igambit10q-63010.htm

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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


Part I — Financial Information		3

Item 1.	Financial Statements:	3
	Consolidated Balance Sheets	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	19

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	20

Item 4T.	Controls and Procedures	21

Part II — Other Information

Item 1.	Legal Proceedings	21

Item 1A.	Risk Factors	21

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	21

Item 3.	Defaults upon Senior Securities	21

Item 4.	Removed and Reserved	21

Item 5.	Other Information	21

Item 6.	Exhibits	21
EX-31.1
EX-31.2
EX-32.1
EX-32.2

IGAMBIT INC.
CONSOLIDATED BALANCE SHEETS

		JUNE 30,		DECEMBER 31,
		2010		2009

ASSETS

Current assets
Cash	$	967,518	$	857,074
Accounts receivable		130,254		56,743
Prepaid expenses		210,358		8,838
Notes receivable - stockholders		17,000		17,000
Assets from discontinued operations		856,130		715,573

Total current assets		2,181,260		1,655,228

Property and equipment, net		715		895

Other assets
Goodwill		185,000		185,000
Deposits		2,500		2,500
Assets from discontinued operations		151,398		150,985

Total other assets		338,898		338,485

	$	2,520,873	$	1,994,608

LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities
Accounts payable	$	335,670	$	204,487
Note payable - related party		34,058		--
Loans payable - stockholders		2,504		2,504

Total current liabilities		372,232		206,991

Stockholders' equity
Common stock, $.001 par value; authorized -
75,000,000 shares; issued and outstanding -
23,954,056 shares		23,954		23,954
Additional paid-in capital		2,522,387		2,522,387
Accumulated deficit		(397,700)		(758,724)

Total stockholders' equity		2,148,641		1,787,617

	$	2,520,873	$	1,994,608

IGAMBIT INC.
CONSOLIDATED STATEMENTS OF INCOME

		THREE MONTHS				SIX MONTHS
		ENDED				ENDED
		JUNE 30,				JUNE 30,
		2010		2009		2010		2009

Sales	$	246,317	$	--	$	413,659	$	--

Cost of sales		96,453		--		144,325		--

Gross profit		149,864		--		269,334		--

Operating expenses
General and administrative expenses		429,173		96,124		858,740		139,819

Loss from operations		(279,309)		(96,124)		(589,406)		(139,819)

Other income
Interest income		434		2,408		918		2,408

Loss from continuing operations before income tax benefit		(278,875)		(93,716)		(588,488)		(137,411)

Income tax expense (benefit)		(108,259)		(37,017)		(229,065)		(54,277)

Loss from continuing operations		(170,616)		(56,699)		(359,423)		(83,134)

Discontinued operations
Income from discontinued operations		642,130		416,364		1,207,287		769,479
Provision for income taxes		266,676		135,607		486,840		275,087

Income from discontinued operations, net of taxes		375,454		280,757		720,447		494,392

Net income	$	204,838	$	224,058	$	361,024	$	411,258


Basic and fully diluted earnings (loss) per common share:
Continuing operations	$	(.01)	$	(.00)	$	(.02)	$	(.00)
Discontinued operations, net of tax	$	.02	$	.01	$	.03	$	.02
Net earnings per common share	$	.01	$	.01	$	.01	$	.02

Weighted average common shares outstanding		23,954,056		22,719,056		23,954,056		22,719,056

IGAMBIT INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
SIX MONTHS ENDED JUNE 30,

		2010		2009

CASH FLOWS FROM OPERATING ACTIVITIES:
Net income	$	361,024	$	411,258
Adjustments to reconcile net income to net
cash (used) provided by operating activities
Income from discontinued operations		(720,447)		(494,392)
Depreciation		180		298
Increase (Decrease) in cash flows as a result of
changes in asset and liability account balances:
Accounts receivable		(73,511)		--
Prepaid expenses		(201,520)		--
Accounts payable		131,183		4,588

Net cash used by continuing operating activities		(503,091)		(78,248)
Net cash (used) provided by discontinued operating activities		(140,557)		166,301

NET CASH (USED) PROVIDED BY OPERATING ACTIVITIES		(643,648)		88,053

CASH FLOWS FROM INVESTING ACTIVITIES:
Increase in deposits		--		(2,500)
Payments received from loans to stockholders		--		4,000

Net cash provided by continuing investing activities		--		1,500
Net cash provided by discontinued investing activities		720,034		510,119

NET CASH PROVIDED BY INVESTING ACTIVITIES		720,034		511,619

CASH FLOWS FROM FINANCING ACTIVITIES:
Increase in loans payable to related party		34,058		--

Net cash provided by continuing financing activities		34,058		--
Net cash used by discontinued financing activities		--		(141,538)

NET CASH PROVIDED (USED) BY FINANCING ACTIVITIES		34,058		(141,538)

NET INCREASE IN CASH		110,444		458,134

CASH - BEGINNING OF PERIOD		857,074		322,439

CASH - END OF PERIOD	$	967,518	$	780,573


SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the period for:
Interest	$	480	$	--
Income taxes		384,934		3,344

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, 2010.

The Company acquired 200 no par value common shares of Gotham for $100. Subsequent to the acquisition of the Company’s newly formed subsidiary, Gotham, on October 1, 2009 Gotham acquired all of the assets and business operations of Jekyll Island Ventures Inc. doing business as Gotham Photo Company (“Jekyll”) for 500,000 shares of the Company’s common stock at a value of $.10 per share, and for 1,500,000 options to purchase the Company’s common stock over a three year period at a value of $.09 per share. Jekyll is a developer of web based software solutions for the real estate industry in the areas of marketing real estate. Subsequent to the acquisition, Jekyll dissolved and distributed its shares of the Company’s common stock to the shareholders of Jekyll. Gotham maintained Jekyll’s d/b/a name of Gotham Photo Company. The assets acquired from Jekyll are as follows:

Nine months ended September 30, 2009:

Pro Forma Balance Sheets

		iGambit		Jekyll		Combined

Current assets	$	1,371,447	$	70,981	$	1,442,428
Fixed assets		1,044		2,993		4,037
Other assets		153,209				153,209
Total assets		1,525,700		73,974		1,599,674

Current liabilities		2,121		--		2,121
Long-term liabilities		--		--		--
Total liabilities		2,121		--		2,121
Stockholders' equity		1,523,579		73,974		1,597,553
Total liabilities and stockholders' equity	$	1,525,700	$	73,974	$	1,599,674

Pro Forma Statements of Operations

		iGambit		Jekyll		Combined

Revenue	$	--	$	249,925	$	249,925
Cost of sales		--		43,151		43,151
Gross profit		--		206,774		206,774
General and administrative expenses		418,772		208,965		627,737
Loss from operations		(418,772)		(2,191)		(420,963)
Other income		7,435		--		7,435
Income tax benefit		107,059		--		107,059
Loss from continuing operations		(304,278)		(2,191)		(306,469)
Income from discontinued operations		744,973		--		744,973
Net income (loss)	$	440,695	$	(2,191)	$	438,504

Year ended December 31, 2008:

Pro Forma Balance Sheets

		iGambit		Jekyll		Combined

Current assets	$	985,927	$	80,650	$	1,066,577
Fixed assets		1,491		--		1,491
Other assets		462,758		--		462,758
Total assets		1,450,176		80,650		1,530,826

Current liabilities		4,754		3,929		8,683
Long-term liabilities		491,538		--		491,538
Total liabilities		496,292		3,929		500,221
Stockholders' equity		953,884		76,721		1,030,605
Total liabilities and stockholders' equity	$	1,450,176	$	80,650	$	1,530,826

Pro Forma Statements of Operations

		iGambit		Jekyll		Combined

Revenue	$	--	$	359,590	$	359,590
Cost of sales		--		62,100		62,100
Gross profit		--		297,490		297,490
General and administrative expenses		123,689		280,198		403,887
(Loss) income from operations		(123,689)		17,292		(106,397)
Other income		2,554		--		2,554
Income tax benefit		44,065		--		44,065
(Loss) income from continuing operations		(77,070)		17,292		(59,778)
Income from discontinued operations		553,363		--		553,363
Net income	$	476,293	$	17,292	$	493,585

Year ended December 31, 2009:

Pro Forma Statements of Operations

		iGambit		Jekyll		Combined

Revenue	$	6,500	$	416,586	$	423,086
Cost of sales		--		90,608		90,608
Gross profit		6,500		325,978		332,478
General and administrative expenses		617,505		453,123		1,070,628
Loss from operations		(611,005)		(127,145)		(738,150)
Other income		3,908		--		3,908
Income tax benefit		254,071		--		254,071
Loss from continuing operations		(353,026)		(127,145)		(480,171)
Income from discontinued operations		923,739		--		923,739
Net income (loss)	$	570,713	$	(127,145)	$	443,568

On February 28, 2006, the Company entered into an asset purchase agreement with Digi-Data Corporation (“Digi-Data”), whereby Digi-Data acquired the Company’s assets and its online digital vaulting business operations in exchange for $1,500,000, which was deposited into an escrow account for payment of the Company’s outstanding liabilities. In addition, as part of the sales agreement, the Company receives payments from Digi-Data based on 10% of the net vaulting revenue payable quarterly over five years. The Company is also entitled to an additional 5% of the increase in net vaulting revenue over the prior year’s revenue. These adjustments to the sales price are included in the discontinued operations line of the statements of income.

	2009		2008

ASSETS
Current:
Accounts receivable	$	713,732	$	367,430
Deferred income taxes		--		279,058
Noncurrent:
Restricted cash		150,985		165,727
Deferred income taxes		--		98,750
Assets of discontinued operations	$	864,717	$	910,965

LIABILITIES
Noncurrent:
Prepaid contingency	$	--	$	141,538
Deferred compensation		--		350,000
Liabilities of discontinued operations	$	--	$	491,538

An escrow account was established in connection with the sale of business to Digi-Data to hold funds for contingent liabilities. Under the terms of the sale, 25% of the quarterly contingency payments are deposited into the escrow account for a period of three years. Also under the terms of the sale, 50% of the balance of the escrow funds held will be released after three years, and the remaining balance released after two more years. The escrow account balance was $151,398 and $150,985 at June 30, 2010 and December 31, 2009, respectively.

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.

The Company analyzes the collectability of accounts receivable each accounting period and adjusts its allowance for doubtful accounts accordingly. A considerable amount of judgment is required in assessing the realization of accounts receivables, including the current creditworthiness of each customer, current and historical collection history and the related aging of past due balances. The Company evaluates specific accounts when it becomes aware of information indicating that a customer may not be able to meet its financial obligations due to deterioration of its financial condition, lower credit ratings, bankruptcy or other factors affecting the ability to render payment. As of December 31, 2009, the Company has charged $65,000 of bad debts to operations for uncollectible accounts.

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 year ended December 31, 2008, the Company purchased computer equipment totaling $1,864. 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.

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. As Gotham’s marketing plan and expected core business is expected to commence later in 2010, it is too early for management to evaluate whether goodwill has been impaired. No impairment was recorded during the six months ended June 30, 2010.

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.

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.

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.

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 income.

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, we recognized compensation expense ratably over the vesting period, net of estimated forfeitures. As of June 30, 2010, there was approximately $148,500 of total unrecognized compensation cost related to non-vested share-based compensation arrangements granted under the 2006 plan. This cost is expected to be recognized over a remaining weighted-average vesting period of 1.16 years.

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.


		2010		2009
From operations:
Continuing operations:
Current tax expense (benefit):
Federal	$	(180,932)	$	(42,872)
State and local		(48,133)		(11,405)
		(229,065)
Deferred tax expense (benefit)		--		--
Total from continuing operations		(229,065)		(54,277)
Discontinued operations:
Current tax expense (benefit)
Federal		386,573		211,220
State and local		100,267		63,867
		486,840		275,087
Deferred tax expense (benefit):
Federal		--		--
State and local		--		--
		--		--
Total from discontinued operations		486,840		--

Total	$	257,775	$	220,810

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 and to deferred compensation. 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.

In accordance with ASC Topic No. 740, Income Taxes, a valuation allowance is established based on the future recoverability of deferred tax assets. This assessment is based upon consideration of available positive and negative evidence, which includes, among other things, the Company’s most recent results of operations and expected future profitability. Management has determined that no valuation allowance related to deferred tax assets is necessary at June 30, 2010 and December 31, 2009.

The Company provided advances to two stockholders and former officers totaling $198,281 and $79,281 as of December 31, 2008, against their respective deferred compensation balances. The advances to the stockholders were collateralized with their common shares issued and outstanding of 5,470,000 shares each. The former officers repaid the advances to the Company during the year ended December 31, 2009.

In September 2009, the Company adopted Accounting Standards Codification (ASC) 105-10-05, which provides for the Financial Accounting Standards Board Accounting Standards Codification (the Codification) to become the single official source of authoritative, nongovernmental U.S. generally accepted accounting principles (GAAP) to be applied by non-governmental entities in the preparation of financial statements in conformity with GAAP. The Codification does not change GAAP, but combines all authoritative standards into a comprehensive, topically organized online database. ASC 105-10-05 explicitly recognizes rules and interpretative releases of the Securities and Exchange Commission (SEC) under Federal securities laws as authoritative GAAP for SEC registrants. Subsequent revisions to GAAP will be incorporated into the Codification through Accounting Standards Updates (ASU). ASC 105-10-05 is effective for interim and annual periods ending after September 15, 2009, and was effective for the Company in the third quarter of 2009. The adoption of ASC 105-10-05 impacted the Company's financial statement disclosures, as all references to authoritative accounting literature were updated to and in accordance with the Codification.

In February 2009, the FASB issued an accounting standard now codified within ASC 805, “Business Combinations” that amends the provisions related to the initial recognition and measurement, subsequent measurement, and disclosure of assets and liabilities arising from contingencies in a business combination. The standard applies to all assets acquired and liabilities assumed in a business combination that arise from contingencies that would be within the scope of ASC 450, “Contingencies”, if not acquired or assumed in a business combination, except for assets or liabilities arising from contingencies that are subject to specific guidance in ASC 805. The standard applies prospectively to business combinations for which the acquisition date is on or after the beginning of the first annual reporting period beginning on or after December 15, 2008. The adoption of the standard by the Company was effective January 1, 2009 and did not have an impact on the Company's financial position and results of operations.

Effective January 1, 2008, the Company adopted the provisions of ASC Topic 820, “Fair Value Measurements and Disclosures”. This pronouncement defines fair value, establishes a hierarchal disclosure framework for measuring fair value, and requires expanded disclosures about fair value measurements. The provisions of this statement apply to all financial instruments that are being measured and reported on a fair value basis. Effective January 1, 2009, the Company adopted the remaining provisions of ASC Topic 820 that were delayed by the issuance of ASC Section 820-10-55, “Fair Value Measurements and Disclosures: Overall: Implementation Guidance and Illustrations”.

In April 2008, the FASB issued an accounting standard now codified within ASC 350, “Intangibles-Goodwill and Other” which amends the factors that should be considered in developing renewal or extension assumptions used to determine the useful life of a recognized intangible asset. Under this standard, entities estimating the useful life of a recognized intangible asset must consider their historical experience in renewing or extending similar arrangements or, in the absence of historical experience, must consider assumptions that market participants would use about renewal or extension. The intent of the standard is to improve the consistency between the useful life of a recognized intangible asset and the period of expected cash flows used to measure the fair value of the asset. Adoption of the standard was effective for financial statements issued for fiscal years beginning after December 15, 2008, and interim periods within those fiscal years, The Company adopted the standard on January 1, 2009. The Company does not expect the standard to have a material impact on its accounting for future acquisitions of intangible assets.

In November 2008, the FASB issued an accounting now standard codified within ASC 350, “Intangibles-Goodwill and Other” that applies to defensive assets which are acquired intangible assets which the acquirer does not intend to actively use, but intends to hold to prevent its competitors from obtaining access to the asset. The standard clarifies that defensive intangible assets are separately identifiable and should be accounted for as a separate unit of accounting in accordance with guidance provided within ASC 805, “Business Combinations” and ASC 820, “Fair Value Measurements and Disclosures”. The standard was effective for intangible assets acquired in fiscal years beginning on or after December 15, 2008. The Company adopted this standard effective January 1, 2009 and will apply the provisions of this guidance to intangible assets acquired on or after that date. The Company does not expect the standard to have a material impact on its accounting for future acquisitions of intangible assets.

In April 2009, the FASB issued an accounting standard now codified within ASC 825, “Financial Instruments” that requires disclosures about the fair value of financial instruments that are not reflected in the consolidated balance sheets at fair value whenever summarized financial information for interim reporting periods is presented. Entities are required to disclose the methods and significant assumptions used to estimate the fair value of financial instruments and describe changes in methods and significant assumptions, if any, during the period. The standard was effective for interim reporting periods ending after June 15, 2009 and was adopted by the Company in the second quarter of 2009.

In April 2009, the FASB issued an accounting standard now codified within ASC 820, “Fair Value Measurements and Disclosures”, which provides guidance on determining fair value when there is no active market or where the price inputs being used represent distressed sales, The standard reaffirms the objective of fair value measurement, which is to reflect how much an asset would be sold for in an orderly transaction. It also reaffirms the need to use judgment to determine if a formerly active market has become inactive, as well as to determine fair values when markets have become inactive. The standard is effective for interim and annual periods ending after June 15, 2009 and was adopted by the Company in the second quarter of 2009.

In May 2009, the FASB issued an accounting standard now codified within ASC 855, “Subsequent Events”, which sets forth general standards of accounting for and disclosure of events that occur after the balance sheet date but before financial statements are issued or are available to be issued. It requires the disclosure of the date through which an entity has evaluated subsequent events and the basis for that date, that is, whether that date represents the date the financial statements were issued or were available to be issued. The standard was effective for interim or annual periods ending after June 15, 2009 and was adopted by the Company in the second quarter of 2009. In February 2010, the FASB issued Accounting Standards Update No. 2010-09 (ASU 2010-09) “Subsequent Events” (Topic 855): “Amendments to Certain Recognition and Disclosure Requirements”. This ASU amends FASB Codification topic 855. The amendments in ASU 2010-09 removes the requirement in ASC 855-10 for a SEC filer to disclose a date through which subsequent events have been evaluated in both issued and revised financial statements. This ASU was effective upon issuance and the Company adopted this ASU as of December 31, 2009. Except for the removal of disclosure requirements in ASC 855-10, the adoption of this standard did not have a material impact on the Company's consolidated financial statements.

In August 2009, the FASB issued ASU No. 2009-05, “Fair Value Measurements and Disclosures - Measuring Liabilities at Fair Value”. The ASU provides additional guidance for the fair value measurement of liabilities under ASC 820, Fair Value Measurements and Disclosures. The ASU provides clarification that in circumstances in which a quoted price in an active market for the identical liability is not available, a reporting entity is required to measure fair value using certain techniques. The ASU also clarifies that when estimating the fair value of a liability, a reporting entity is not required to include a separate input or adjustment to other inputs relating to the existence of a restriction that prevents the transfer of a liability. It also clarifies that both a quoted price in an active market for the identical liability at the measurement date and the quoted price for the identical liability when traded as an asset in an active market when no adjustments to the quoted price of the asset are required are Level fair value measurements. The Company adopted the ASU in the fourth fiscal quarter of 2009.

In October 2009, the FASB issued ASU 2009-13, Multiple-Deliverable Revenue Arrangements, (amendments to ASC Topic 605, Revenue Recognition) (ASU 2009-13) and ASU 2009-14, “Certain Arrangements that Include Software Elements”, (amendments to ASC Topic 985, Software) (ASU 2009-14). ASU 2009-13 requires entities to allocate revenue in an arrangement using estimated selling prices of the delivered goods and services based on a selling price hierarchy. The amendments eliminate the residual method of revenue allocation and require revenue to be allocated using the relative selling price method. ASU 2009-14 removes tangible products from the scope of software revenue guidance and provides guidance on determining whether software deliverables in an arrangement that includes a tangible product are covered by the scope of the software revenue guidance. ASU 2009-13 and ASU 2009-14 should be applied on a prospective basis for revenue arrangements entered into or materially modified in fiscal years beginning on or after June 15,2010, with early adoption permitted. The Company is currently evaluating the impact of the adoption of these ASUs on its consolidated results of operations or financial condition.

In December 2009, the FASB issued ASU No. 2009-17, “Improvements to Financial Reporting by Enterprises Involved with Variable” Interest Entities, which amends ASC 810, Consolidation to address the elimination of the concept of a qualifying special purpose entity. The standard also replaces the quantitative-based risks and rewards calculation for determining which enterprise has a controlling financial interest in a variable interest entity with an approach focused on identifying which enterprise has the power to direct the activities of a variable interest entity and the obligation to absorb losses of the entity or the right to receive benefits from the entity. This standard also requires continuous reassessments of whether an enterprise is the primary beneficiary of a VIE whereas previous accounting guidance required reconsideration of whether an enterprise was the primary beneficiary of a VIE only when specific events had occurred.

The standard provides more timely and useful information about an enterprise's involvement with a variable interest entity and will be effective as of the beginning of interim and annual reporting periods that begin after November 15, 2009, which for the Company would be January 1, 2010. The Company does not expect the adoption of this standard to have a material effect on its consolidated results of operations and financial condition.

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 does not expect the adoption of this standard to have a material impact on its consolidated financial statements.

The FASB updated ASC Topic 810, Consolidations, and ASC Topic 860, “Transfers and Servicing”, which significantly changed the accounting for transfers of financial assets and the criteria for determining whether to consolidate a variable interest entity (VIE). The update to ASC Topic 860 eliminates the qualifying special purpose entity (QSPE) concept, establishes conditions for reporting a transfer of a portion of a financial asset as a sale, clarifies the financial asset de-recognition criteria, revises how interests retained by the transferor in a sale of financial assets initially are measured, and removes the guaranteed mortgage securitization re-characterization provisions. The update to ASC Topic 810 requires reporting entities to evaluate former QSPEs for consolidation, changes the approach to determining a VIE's primary beneficiary from a mainly quantitative assessment to an exclusively qualitative assessment designed to identify a controlling financial interest, and increases the frequency of required reassessments to determine whether a company is the primary beneficiary of a VIE. The Company does not expect the adoption of this standard to have a material impact on its consolidated financial statements.

On July 20, 2010, the Company entered into a letter of intent to acquire the assets and business of Allied Airbus, Inc. (“Allied”). In exchange for the acquisition of Allied, the Company would issue to Allied upon execution of the definitive agreement 500,000 shares of the Company’s common stock and an additional 2,250,000 common shares over a three year period beginning on January 1, 2011 based upon certain performance criteria, as well as additional cash or discounted common stock based upon earnings criteria. The Company would also assume or retire debt of Allied of not more than $225,000. The letter of intent will terminate on September 30, 2010 if both parties are unable tonegotiate a mutually acceptable definitive agreement, unless the parties agree in writing to extend such date.

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.

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.

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.

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 year ended December 31, 2008, we purchased computer equipment totaling $1,864. 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.

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. As Gotham’s marketing plan and expected core business is expected to commence later in 2010, it is too early for management to evaluate whether goodwill has been impaired. No impairment was recorded during the six months ended June 30, 2010.

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.

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.

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, 2009 and during the six months ended June 30, 2010 Gotham produced approximately $166,661 and $413,659 of revenue, respectively. We are focused on expanding the operations of Gotham by marketing the company to existing and potential new clients. Currently Gotham has several proposals outstanding to franchisees of one of its main customers, as well as other potential new clients. In addition to Gotham’s operations, we receive Quarterly Revenue Share Payments and Annual Increase Payments from Digi-Data Corporation, which are payable pursuant to the terms of an agreement under which we sold certain assets to DDC in 2006. Contingency Payments earned from DDC under the agreement totaled $1,446,014 in the year ended December 31, 2009, and $1,008,733 in the six months ended June 30, 2010 which we anticipate will be paid in September 2010. Under our arrangement with DDC, we earned an additional $198,554 of accrued revenue for the 5% year to year Contingency Payments during the six months ended June 30, 2010, which we anticipate will be paid in 2011. We expect that the payments from DDC, which we will receive through February 2011, will continue to grow based upon the expansion of DDC’s business. We are also focused on acquiring or partnering with additional technology companies.

Revenues and Net Income. We had $246,317 of revenue during the three months ended June 30, 2010, as compared to no revenue during the three months ended June 30, 2009. The increase in revenue was due to revenue generated by our acquired subsidiary Gotham. In addition, we had income from discontinued operations of $375,454 for the three months ended June 30, 2010, compared to $280,757 for the three months ended June 30, 2009, and net income of $204,838 for the three months ended June 30, 2010, compared to $224,058 for the three months ended June 30, 2009. Our increase in revenue was offset entirely by a $333,049 increase in General and administrative expenses. We continue to receive 10% of Digi-Data’s gross Vault sales and 5% of the year to year increase. This agreement ends on February 28, 2011.

General and Administrative Expenses. General and Administrative Expenses increased to $429,173 for the three months ended June 30, 2010 from $96,124 for the three months ended June 30, 2009. For the three months ended June 30, 2010 our General and Administrative Expenses consisted of corporate administrative expenses of $125,937, legal and accounting fees of $47,855 and payroll expenses of $255,381 For the three months ended June 30, 2009 our General and Administrative Expenses consisted of corporate administrative expenses of $24,779, and legal and accounting fees of $71,345. The increases from the three months ended June 30, 2009 to the three months ended June 30, 2010 relate primarily to: (i) professional costs associated with the preparation and filing of a registration statement with the SEC; and (ii) costs associated with the operation of our Gotham subsidiary. Costs associated with the operation of our Gotham subsidiary should remain level going forward, subject to a material expansion in the business operations of Gotham which would likely increase our corporate administrative expenses. Further, we anticipated an increase in legal and accounting fees in 2010 as a result of having become a reporting company under the Securities Exchange Act of 1934.

Revenues and Net Income. We had $413,659 of revenue during the six months ended June 30, 2010, as compared to no revenue during the six months ended June 30, 2009. The increase in revenue was due to revenue generated by our acquired subsidiary Gotham. In addition, we had income from discontinued operations of $720,447 for the six months ended June 30, 2010, compared to $494,392 for the six months ended June 30, 2009, and net income of $361,024 for the six months ended June 30, 2010, compared to $411,258 for the six months ended June 30, 2009. Our increase in revenue was offset entirely by a $719,990 increase in General and administrative expenses. We continue to receive 10% of Digi-Data’s gross Vault sales and 5% of the year to year increase. This agreement ends on February 28, 2011.

General and Administrative Expenses. General and Administrative Expenses increased to $858,740 for the six months ended June 30, 2010 from $139,819 for the six months ended June 30, 2009. For the six months ended June 30, 2010 our General and Administrative Expenses consisted of corporate administrative expenses of $211,529, legal and accounting fees of $68,730, initial public offering expenses of $49,276, and payroll expenses of $529,205 For the six months ended June 30, 2009 our General and Administrative Expenses consisted of corporate administrative expenses of $51,724 and legal and accounting fees of $88,095. The increases from the six months ended June 30, 2009 to the six months ended June 30, 2010 relate primarily to: (i) salaries for officers hired by the Company at the end of the 2nd quarter of 2009; (ii) professional costs associated with the preparation and filing of a registration statement with the SEC; and (iii) 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. Further, whereas the additional professional fees associated with the acquisition of Jekyll Island Ventures, Inc. will not carry over into future periods unless we engage in other acquisitions, we anticipated an increase in legal and accounting fees in 2010 as a result of having become a reporting company under the Securities Exchange Act of 1934.

Our primary capital requirements in 2010 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.

Cash used in operating activities was $643,648 for the first six months ending June 30, 2010, compared to cash provided by operating activities of $88,053 for the first six months ending June 30, 2009. Our primary source of operating cash flow for the six months ending June 30, 2010 is from net income. We receive Quarterly Revenue Share Payments and Annual Increase Payments from Digi-Data Corporation, which are payable pursuant to the terms of an agreement under which we sold certain assets to DDC in 2006. Cash payments received from DDC under the agreement totaled $1,383,514 in the year ended December 31, 2009, and $1,067,236 in the six months ended June 30, 2010. We earned an additional $1,207,287 under our arrangement with DDC during the six months ended June 30, 2010, of which $1,008,733 was for the first two quarters Contingency Payments and $198,554 was accrued revenue for the 5% year to year Contingency Payment. $472,384 for the first quarter Contingency Payment was paid in May 2010, and we anticipate the second quarter Contingency Payment will be paid in September 2010. The 5% year to year Contingency Payment will continue to accrue monthly and be paid in 2011 as per the agreement. We expect that the payments from DDC, which we will receive through February 2011, will continue to grow based upon the expansion of DDC’s business.

In addition to the DCC Contingency Payments, we receive revenue from the operation of our Gotham subsidiary, which operates the business we acquired from Jekyll Island Ventures, Inc. in 2009. We anticipate that Gotham’s business and revenues will continue to grow throughout 2010. Gotham is not currently cash flow positive. Gotham generated revenues of $166,661 and a net loss of $(124,954) in 2009 and revenues of $411,249 and a net loss of $(152,549) for the six months ended June 30, 2010.

Cash provided by investing activities was $720,034 for the first six months ending June 30, 2010 and $511,619 for the six months ending June 30, 2009. The entire source of cash provided by investing activities is the DDC contingency payments classified as cash flows from discontinued investing activities.

Cash provided from financing activities was $34,058 for the six months ending June 30, 2010 compared to cash used by financing activities of $141,538 for the six months ending June 30, 2009. The cash flow from financing activities in the first six months of fiscal 2010 was an increase in a loan payable to a related party from our subsidiary Gotham. The cash used from financing activities in the first six months of fiscal year 2009 was a decrease in the DDC prepaid contingency liability.

Evaluation of disclosure controls and procedures. Under the supervision and with the participation of the Company’s management, including the Company’s principal executive officer and principal financial officer, the Company conducted an evaluation of the effectiveness of its disclosure controls and procedures, as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), as of June 30, 2010. Based on their evaluation, our principal executive officer and principal financial officer concluded that our disclosure controls and procedures were effective.


Item 6.			Exhibits

Exhibit No.					Description

		31.1			Certification of the Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

		31.2			Certification of the Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

	32.1			Certification of the Chief Executive Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. (This exhibit shall not be deemed “filed” for the purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to the liability of that section. Further, this exhibit shall not be deemed to be incorporated by reference into any filing under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended.)

	32.2			Certification of the Interim Chief Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. (This exhibit shall not be deemed “filed” for the purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to the liability of that section. Further, this exhibit shall not be deemed to be incorporated by reference into any filing under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended.)


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.)


Delaware		11-3363609
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

	Six Months Ended June 30,
	2010		2009
StocSStock options		1,046,900		296,900
Aver Common stock warrants		835,000		3,085,000

Basic Total shares excluded from calculation		1,881,900		3,381,900

								Weighted
								Average
						Weighted		Remaining
			Average		Average			Contractual
	Warrants		Exercise Price		Grant-Date Fair Value			Life (Years)
Warrants outstanding at January 1, 2010		3,085,000	$	0.83	$		0.10
No warrant activity		--		--			--
Warrants outstanding at June 30, 2010		3,085,000	$	0.83	$		0.10	6.58

								Weighted
								Average
						Weighted		Remaining
			Average		Average			Contractual
	Warrants		Exercise Price		Grant-Date Fair Value			Life (Years)
Options outstanding at January 1, 2010		1,796,000	$	0.01	$		0.10
No option activity		--		--			--
Options outstanding at June 30, 2010		1,796,900	$	0.01	$		0.10	5.34


þ		QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934


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

Cash		$ 4,023
Accounts receivable		66,958
Fixed assets		2,993
		$73,974


	iGambit, Inc.
	/s/ John Salerno
	John Salerno
	Chief Executive Officer



	/s/ Elisa Luqman
	Elisa Luqman
	Chief Financial Officer