011, respectively.
Prepaid Expenses
Prepaid expenses consist of the following:
September 30, December 31,
2012
2011
Prepaid state income taxes
$ 22,368
$ 31,758
Prepaid insurance
36,251
26,891
$ 58,619
$ 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 nine months ended September 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 $6,373 and $4,436 was charged to operations for the nine months ended
September 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 nine months ended September 30, 2012. Based
on the Company’s evaluation of goodwill, no impairment was recorded during the nine months
ended September 30, 2012.
8
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. Interest received of
$45,611 includes $12,044 that had been accrued in 2012.
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 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.
9
Nine Months Ended
September 30,
2012
2011
StocS Stock options
2,768,900
2,768,900
Common stock warrants
275,000
3,085,000
Basic Total shares excluded from calculation
3,043,900
5,853,900
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 September 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.
Warrant activity during the nine months ended September 30, 2012 follows:
Weighted
Average
Weighted
Remaining
Average
Average
Contractual
Grant-Date
Warrants
Exercise Price
Fair Value
Life (Years)
Warrants outstanding at
January 1, 2012
275,000
$
0.94
$
0.10
No warrant activity
--
--
--
Warrants outstanding at
September 30, 2012
275,000
$
0.94
$
0.10
0.95
10
Stock Option Plan activity during the nine months ended September 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
September 30, 2012
2,768,900
$
0.04
$
0.10
6.10
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.
Nine months ended September 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%
Note 7 - Income Taxes
The tax provision at September 30 consists of the following:
2012
2011
From operations:
Continuing operations:
Current tax expense (benefit):
Federal
$(205,059)
$ (192,649)
State and local
(49,632)
--
Total from continuing operations
(254,691)
(192,649)
Discontinued operations:
Current tax expense (benefit)
Federal
--
82,314
State and local
--
--
Total from discontinued operations
--
82,314
Total
$(254,691)
$ (110,335)
11
A reconciliation of the statutory federal income tax rate and the effective tax rate follows:
Nine Months Ended
September 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)%
(0.9)%
Effective tax rate
38.0%
33.1%
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.
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
September 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 nine months ended September 30, 2012 and 2011 were $5,476 and $9,284,
respectively.
12
Note 9 – Significant Customers
Sales of Gotham to three customers amounted to approximately 64% of Gotham’s total sales for
the nine months ended September 30, 2012 at 38%, 15%, and 11%, 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 September 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 $766 and $763 for the nine months ended September 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
$6,263 and $25,390 at September 30, 2012 and December 31, 2011, respectively. The note bears
interest at a rate of 5.5% and is due on December 31, 2012.
Interest expense of $354 and $531 was charged to operations for the nine months ended
September 30, 2012 and 2011, respectively.
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 a month to month license agreement for office space that commenced on August 2,
2012 at a monthly license fee of $2,400. The license agreement may be terminated upon 30 days
notice.
Total future minimum annual lease payments under the lease for the years ending December 31
are as follows:
2012
$ 4,500
2013
18,360
2014
18,720
2015
19,080
13
2016
19,440
$ 80,100
Rent expense of $69,642 and $72,112 was charged to operations for the nine months ended
September 30, 2012 and 2011, respectively.
Note 13 - Litigation
Digi-Data Corporation
In connection with the asset purchase agreement discussed in Note 2, the Company filed a
complaint against Digi-Data on October 1, 2012 for unpaid contingency payments owed to the
Company totaling $570,590 at September 30, 2012, exclusive of the bad debt reserve of
$250,000.
Allied Airbus, Inc.
On November 1, 2011, the Company commenced collection proceedings against Allied Airbus,
Inc. (“Allied”) for nonpayment of various promissory notes totaling $434,512 at December 31,
2011 in connection with a letter of intent the Company entered into to acquire the assets and
business of Allied, to which a definitive agreement could not be reached. The claim against
Allied included accrued interest at the rate of 6%.
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 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
14
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 September 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.
Litigation
As discussed in Note 13, the Company filed a complaint against Digi-Data on October 1, 2012
for unpaid contingency payments owed to the Company totaling $570,590 at September 30,
2012, exclusive of the bad debt reserve of $250,000.
.
15
IGAMBIT INC.
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.
16
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.
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 debt 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 nine
months ended September 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 nine months ended
September 30, 2012, the Company purchased computer equipment totaling $ 6,447. Computer
equipment is depreciated over 5 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 $6,373 and $4,436 was charged to operations for the nine months
ended September 30, 2012 and 2011, respectively.
17
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
nine months ended September 30, 2012. Based on the Company’s evaluation of goodwill, no
impairment was recorded during the nine months ended September 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.
18
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 nine months ended
September 30, 2012 Gotham produced approximately $1,623,654 and $1,260,881 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. 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 are
also focused on acquiring or partnering with additional technology companies.
Assets. At September 30, 2012, we had $1,496,207 in total assets, compared to $1,891,178 at
December 31, 2011. The decrease in total assets was primarily due to the repayment of notes
receivable from Allied Airbus that was used to fund the operating loss.
Liabilities. At September 30, 2012, our total liabilities were $309,212 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 total liabilities was primarily
due to an increase in accounts payable.
Stockholders’ Equity (Deficit). Our stockholders’ equity decreased to $1,186,995 at
September 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 $(1,240,049) at
September 30, 2012 resulting from the end of the contingency payments from Digi-Data Corp.
and from operating losses of Gotham.
Three Months Ended September 30, 2012 as Compared to Three Months Ended September 30,
2011
Revenues and Net Income. We had $416,429 of revenue during the three months ended
September 30, 2012, as compared to $410,258 of revenue during the three months ended
September 30, 2011. The increase in revenue was due to revenue generated by our acquired
subsidiary Gotham.
General and Administrative Expenses. General and Administrative Expenses decreased to
$438,058 for the three months ended September 30, 2012 from $458,574 for the three months
ended September 30, 2011. For the three months ended September 30, 2012 our General and
Administrative expenses consisted of corporate administrative expenses of $96,829, legal and
accounting fees of $35,573, payroll expenses of $279,068, health and insurance expenses of
$17,131 and directors and officers insurance of $9,457. For the three months ended September
19
30, 2011 our General and Administrative expenses consisted of corporate administrative
expenses of $128,682, legal and accounting fees of $21,760, and payroll expenses of $307,317
and compensation for vested options of $815. The decreases from the three months ended
September 30, 2011 to the three months ended September 30, 2012 relate primarily to a decrease
in payroll expenses due to a decrease in staff during the period.
Nine months ended September 30, 2012 as Compared to Nine months ended September 30,
2012
Revenues and Net Income. We had $1,325,945 of revenue during the nine months ended
September 30, 2012, as compared to revenue of $1,299,602 during the nine months ended
September 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 nine
month ended September 30, 2012 compared to $242,099 for the nine months ended September
30, 2011, and net loss of $(415,598) for the nine months ended September 30, 2012, compared to
net loss of $(230,188) for the nine months ended September 30, 2011. Our increase in net loss
was due to the Digi-Data agreement ending on February 28, 2011.
General and Administrative Expenses. General and Administrative Expenses increased to
$1,368,293 for the nine months ended September 30, 2012 from $1,361,635 for the nine months
ended September 30, 2011. For the nine months ended September 30, 2012 our General and
Administrative Expenses consisted of corporate administrative expenses of $358,604, legal and
accounting fees of $67,475, payroll expenses of $863,342, health insurance expenses of $51,820
and directors and officers insurance expense of $27,052. For the nine months ended September
30, 2011 our General and Administrative Expenses consisted of corporate administrative
expenses of $375,122, legal and accounting fees of $114,411 and payroll expenses of $871,287
and compensation for vested options expense of $815. The increases from the nine months ended
September 30, 2011 to the nine months ended September 30, 2012 relate primarily to an increase
in insurance expenses.
Liquidity and Capital Resources
As reflected in the accompanying consolidated financial statements, at September 30,
2012, we had $363,591 of cash and stockholders’ equity of $1,186,995, compared to
stockholders’ equity of $1,602,593 at December 31, 2011. At September 30, 2012 we had
$1,496,207 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.
20
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 used by operating activities was $-263,227 for the nine months ending
September 30, 2012, compared to net cash used by operating activities of $543,138for the nine
months ending September 30, 2011. Our primary source of operating cash flows from continued
operating activities for the nine months ending September 30, 2012 was from our Gotham
subsidiary’s revenues of $1,260,881. Additional contributing factors to the change were from
collections of accounts receivable of $110,905, decrease in prepaid expenses of $30, and an
increase in accounts payable of $39,754. Net cash provided by discontinued operating activities
was $250,000 for the nine months ending September 30, 2012 and cash used by discontinued
operating activities was $82,312 for the nine months ending September 30, 2011. The $250,000
provided from discontinued operating activities for the nine months ending September 30, 2012
was from collections of the DDC accounts receivable. Our primary source of operating cash flow
for the nine months ending September 30, 2011 was from a decrease in prepaid expenses of
$150,809. For the nine months ending September 30, 2011 we also had income from
discontinued operations of $82,312. The agreement with DDC ended on February 28, 2011.
Revenue earned from DDC totaled $242,099 during the nine months ending September 30, 2011
Of the $242,099 revenue earned from DDC in the nine months ending September 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 $92,099 was offset by an increase in the accounts
receivable included in Assets from Discontinued Operations.
Cash provided by investing activities was $421,145 and $381,096 respectively, for the first
nine months ending September 30, 2012 and September 30, 2011. For the nine months ending
September 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 nine months ending
September 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 $19,127 for the nine months ended September 30,
2012 compared to $0 for the nine months ended September 30, 2011The cash flow used by
financing activities in the first nine months of fiscal 2012 was a repayment of loans from
shareholders.
Supplemental Cash Flow Activity
21
In the nine months ended September 30, 2012 the company paid income taxes of $4,125
compared to $13,940 for the nine months ended September 30, 2011.The decrease in taxes was
due to tax overpayments in 2010. The Company also paid interest of $1,478 during the first nine
months of fiscal year 2012 compared to $1,826 during the first nine 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
September 30, 2010. 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 third fiscal quarter of 2011 that have materially affected, or are reasonably
likely to materially affect, our internal controls over financial reporting.
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.
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.
On October 1, 2012, we filed a lawsuit in the United States District Court for the District of
Maryland, Baltimore Division, asserting claims against DigiData Corp. ("Defendant") for
monetary damages arising from the Defendant's breach of contract regarding that certain Asset
Purchase Agreement dated February 26, 2006 among the parties, and to enforce payment of
outstanding contingency payments due to the Company pursuant to said agreement.
Item 1A. Risk Factors.
Not required
22
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
None
Item 3. Defaults upon Senior Securities.
None
Item 4. Removed and Reserved.
Item 5. Other Information.
None
Item 6. Exhibits
Exhibit No.
Description
Certification of the Chief Executive Officer Pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002.
Certification of the 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.)
23
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized, on November 14, 2012.
iGambit Inc.
/s/ John Salerno
John Salerno
Chief Executive Officer
/s/ Elisa Luqman
Elisa Luqman
Chief Financial Officer
24
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.)
25
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.
November 14, 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.
November 14, 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 September 30, 2010, (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.
November 14, 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 September 30, 2010, (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.
November 14, 2012
/s/ Elisa Luqman
Chief Financial Officer
|
Note 7 - Income Taxes: Schedule of Income Tax Provisions (Tables)
|
9 Months Ended |
|---|---|
|
Sep. 30, 2012
|
|
| Tables/Schedules | |
| Schedule of Income Tax Provisions | Schedule of Income Tax Provisions
2012 2011 From operations: Continuing operations: Current tax expense (benefit): Federal $(205,059) $ (192,649) State and local (49,632) -- Total from continuing operations (254,691) (192,649) Discontinued operations: Current tax expense (benefit) Federal -- 82,314 State and local -- -- Total from discontinued operations -- 82,314
Total $(254,691) $ (110,335) |
|
Note 3 - Summary of Significant Accounting Policies: Income Taxes (Policies)
|
9 Months Ended |
|---|---|
|
Sep. 30, 2012
|
|
| Policies | |
| Income Taxes | 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 3 - Summary of Significant Accounting Policies: Fair Value of Financial Instruments (Policies)
|
9 Months Ended |
|---|---|
|
Sep. 30, 2012
|
|
| Policies | |
| Fair Value of Financial Instruments | 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. |
|
Note 2 - Discontinued Operations: Accounts Receivable (Details) (USD $)
In Thousands, unless otherwise specified |
Dec. 31, 2010
|
|---|---|
| Allowance for Doubtful Accounts, Premiums and Other Receivables | $ 250,000 |
|
Note 6 - Stock Based Compensation: Schedule of Options (Tables)
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9 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Sep. 30, 2012
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| Tables/Schedules | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Schedule of Options |
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Note 4 - Notes Receivable
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9 Months Ended |
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Sep. 30, 2012
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| Notes | |
| Note 4 - Notes Receivable | 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. Interest received of $45,611 includes $12,044 that had been accrued in 2012. |