UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
(Mark One)
þ
QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the Quarterly period ended March 31, 2015
o
TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT
For the transition period from
to
Commission file number 000-53862
iGambit Inc.
(Exact name of small business issuer as specified in its charter)
Delaware
11-3363609
(State or other jurisdiction of
(I.R.S. Employer
incorporation or organization)
Identification No.)
1050 W. Jericho Turnpike, Suite A
Smithtown, New York 11787
(Address of Principal Executive Offices) (Zip Code)
(631) 670-6777
(Issuer’s Telephone Number, Including Area Code)
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or
15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period
that the registrant was required to file such reports), and (2) has been subject to such filing requirements for
the past 90 days. Yes þ No o
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web
site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of
Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that
the registrant was required to submit and post such files). Yes þ No o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-
accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer”,
“accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):
Large accelerated Accelerated filer
Non-accelerated filer o
Smaller reporting
filer o
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 26,583,990 shares of its common stock outstanding as of May 15, 2015.
iGambit Inc.
Form 10-Q
Page No.
Part I — Financial Information
1
Item 1.
Financial Statements:
1
Condensed Consolidated Balance Sheets
1
Condensed Consolidated Statements of Income
2
Condensed Consolidated Statements of Cash Flows
3
Notes to Condensed Consolidated Financial Statements
4
Management’s Discussion and Analysis of Financial Condition and
Results of Operations
16
Quantitative and Qualitative Disclosures About Market Risk
22
Controls and Procedures
22
Part II — Other Information
22
Legal Proceedings
22
Risk Factors
22
Unregistered Sales of Equity Securities and Use of Proceeds
23
Defaults upon Senior Securities
23
Removed and Reserved
23
Other Information
23
Exhibits
23
EX-31.1
EX-31.2
EX-32.1
EX-32.2
i
IGAMBIT INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
THREE MONTHS ENDED MARCH 31,
PART I – FINANCIAL INFORMATION
Item 1 – Financial Statements
IGAMBIT INC.
CONSOLIDATED BALANCE SHEETS
MARCH 31,
2015
DECEMBER 31,
(Unaudited)
2014
ASSETS
Current assets
Cash
$
38,734 $
133,436
Accounts receivable, net
111,529
81,671
Prepaid expenses
19,435
45,110
Total current assets
169,698
260,217
Property and equipment, net
12,156
8,436
Other assets
Deposits
12,133
12,133
$
193,987 $
280,786
LIABILITIES AND STOCKHOLDERS' DEFICIENCY
Current liabilities
Accounts payable
$
301,197 $
285,277
Note payable - stockholder
30,180
--
Total current liabilities
331,377
285,277
Commitments and contingencies
Stockholders' deficiency
Preferred stock, $.001 par value; authorized - 100,000,000 shares;
issued and outstanding - 0 shares in 2015 and 2014,
respectively
--
--
Common stock, $.001 par value; authorized - 200,000,000 shares;
issued and outstanding - 26,583,990 shares in 2015 and
2014, respectively
26,584
26,584
Additional paid-in capital
2,863,122
2,851,124
Accumulated deficit
(3,027,096)
(2,882,199)
Total stockholders' deficiency
(137,390)
(4,491)
$
193,987 $
280,786
1
IGAMBIT INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
THREE MONTHS ENDED MARCH 31,
(UNAUDITED)
2015
2014
Sales
$
300,347 $
240,213
Cost of sales
135,622
102,912
Gross profit
164,725
137,301
Operating expenses
General and administrative expenses
307,919
272,267
Loss from operations
(143,194)
(134,966)
Other income (expenses)
Interest expense
(1,703)
(3,467)
Amortization of debt discount
--
(34,500)
Total other income (expenses)
(1,703)
(37,967)
Loss from continuing operations
(144,897)
(172,933)
Income from discontinued operations
--
11,355
Net loss
$ (144,897) $ (161,578)
Basic and fully diluted earnings (loss) per common share:
Continuing operations
$
(.01) $
(.01)
Discontinued operations
$
.00 $
.00
Net loss per common share
$
(.01) $
(.01)
Weighted average common shares outstanding
26,583,900
25,044,056
2
IGAMBIT INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
THREE MONTHS ENDED MARCH 31,
(UNAUDITED)
2015
2014
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss
$ (144,897)
$ (161,578)
Adjustments to reconcile net loss to net
cash provided (used) by operating activities
Income from discontinued operations
--
(11,355)
Depreciation
1,306
1,191
Debt discount amortization
--
34,500
Stock-based compensation expense
11,998
--
Increase (Decrease) in cash flows as a result of
changes in asset and liability account balances:
Accounts receivable
(29,858)
32,581
Prepaid expenses
25,675
(14,204)
Due from rescission agreement
--
10,000
Accounts payable
15,920
74,240
Net cash used by continuing operating activities
(119,856)
(34,625)
Net cash provided by discontinued operating activities
--
37,500
NET CASH PROVIDED (USED) BY OPERATING ACTIVITIES
(119,856)
2,875
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment
(5,026)
(2,026)
Increase in deposits
--
(2,712)
NET CASH USED BY INVESTING ACTIVITIES
(5,026)
(4,738)
NET CASH PROVIDED BY FINANCING ACTIVITIES:
Proceeds from stockholder's loan
30,180
3,600
NET INCREASE (DECREASE) IN CASH
(94,702)
1,737
CASH - BEGINNING OF PERIOD
133,436
26,870
CASH - END OF PERIOD
$
38,734
$
28,607
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the period for:
Interest
$
1,703
$
1,425
3
Note 1 - Organization and Basis of Presentation
The consolidated financial statements presented are those of iGambit Inc., (the
“Company”) and its wholly-owned subsidiary, Gotham Innovation Lab Inc. (“Gotham”).
The Company was incorporated under the laws of the State of Delaware on April 13,
2000. The Company was originally incorporated as Compusations Inc. under the laws of
the State of New York on October 2, 1996. The Company changed its name to
BigVault.com Inc. upon changing its state of domicile on April 13, 2000. The Company
changed its name again to bigVault Storage Technologies Inc. on December 21, 2000
before changing to iGambit Inc. on April 5, 2006. Gotham was incorporated under the
laws of the state of New York on September 23, 2009. The Company is a holding
company which seeks out acquisitions of operating companies in technology markets.
Gotham is in the business of providing media technology services to real estate agents
and brokers in the New York metropolitan area.
Interim Financial Statements
The following (a) condensed consolidated balance sheet as of December 31, 2014, which
has been derived from audited financial statements, and (b) the unaudited condensed
consolidated interim financial statements of the Company have been prepared in
accordance with the instructions to Form 10-Q and Rule 8-03 of Regulation S-X.
Accordingly, they do not include all of the information and footnotes required by GAAP
for complete financial statements. In the opinion of management, all adjustments
(consisting of normal recurring accruals) considered necessary for a fair presentation
have been included. Operating results for the three months ended March 31, 2015 are not
necessarily indicative of results that may be expected for the year ending December 31,
2015. These condensed consolidated financial statements should be read in conjunction
with the audited consolidated financial statements and notes thereto for the year ended
December 31, 2014 included in the Company’s Annual Report on Form 10-K, filed with
the Securities and Exchange Commission (“SEC”) on April 15, 2015.
Note 2 – Discontinued Operations
Sale of Business
On February 28, 2006, the Company entered into an asset purchase agreement with Digi-
Data Corporation (“Digi-Data”), whereby Digi-Data acquired the Company’s assets and
its online digital vaulting business operations in exchange for $1,500,000, which was
deposited into an escrow account for payment of the Company’s outstanding liabilities.
In addition, as part of the sales agreement, the Company received payments from Digi-
Data based on 10% of the net vaulting revenue payable quarterly over five years. The
Company was also entitled to an additional 5% of the increase in net vaulting revenue
over the prior year’s revenue.
4
Accounts Receivable
Assets from discontinued operations, net includes accounts receivable which represents
50% of contingency payments earned for the previous quarters. The reserve for bad debts
of $250,000 charged to operations in 2010 was reversed in connection with the Summary
Judgment and Forbearance Agreement described in Note 11. Also included is accrued
interest receivable of $85,156 recorded for interest granted on the balance due from Digi-
data through May 2014. The entire balance including accrued interest totaling $655,746
was repaid to the Company by Digi-data in the year ended December 31, 2014
Note 3 – Summary of Significant Accounting Policies
Principles of Consolidation
The consolidated financial statements include the accounts of the Company and its
wholly-owned subsidiary, Gotham Innovation Lab, Inc. All intercompany accounts and
transactions have been eliminated.
Use of Estimates in the Preparation of Financial Statements
The preparation of financial statements in conformity with generally accepted accounting
principles requires management to make estimates and assumptions that affect the
reported amounts of assets and liabilities and disclosure of contingent assets and
liabilities at the date of the consolidated financial statements and the reported amounts of
revenues and expenses during the period. Actual results could differ from those estimates.
Fair Value of Financial Instruments
For certain of the Company’s financial instruments, including cash and cash equivalents,
accounts receivable, accounts payable, and amounts due to related parties, the carrying
amounts approximate fair value due to their short maturities. Additionally, there are no
assets or liabilities for which fair value is remeasured on a recurring basis.
Revenue Recognition
The Company’s revenues are derived primarily from the sale of products and services
rendered to real estate brokers. The Company recognizes revenues when the services or
products have been provided or delivered, the fees charged are fixed or determinable, the
Company and its customers understand the specific nature and terms of the agreed upon
transactions, and collectability is reasonably assured.
Advertising Costs
The Company expenses advertising costs as incurred. Advertising costs for the three
months ended March 31, 2015 and 2014 were $1,325 and $843, respectively.
5
Cash and Cash Equivalents
For purposes of reporting cash flows, cash and cash equivalents include checking and
money market accounts and any highly liquid debt instruments purchased with a maturity
of three months or less.
Accounts Receivable
The Company analyzes the collectability of accounts receivable from continuing
operations each accounting period and adjusts its allowance for doubtful accounts
accordingly. A considerable amount of judgment is required in assessing the realization
of accounts receivables, including the creditworthiness of each customer, current and
historical collection history and the related aging of past due balances. The Company
evaluates specific accounts when it becomes aware of information indicating that a
customer may not be able to meet its financial obligations due to deterioration of its
financial condition, lower credit ratings, bankruptcy or other factors affecting the ability
to render payment. Allowance for doubtful accounts was $17,865 at March 31, 2015 and
December 31, 2014, respectively. There was no bad debt expense charged to operations
for the three months ended March 31, 2015 and 2014, respectively.
Property and equipment and depreciation
Property and equipment are stated at cost. Depreciation for both financial reporting and
income tax purposes is computed using combinations of the straight line and accelerated
methods over the estimated lives of the respective assets. Computer equipment is
depreciated over 5 years and furniture and fixtures are depreciated over 7 years.
Maintenance and repairs are charged to expense when incurred. When property and
equipment are retired or otherwise disposed of, the related cost and accumulated
depreciation are removed from the respective accounts and any gain or loss is credited or
charged to income.
Depreciation expense of $1,306 and $1,191 was charged to operations for the three
months ended March 31, 2015 and 2014, respectively.
Stock-Based Compensation
The Company accounts for its stock-based awards granted under its employee
compensation plan in accordance with ASC Topic No. 718-20, Awards Classified as
Equity, which requires the measurement of compensation expense for all share-based
compensation granted to employees and non-employee directors at fair value on the date
of grant and recognition of compensation expense over the related service period for
awards expected to vest. The Company uses the Black-Scholes option pricing model to
estimate the fair value of its stock options and warrants. The Black-Scholes option
pricing model requires the input of highly subjective assumptions including the expected
stock price volatility of the Company’s common stock, the risk free interest rate at the
date of grant, the expected vesting term of the grant, expected dividends, and an
assumption related to forfeitures of such grants. Changes in these subjective input
6
assumptions can materially affect the fair value estimate of the Company’s stock options
and warrants.
Income Taxes
The Company accounts for income taxes using the asset and liability method in
accordance with ASC Topic No. 740, Income Taxes. Under this method, deferred tax
assets and liabilities are determined based on differences between financial reporting and
tax bases of assets and liabilities, and are measured using the enacted tax rates and laws
that are expected to be in effect when the differences are expected to reverse.
The Company applies the provisions of ASC Topic No. 740 for the financial statement
recognition, measurement and disclosure of uncertain tax positions recognized in the
Company’s financial statements. In accordance with this provision, tax positions must
meet a more-likely-than-not recognition threshold and measurement attribute for the
financial statement recognition and measurement of a tax position.
Recent Accounting Pronouncements
FASB ASC 606 ASU 2014-09 - Revenue from contracts with customers:
In May 2014, the FASB issued amended guidance on contracts with customers to transfer
goods or services or contracts for the transfer of nonfinancial assets, unless those
contracts are within the scope of other standards (e.g., insurance contracts or lease
contracts). The guidance requires an entity to recognize revenue on contracts with
customers to depict the transfer of promised goods or services to customers in an amount
that reflects the consideration to which the entity expects to be entitled in exchange for
those goods or services. The guidance requires that an entity depict the consideration by
applying the following steps:
Step 1: Identify the contract(s) with a customer.
Step 2: Identify the performance obligations in the contract.
Step 3: Determine the transaction price.
Step 4: Allocate the transaction price to the performance obligations in the contract.
Step 5: Recognize revenue when (or as) the entity satisfies a performance obligation.
The amendments in this ASU are effective for annual reporting periods beginning after
December 15, 2016, including interim periods within that reporting period. Early
application is not permitted. This amendment is to be either retrospectively adopted to
each prior reporting period presented or retrospectively with the cumulative effect of
initially applying this ASU recognized at the date of initial application. Adoption of this
guidance is not expected to have a material impact on the Company's consolidated
financial statements.
7
FASB ASC 718 ASU 2014-12 – Compensation – Stock Compensation:
In June 2014, the FASB issued ASU No. 2014-12, "Compensation - Stock Compensation
(Topic 718): Accounting for Share-Based Payments When the Terms of an Award
Provide that a Performance Target Could be Achieved after the Requisite Service
Period," ("ASU 2014-12"). The amendments in ASU 2014-12 require that a
performance target that affects vesting and that could be achieved after the requisite
service period be treated as a performance condition. A reporting entity should apply
existing guidance in ASC Topic No. 718, "Compensation - Stock Compensation" as it
relates to awards with performance conditions that affect vesting to account for such
awards. The amendments in ASU 2014-12 are effective for annual periods and interim
periods within those annual periods beginning after December 15, 2015. Early adoption
is permitted. Entities may apply the amendments in ASU 2014-12 either: (a)
prospectively to all awards granted or modified after the effective date; or (b)
retrospectively to all awards with performance targets that are outstanding as of the
beginning of the earliest annual period presented in the financial statements and to all
new or modified awards thereafter. The Company does not anticipate that the adoption of
ASU 2014-12 will have a material impact on its consolidated financial statements.
Note 4 - Earnings Per Common Share
The Company calculates net earnings (loss) per common share in accordance with ASC
260 “Earnings Per Share” (“ASC 260”). Basic and diluted net earnings (loss) per
common share was determined by dividing net earnings (loss) applicable to common
stockholders by the weighted average number of common shares outstanding during the
period. The Company’s potentially dilutive shares, which include outstanding common
stock options and common stock warrants, have not been included in the computation of
diluted net earnings (loss) per share for all periods as the result would be anti-dilutive.
Three Months Ended
March 31,
2015
2014
Stock options
1,718,900
668,900
Stock warrants
275,000
275,000
Total shares excluded from calculation
1,993,900
943,900
Note 5 – Stock Based Compensation
Stock-based compensation expense for all stock-based award programs, including grants
of stock options and warrants, is recorded in accordance with "Compensation—Stock
Compensation", Topic 718 of the FASB ASC. Stock-based compensation expense, which
is calculated net of estimated forfeitures, is computed using the grant date fair-value and
amortized over the requisite service period for all stock awards that are expected to vest.
The grant date fair value for stock options and warrants is calculated using the Black-
Scholes option pricing model. Determining the fair value of options at the grant date
8
requires judgment, including estimating the expected term that stock options will be
outstanding prior to exercise, the associated volatility of the Company’s common stock,
expected dividends, and a risk-free interest rate. Stock-based compensation expense is
reported under general and administrative expenses in the accompanying consolidated
statements of operations.
Options
In 2006, the Company adopted the 2006 Long-Term Incentive Plan (the "2006 Plan").
Awards granted under the 2006 Plan have a ten-year term and may be incentive stock
options, non-qualified stock options or warrants. The awards are granted at an exercise
price equal to the fair market value on the date of grant and generally vest over a three or
four year period. The Plan expired on December 31, 2009, therefore as of March 31,
2015, there was no unrecognized compensation cost related to non-vested share-based
compensation arrangements granted under the 2006 plan.
The 2006 Plan provided for the granting of options to purchase up to 10,000,000 shares
of common stock. 8,146,900 options have been issued under the plan to date of which
7,157,038 have been exercised and 692,962 have expired to date. There were 296,900
options outstanding under the 2006 Plan on its expiration date of December 31, 2009. All
options issued subsequent to this date were not issued pursuant to any plan.
Stock option activity during the three months ended March 31, 2015 and 2014 follows:
Weighted
Average
Weighted
Remaining
Weighted
Average
Average
Contractual
Options
Grant-Date
Life
Outstanding
Exercise Price
Fair Value
(Years)
Options outstanding at
December 31, 2013
668,900
$
0.06
$
0.10
4.69
No option activity
--
--
--
Options outstanding at
March 31, 2014
668,900
0.06
0.10
4.44
Options outstanding at
December 31, 2014
1,518,900
$
0.03
$
0.10
4.76
Options granted
200,000
0.01
0.40
4.98
March 31, 2015
1,718,900
$
0.03
$
0.13
4.57
9
Options outstanding at March 31, 2015 consist of:
Date
Number
Number
Exercise
Expiration
Issued
Outstanding
Exercisable
Price
Date
May 1, 2006
100,000
100,000
$0.01
May 1, 2016
May 1, 2006
100,000
100,000
$0.01
May 1, 2016
May 1, 2006
50,000
50,000
$0.01
May 1, 2016
May 1, 2006
46.900
46,900
$0.01
May 1, 2016
June 9, 2014
213,000
213,000
$0.03
June 9, 2024
June 9, 2014
159,000
159,000
$0.03
June 9, 2024
June 9, 2014
600,000
600,000
$0.03
June 9, 2024
June 6, 2014
250,000
250,000
$0.05
June 6, 2019
March 24, 2015
200,000
200,000
$0.01
March 24, 2020
Total
1,718,900
1,718,900
Warrants
In addition to our 2006 Long Term Incentive Plan, we have issued and outstanding
compensatory warrants to two consultants entitling the holders to purchase a total of
275,000 shares of our common stock at an average exercise price of $0.94 per share.
Warrants to purchase 25,000 shares of common stock vest upon 6 months after the
Company engages in an IPO, have an exercise price of $3.00 per share, and expire 2
years after the Company engages in an IPO. Warrants to purchase 250,000 shares of
common stock vest 100,000 shares on issuance (June 1, 2009), and 50,000 shares on each
of the following three anniversaries of the date of issuance, have exercise prices ranging
from $0.50 per share to $1.15 per share, and expire on June 1, 2019. The issuance of the
compensatory warrants was not submitted to our shareholders for their approval.
Warrant activity during the three months ended March 31, 2015 and 2014 follows:
10
Weighted
(1)Weighted
Weighted
Average Grant-
Average
Date
Remaining
Warrants
Average
Contractual
Outstanding
Exercise Price
Fair Value
Life (Years)
Warrants outstanding at
December 31, 2013
275,000
$
0.94
$
0.10
5.42
No warrant activity
--
--
--
Warrants outstanding at
March 31, 2014
275,000
$
0.94
$
0.10
5.17
Warrants outstanding at
December 31, 2014
275,000
0.94
0.10
4.42
No warrant activity
--
--
--
Warrants outstanding at
March 31, 2015
275,000
$
0.94
$
0.10
4.17
(1) Exclusive of 25,000 warrants expiring 2 years after initial IPO.
Warrants outstanding at December 31, 2014 consist of:
Date
Number
Number
Exercise
Expiration
Issued
Outstanding
Exercisable
Price
Date
April 1, 2000
25,000
25,000
$3.00
2 years after IPO
June 1, 2009
100,000
100,000
$0.50
June 1, 2019
June 1, 2009
50,000
50,000
$0.65
June 1, 2019
June 1, 2009
50,000
50,000
$0.85
June 1, 2019
June 1, 2009
50,000
50,000
$1.15
June 1, 2019
Total
275,000
275,000
Note 6 – Convertible Note Payable
On September 16, 2013, the Company issued an 8% convertible note in the aggregate
principal amount of $103,500, convertible into shares of the Company’s common stock.
The Note, including accrued interest was due June 18, 2014 and was convertible any time
after 180 days at the option of the holder into shares of the Company’s common stock at
55% of the average stock price of the lowest 3 closing bid prices during the 10 trading
day period ending on the latest complete trading day prior to the conversion date. Interest
expense on the convertible note of $3,242 was recorded for the year ended December 31,
2014.
Initially the Company had anticipated repaying the obligation prior to the effective date
of the holder electing to convert. Since the effective date of the election to convert has
passed the Company recorded a debt discount related to identified embedded derivatives
relating to conversion features and a reset provisions (see Note 7) based fair values as of
the inception date of the Note. The calculated debt discount equaled the face of the note
and was amortized over the term of the note. During the year ended December 31, 2014,
the Company amortized $63,250 of debt discount. During the year ended December 31,
2014, the noteholder converted $49,000 of the principal balance to 1,539,934 shares of
11
common stock, and the Company repaid the remaining note balance of $54,500 and
accrued interest of $5,646 on June 18, 2014.
Note 7 - Derivative Liability
Convertible Note
During the year ended December 31, 2013, the Company issued a convertible note (see
Note 6 above).
The note is convertible into common stock, at the holders’ option, at a discount to the
market price of the Company’s common stock. The Company has identified embedded
derivatives included in these notes as a result of certain anti-dilutive (reset) provisions,
related to certain conversion features. The accounting treatment of derivative financial
instruments requires that the Company record the fair value of the derivatives as of the
inception date of the convertible note and debt discount amortization to fair value as of
each subsequent reporting date. This resulted in a fair value of derivative liability of
$152,076 in which to the extent of the face value of convertible note was treated as debt
discount with the remainder treated as interest expense.
The fair value of the embedded derivatives at December 31, 2013, in the amount of
$152,076, was determined using the Binomial Option Pricing Model based on the
following assumptions: (1) dividend yield of 0%; (2) expected volatility of 243.00%, (3)
weighted average risk-free interest rate of 0.09%, (4) expected lives of 0.72 to 0.75 years,
and (5) estimated fair value of the Company’s common stock of $0.51 per share. The
Company recorded interest expense from the excess of the derivative liability over the
convertible note of $48,576 during the year ended December 31, 2013. A gain on
derivative liability of $152,076 was recorded during the year ended December 31, 2014
for the satisfaction of the convertible note.
Based upon ASC 840-15-25 (EITF Issue 00-19, paragraph 11) the Company has adopted
a sequencing approach regarding the application of ASC 815-40 to its outstanding
convertible note. Pursuant to the sequencing approach, the Company evaluates its
contracts based upon earliest issuance date.
Note 8 – Stock Transactions
On September 25, 2014, the Board unanimously approved an amendment to the
Company’s Articles of Incorporation to increase the number of shares of Common Stock
which the Company is authorized to issue from seventy five million (75,000,000) to
Three Hundred Million (300,000,000) shares of Common Stock, $0.001 par value per
share, and to create a new class of stock entitled “preferred stock” (together, the
“Capitalization Amendments”). The Capitalization Amendments create provisions in the
Company’s Articles of Incorporation, which allows the voting powers, designations,
preferences and other special rights, and qualifications, limitations and restrictions of
each series of preferred stock to be established from time to time by the Board without
12
approval of the stockholders. No dividend, voting, conversion, liquidation or redemptions
rights as well as redemption or sinking fund provisions are yet established with respect to
the Company’s preferred stock. On October 3, 2014, the Majority Stockholders executed
and delivered to the Company a written consent approving the Current Action.
Common Stock Issued
In connection with the convertible note payable (see Note 6 above) the noteholder
converted $49,000 of the principal balance to 1,539,934 shares of common stock during
the year ended December 31, 2014. The stock issued was determined based on the terms
of the convertible note.
Note 9 - Income Taxes
Quarter Ended March 31,
2015
2014
Effective tax rate
0.0 %
0.0 %
A full valuation allowance was recorded against the Company’s net deferred tax assets. A
valuation allowance must be established if it is more likely than not that the deferred tax
assets will not be realized. This assessment is based upon consideration of available
positive and negative evidence, which includes, among other things, the Company’s most
recent results of operations and expected future profitability. Based on the Company’s
cumulative losses in recent years, a full valuation allowance against the Company’s
deferred tax assets has been established as Management believes that the Company will
not realize the benefit of those deferred tax assets.
Note 10 - 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 three months ended March 31, 2015 and 2014
were $1,300 and $2,149, respectively.
Note 11 – Concentrations and Credit Risk
Sales and Accounts Receivable
Gotham had sales to one customer which accounted for approximately 57% of Gotham’s
total sales for the three months ended March 31, 2015. The one customer accounted for
approximately 64% of accounts receivable at March 31, 2015.
Gotham had sales to one customer which accounted for approximately 65% of Gotham’s
total sales for the three months ended March 31, 2014. The one customer accounted for
approximately 62% of accounts receivable at March 31, 2014.
13
Cash
Cash is maintained at a major financial institution. Accounts held at U.S. financial
institutions are insured by the FDIC up to $250,000. Cash balances could exceed insured
amounts at any given time, however, the Company has not experienced any such losses.
The Company did not have any interest-bearing accounts at March 31, 2015 and
December 31, 2014, respectively.
Note 12 - Fair Value Measurement
The Company adopted the provisions of Accounting Standards Codification subtopic
825-10, Financial Instruments (“ASC 825-10”) on January 1, 2008. ASC 825-10 defines
fair value as the price that would be received from selling an asset or paid to transfer a
liability in an orderly transaction between market participants at the measurement date.
When determining the fair value measurements for assets and liabilities required or
permitted to be recorded at fair value, the Company considers the principal or most
advantageous market in which it would transact and considers assumptions that market
participants would use when pricing the asset or liability, such as inherent risk, transfer
restrictions, and risk of nonperformance. ASC 825-10 establishes a fair value hierarchy
that requires an entity to maximize the use of observable inputs and minimize the use of
unobservable inputs when measuring fair value. ASC 825-10 establishes three levels of
inputs that may be used to measure fair value:
Level 1 – Quoted prices in active markets for identical assets or liabilities.
Level 2 – Observable inputs other than Level 1 prices such as quoted prices for similar
assets or liabilities; quoted prices in markets with insufficient volume or infrequent
transactions (less active markets); or model-derived valuations in which all significant
inputs are observable or can be derived principally from or corroborated by observable
market data for substantially the full term of the assets or liabilities.
Level 3 – Unobservable inputs to the valuation methodology that are significant to the
measurement of fair value of assets or liabilities.
All items required to be recorded or measured on a recurring basis consist of derivative
liabilities and are based upon level 3 inputs.
To the extent that valuation is based on models or inputs that are less observable or
unobservable in the market, the determination of fair value requires more judgment. In
certain cases, the inputs used to measure fair value may fall into different levels of the
fair value hierarchy. In such cases, for disclosure purposes, the level is the fair value
hierarchy within which the fair value measurement is disclosed and is determined based
on the lowest level input that is significant to the fair value measurement.
14
Upon adoption of ASC 825-10, there was no cumulative effect adjustment to beginning
retained earnings and no impact on the financial statements.
The carrying value of the Company’s cash and cash equivalents, accounts receivable,
accounts payable, short-term borrowings (including convertible note payable), and other
current assets and liabilities approximate fair value because of their short-term maturity.
As of March 31, 2015 and December 31, 2014, the Company did not have any items that
would be classified as level 1 or 2 disclosures.
The Company recognizes its derivative liabilities as level 3 and values its derivatives
using the methods discussed in Note 7. While the Company believes that its valuation
methods are appropriate and consistent with other market participants, it recognizes that
the use of different methodologies or assumptions to determine the fair value of certain
financial instruments could result in a different estimate of fair value at the reporting
date. The primary assumptions that would significantly affect the fair values using the
methods discussed in Note 7 are that of volatility and market price of the underlying
common stock of the Company.
As of March 31, 2015 and December 31, 2014, the Company did not have any derivative
instruments that were designated as hedges.
Fluctuations in the Company’s stock price are a primary driver for the changes in the
derivative valuations during each reporting period. As the stock price decreases for each
of the related derivative instruments, the value to the holder of the instrument generally
decreases, therefore decreasing the liability on the Company’s balance sheet.
Additionally, stock price volatility is one of the significant unobservable inputs used in
the fair value measurement of each of the Company’s derivative instruments. The
simulated fair value of these liabilities is sensitive to changes in the Company’s expected
volatility. A 10% change in pricing inputs and changes in volatilities and correlation
factors would currently not result in a material change in value for the level 3 financial
liability.
Note 13 - Related Party Transactions
Note Payable – Related Party
Gotham was provided a loan which was due on December 31, 2013 from an entity that
was previously a related party. The balance of $6,263 has not been paid and is
accordingly included in accounts payable at December 31, 2014.
Loan Payable - Stockholder
A stockholder/officer of the Company made cash advances totaling $30,180 on behalf of
the Company. The loan does not bear interest and will be repaid by December 31, 2015.
15
Note 14 – Commitments and Contingencies
Lease Commitment
On February 1, 2012, iGambit entered into a 5 year lease for new executive office space
in Smithtown, New York commencing on March 1, 2012 at a monthly rent of $1,500
with 2% annual increases.
Gotham has a month to month license agreement for office space that commenced on
August 2, 2012 at a monthly license fee of $4,025. 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:
2015
$ 14,370
2016
19,440
2017
3,240
$ 37,050
Rent expense of $17,273 and $17,456 was charged to operations for the three months
ended March 31, 2015 and 2014, respectively.
Contingencies
The Company provides accruals for costs associated with the estimated resolution of
contingencies at the earliest date at which it is deemed probable that a liability has been
incurred and the amount of such liability can be reasonably estimated.
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
16
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.
Revenue Recognition
Our revenues from continuing operations consist of revenues derived primarily
from sales of products and services rendered to real estate brokers. We recognize
revenues when the services or products have been provided or delivered, the fees charged
are fixed or determinable, we and our customers understand the specific nature and terms
of the agreed upon transactions, and collectability is reasonably assured.
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
17
We analyze the collectability of accounts receivable from continuing operations
each accounting period and adjust our allowance for doubtful accounts accordingly. A
considerable amount of judgment is required in assessing the realization of accounts
receivables, including the creditworthiness of each customer, current and historical
collection history and the related aging of past due balances. We evaluate specific
accounts when we become aware of information indicating that a customer may not be
able to meet its financial obligations due to deterioration of its financial condition, lower
credit ratings, bankruptcy or other factors affecting the ability to render payment.
Allowance for doubtful accounts was $17,865 at March 31, 2015 and December 31,
2014, respectively. There was no bad debt expense charged to operations for three
months ended March 31, 2015 and 2014, respectively.
Property and equipment and depreciation
Property and equipment are stated at cost. Depreciation for both financial
reporting and income tax purposes is computed using combinations of the straight line
and accelerated methods over the estimated lives of the respective assets. Computer
equipment is depreciated over 5 years and furniture and fixtures are depreciated over 7
years. Maintenance and repairs are charged to expense when incurred. When property
and equipment are retired or otherwise disposed of, the related cost and accumulated
depreciation are removed from the respective accounts and any gain or loss is credited or
charged to income.
Depreciation expense of $1,306 and $1,191 was charged to operations for the
three months ended March 31, 2015 and 2014, respectively.
Stock-Based Compensation
We account for our stock-based awards granted under our employee
compensation plan in accordance with ASC Topic No. 718-20, Awards Classified as
Equity, which requires the measurement of compensation expense for all share-based
compensation granted to employees and non-employee directors at fair value on the date
of grant and recognition of compensation expense over the related service period for
awards expected to vest. We use the Black-Scholes option valuation model to estimate
the fair value of our stock options and warrants. The Black-Scholes option valuation
model requires the input of highly subjective assumptions including the expected stock
price volatility of our 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.
18
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.
Convertible Note
On September 16, 2013, we issued an 8% convertible note in the aggregate principal amount of
$103,500, convertible into shares of the Company’s common stock. The Note, including accrued interest is
due June 18, 2014 and is convertible any time after 180 days at the option of the holder into shares of our
common stock at 55% of the average stock price of the lowest 3 closing bid prices during the 10 trading
day period ending on the latest complete trading day prior to the conversion date. Interest expense on the
convertible note of $3,242 was recorded for the year ended December 31, 2014.
Initially we anticipated repaying the obligation prior to the effective date of the holder electing to convert.
Since the effective date of the election to convert has passed we recorded a debt discount related to
identified embedded derivatives relating to conversion features and a reset provisions based fair values as
of the inception date of the Note. The calculated debt discount equaled the face of the note and was
amortized over the term of the note. During the year ended December 31, 2014, we amortized $63,250 of
debt discount. During the year ended December 31, 2014, the noteholder converted $49,000 of the
principal balance to 1,539,934 shares of common stock, and we repaid the remaining note balance of
$54,500 and accrued interest of $5,646 on June 18, 2014.
Derivative Liability
During the year ended December 31, 2013, we issued a convertible note.
The note is convertible into common stock, at the holders’ option, at a discount to the market price
of our common stock. We identified embedded derivatives included in these notes as a result of certain
anti-dilutive (reset) provisions, related to certain conversion features. The accounting treatment of
derivative financial instruments requires that we record the fair value of the derivatives as of the inception
date of the convertible note and debt discount amortization to fair value as of each subsequent reporting
date. This resulted in a fair value of derivative liability of $152,076 in which to the extent of the face value
of convertible note was treated as debt discount with the remainder treated as interest expense.
The fair value of the embedded derivatives at December 31, 2013, in the amount of $152,076, was
determined using the Binomial Option Pricing Model based on the following assumptions: (1) dividend
yield of 0%; (2) expected volatility of 243.00%, (3) weighted average risk-free interest rate of 0.09%, (4)
expected lives of 0.72 to 0.75 years, and (5) estimated fair value of our common stock of $0.51 per share.
We recorded interest expense from the excess of the derivative liability over the convertible note of
$48,576 during the year ended December 31, 2013. We recorded a gain on derivative liability of $152,076
during the year ended December 31, 2014 for the satisfaction of the convertible note.
Based upon ASC 840-15-25 (EITF Issue 00-19, paragraph 11) we adopted a sequencing approach
regarding the application of ASC 815-40 to its outstanding convertible note. Pursuant to the sequencing
approach, we evaluate its contracts based upon earliest issuance date.
INTRODUCTION
iGambit is a company focused on the technology markets. Our sole operating subsidiary, Gotham
Innovation Lab, Inc., is in the business of providing media technology services to the real estate industry.
We are focused on expanding the operations of Gotham by marketing the company to existing and potential
new clients.
19
Assets. At March 31, 2015, we had $193,987 in total assets, compared to $280,786 at December
31, 2014. The decrease in total assets was primarily due to the decrease in cash and the decrease in prepaid
expenses.
Liabilities. At March 31, 2015, our total liabilities were $331,377 compared to $285,277 at
December 31, 2014. Our total liabilities at March 31, 2015 consisted of accounts payable of $301,197, and
a note payable to a shareholder of $30,180, whereas our total liabilities as of December 31, 2014 consisted
of accounts payable of $285,277. We do not have any long term liabilities.
Stockholders’ Deficiency. Our stockholders’ deficiency increased to $137,390 at March 31, 2015
from $4,491 at December 31, 2014. This increase was primarily due to an increase in accumulated deficit
from $(2,882,199) at December 31, 2014 to $(3,027,096) at March 31, 2015, resulting from losses from
operations of $(144,897) for the three months ended March 31, 2015.
THREE MONTHS ENDED MARCH 31, 2015 AS COMPARED TO THREE MONTHS ENDED
MARCH 31, 2014
Revenues and Cost of Sales. We had $300,347 of revenue during the three months ended March
31, 2015 compared to revenue of $240,213 during the three months ended March 31, 2014. The increase in
revenue was due primarily to an increase in revenue generated by our Gotham subsidiary as result of
transitioning out our customer technical services division and focusing more on the real estate photography
division. In addition to Gotham’s operations, we had income from discontinued operations of $0 and
$11,355 for the three months ended March 31, 2015 and March 31, 2014, respectively.
General and Administrative Expenses. General and Administrative Expenses increased to
$307,919 for the three months ended March 31, 2015 from $272,267 for the three months ended March 31,
2014. For the three months ended March 31, 2015 our General and Administrative Expenses consisted of
corporate administrative expenses of $85,794, legal and accounting fees of $40,080,health insurance
expenses of $7,688, directors and officers insurance expenses of $10,600, payroll expenses of $141,041,
consulting expenses of $14,498 and exchange filing fees of $8,218. For the three months ended March 31,
2014 our General and Administrative Expenses consisted of corporate administrative expenses of $74,221,
legal and accounting fees of $36,336, health insurance expenses of $19,887, directors and officers
insurance expenses of $10,924 and payroll expenses of 130,899.. The increases from the three months
ended March 31, 2014 to the three months ended March 31, 2014 relate primarily to: (i) an increase in
payroll expenses; (ii) an increase in consulting expenses; (iii) an increase exchange filing fees; and (iv) an
increase in general and administrative costs associated with the operation of our Gotham subsidiary. Costs
associated with our officers’ salaries and the operation of our Gotham subsidiary should remain level going
forward, subject to a material expansion in the business operations of Gotham which would likely increase
our corporate administrative expenses.
Other Income (Expense). There was interest expense of $1,703 and $3,467 for the three months
ended March 31, 2015 and March 31, 2014, respectively. There was $34,500 in amortization of debt
discount for the three months ending March 31, 2014.
LIQUIDITY AND CAPITAL RESOURCES
General
As reflected in the accompanying consolidated financial statements, at March 31, 2015, we had
$38,734 of cash and a stockholders’ deficiency of $137,390 as compared to $133,436 and $4,491 at
December 31, 2014. At March 31, 2015 we had $193,987 in total assets, compared to $280,786 at
December 31, 2014.
Our primary capital requirements in 2015 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
20
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 used by operating activities was $119,856 for the three months ended March 31, 2015,
compared to net cash provided by operating activities of $2,875 for the three months ended March 31,
2014. Our primary source of operating cash flows from continuing operating activities for the three months
ended March 31, 2015 was from our Gotham subsidiary’s revenues of $300,347 and $240,213 for the three
months ended March 31, 2014. Additional contributing factors to the change were from an increase in
accounts receivable of $29,858, a decrease in prepaid expenses of $25,675 and an increase in accounts
payable of $15,920. Net cash provided by discontinued operating activities was $0 for the three months
ended March 31, 2015 and cash provided by discontinued operating activities was $37,500 for the three
months ended March 31, 2014. The $37,500 cash provided by discontinued operations for the three months
ended March 31, 2014, represents cash payments received from DDC which was offset by a decrease in
accounts receivable included in the Assets from Discontinued Operations.
Cash used in investing activities was $5,026 for the three months ended March 31, 2015 and $4,738
for the three months ended March 31, 2044. For the three months ended March 31, 2015 the use of cash
from investing activities was from the purchase of property and equipment of $5,026. For the three
months ended March 31, 2014 the use of cash from investing activities was $2,026 from the purchase of
property and equipment and from an increase in deposits of $2,712.
Cash provided by financing activities was $30,180 for the three months ended March 31, 2015
compared to $3,600 for the three months ended March 31, 2014. The cash provided by financing activities
for the three months ended March 31, 2015 and March 31, 2014 was loans from shareholders of $30,180
and $3,600, respectively.
Supplemental Cash Flow Activity
In the three months ended March 31, 2015 the company paid interest of $1,703 compared to
interest of $1,425 in the three months ended March 31, 2014.
21
Item 3. Quantitative and Qualitative Disclosures about Market Risk.
Not Required.
Item 4. Controls and Procedures.
Conclusion Regarding the Effectiveness of Disclosure Controls and Procedures
We carried out an evaluation, as required by paragraph (b) of Rule 13a-15 and 15d-15 of the
Exchange Act under the supervision and with the participation of our management, including our Chief
Executive Officer and Chief Financial Officer, of the effectiveness of our disclosure controls and
procedures, as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act as of March 31, 2012.
Based upon that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our
disclosure controls and procedures were effective as of March 31, 2015.
Change in Internal Controls
During the quarter ended March 31, 2015, there were no changes in our internal control over
financial reporting that materially affected, or are reasonably likely to materially affect, our internal control
over financial reporting.
.
PART II — OTHER INFORMATION
Item 1. Legal Proceedings.
From time-to-time, the Company is involved in various civil actions as part of its normal course of
business. The Company is not a party to any litigation that is material to ongoing operations as defined in
Item 103 of Regulation S-K as of the period ended March 31, 2015.
Item 1A. Risk Factors
Not required
22
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
In connection with the convertible note payable the noteholder converted $49,000 of the principal balance
to 1,539,934 shares of common stock during the year ended December 31, 2014. The stock issued was
determined based on the terms of the convertible note.
Item 3. Defaults upon Senior Securities.
None
Item 4.
Removed and Reserved.
Item 5. Other Information.
None
Item 6.
Exhibit No.
Description
31.1 Certification of the Chief Executive Officer Pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002.
31.2 Certification of the Chief Financial Officer Pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002.
32.1 Certification of the Chief Executive Officer Pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002. (This exhibit shall not be deemed “filed” for
the purposes of Section 18 of the Securities Exchange Act of 1934, as
amended, or otherwise subject to the liability of that section. Further, this
exhibit shall not be deemed to be incorporated by reference into any filing
under the Securities Act of 1933, as amended, or the Securities Exchange
Act of 1934, as amended.)
32.2 Certification of the Interim Chief Financial Officer Pursuant to Section 906
of the Sarbanes-Oxley Act of 2002. (This exhibit shall not be deemed
“filed” for the purposes of Section 18 of the Securities Exchange Act of
1934, as amended, or otherwise subject to the liability of that section.
Further, this exhibit shall not be deemed to be incorporated by reference
into any filing under the Securities Act of 1933, as amended, or the
Securities Exchange Act of 1934, as amended.)
23
In accordance with the requirements of the Exchange Act, the registrant caused this
report to be signed on its behalf by the undersigned, thereunto duly authorized, on May
14, 2015.
iGambit Inc.
/s/ John Salerno
John Salerno
Chief Executive Officer
/s/ Elisa Luqman
Elisa Luqman
Chief Financial Officer and
Principal Accounting Officer
Exhibit Index
Exhibit No.
Description
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.)
Exhibit 31.1
Chief Executive Officer Certification
Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
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.
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Exhibit 31.2
Chief Financial Officer Certification
Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
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.
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| May 14, 2015 | /s/ Elisa Luqman |
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Exhibit 32.1
WRITTEN STATEMENT OF THE CHIEF EXECUTIVE OFFICERPursuant to 18 U.S.C. Section 1350As 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 March 31, 2015, (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.
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| May 14, 2015 | /s/ John Salerno |
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Exhibit 32.2
WRITTEN STATEMENT OF THE CHIEF FINANCIAL OFFICERPursuant to 18 U.S.C. Section 1350As 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 March 31, 2015, (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.
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| May 14, 2015 | /s/ Elisa Luqman |
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Note 3 - Summary of Significant Accounting Policies: Recent Accounting Pronouncements (Policies)
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Mar. 31, 2015
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Recent Accounting Pronouncements
FASB ASC 606 ASU 2014-09 - Revenue from contracts with customers:
In May 2014, the FASB issued amended guidance on contracts with customers to transfer goods or services or contracts for the transfer of nonfinancial assets, unless those contracts are within the scope of other standards (e.g., insurance contracts or lease contracts). The guidance requires an entity to recognize revenue on contracts with customers to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The guidance requires that an entity depict the consideration by applying the following steps:
Step 1: Identify the contract(s) with a customer. Step 2: Identify the performance obligations in the contract. Step 3: Determine the transaction price. Step 4: Allocate the transaction price to the performance obligations in the contract. Step 5: Recognize revenue when (or as) the entity satisfies a performance obligation.
The amendments in this ASU are effective for annual reporting periods beginning after December 15, 2016, including interim periods within that reporting period. Early application is not permitted. This amendment is to be either retrospectively adopted to each prior reporting period presented or retrospectively with the cumulative effect of initially applying this ASU recognized at the date of initial application. Adoption of this guidance is not expected to have a material impact on the Company's consolidated financial statements.
FASB ASC 718 ASU 2014-12 – Compensation – Stock Compensation: In June 2014, the FASB issued ASU No. 2014-12, "Compensation - Stock Compensation (Topic 718): Accounting for Share-Based Payments When the Terms of an Award Provide that a Performance Target Could be Achieved after the Requisite Service Period," ("ASU 2014-12"). The amendments in ASU 2014-12 require that a performance target that affects vesting and that could be achieved after the requisite service period be treated as a performance condition. A reporting entity should apply existing guidance in ASC Topic No. 718, "Compensation - Stock Compensation" as it relates to awards with performance conditions that affect vesting to account for such awards. The amendments in ASU 2014-12 are effective for annual periods and interim periods within those annual periods beginning after December 15, 2015. Early adoption is permitted. Entities may apply the amendments in ASU 2014-12 either: (a) prospectively to all awards granted or modified after the effective date; or (b) retrospectively to all awards with performance targets that are outstanding as of the beginning of the earliest annual period presented in the financial statements and to all new or modified awards thereafter. The Company does not anticipate that the adoption of ASU 2014-12 will have a material impact on its consolidated financial statements. |
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Note 4 - Earnings Per Common Share
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| Note 4 - Earnings Per Common Share |
Note 4 - Earnings Per Common Share
The Company calculates net earnings (loss) per common share in accordance with ASC 260 “Earnings Per Share” (“ASC 260”). Basic and diluted net earnings (loss) per 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.
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