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0001211524-17-000046.txt : 20170417 0001211524-17-000046.hdr.sgml : 20170417 20170417162943 ACCESSION NUMBER: 0001211524-17-000046 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 48 CONFORMED PERIOD OF REPORT: 20161231 FILED AS OF DATE: 20170417 DATE AS OF CHANGE: 20170417 FILER: COMPANY DATA: COMPANY CONFORMED NAME: iGambit, Inc. CENTRAL INDEX KEY: 0001479681 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-BUSINESS SERVICES, NEC [7389] IRS NUMBER: 113363609 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K SEC ACT: 1934 Act SEC FILE NUMBER: 000-53862 FILM NUMBER: 17764846 BUSINESS ADDRESS: STREET 1: 1050 W JERICHO TURNPIKE STREET 2: SUITE A CITY: SMITHTOWN STATE: NY ZIP: 11788 BUSINESS PHONE: 631-670-6777 MAIL ADDRESS: STREET 1: 1050 W JERICHO TURNPIKE STREET 2: SUITE A CITY: SMITHTOWN STATE: NY ZIP: 11788 10-K 1 f2016igambitform10kdraft4152.htm IGAMBIT 10-K DEC 31ST 2016 Converted by EDGARwiz

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-K

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE

SECURITIES EXCHANGE ACT OF 1934

For the Fiscal Year Ended December 31, 2016

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF

THE SECURITIES EXCHANGE ACT OF 1934

Commission File Number: 000-53862

IGAMBIT INC.

(Exact name of registrant 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)

(631) 670-6777

(Registrant’s telephone number)

(Registrant’s former telephone number)

Securities registered under Section 12(b) of the Exchange Act:

Title of Each Class: NONE

Name of Each Exchange on Which

Registered:

Securities registered pursuant to Section 12(g) of the Act: Common Stock

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in

Rule 405 of the Securities Act. Yes o No þ

Indicate by check mark if the registrant is not required to file reports pursuant to

Section 13 or Section 15(d) of the Exchange Act. Yes o No þ

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 website, if any, every Interactive Date File required to be submitted and

posted pursuant to Rule 405 of Regulation S-T (Section 232.405 of the 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 if disclosure of delinquent filers pursuant to Item 405 of

Regulation S-K is not contained herein, and will not be contained, to the best of

registrant’s knowledge, in definitive proxy or information statements incorporated by

reference in Part III of this Form 10-K or any amendment to this Form 10-K. o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated

filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large

accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of

the Exchange Act. (Check one):

Large

Accelerated

Non-accelerated filer o

Smaller

accelerated

filer o

reporting

filer o

company þ

(Do not check if a smaller reporting company)

Indicate by check mark whether the registrant is a shell company (as defined in Rule 126-

2 of the act): Yes o No þ

As of June 30, 2016, the aggregate market value of shares held by non-affiliates of the

registrant (based upon the closing sale prices of such shares on the OTCQB Market on

June 30, 2016) was approximately $370.773. For purposes of calculating the aggregate

market value of shares held by non-affiliates, we have assumed that all outstanding shares

are held by non-affiliates, except for shares held by each of our executive officers,

directors and 5% or greater stockholders. In the case of 5% or greater stockholders, we

have not deemed such stockholders to be affiliates unless there are facts and

circumstances which would indicate that such stockholders exercise any control over our

company, or unless they hold 10% or more of our outstanding common stock. These

assumptions should not be deemed to constitute an admission that all executive officers,

directors and 5% or greater stockholders are, in fact, affiliates of our company, or that

there are not other persons who may be deemed to be affiliates of our company. Further

information concerning shareholdings of our officers, directors and principal stockholders

is included or incorporated by reference in Part III, Item 12 of this Annual Report on

Form 10-K.

As of April 17, 2017 there were 116,868,990 shares of the Registrant’s $0.001 par value

common stock outstanding.

DOCUMENTS INCORPORATED BY REFERENCE: None

iGambit Inc.

FORM 10-K — FOR THE YEAR ENDED DECEMBER 31, 2016

TABLE OF CONTENTS

Page No.

PART I

Item 1

Business

Item 1A

Risk Factors

Item 1B

Unresolved Staff Comments

Item 2

Properties

Item 3

Legal Proceedings

Item 4

(Removed and Reserved)

PART II

Item 5

Market for Registrant’s Common Equity, Related Stockholder Matters

and Issuer Purchases of Equity Securities

Item 6

Selected Financial Data

Item 7

Management’s Discussion and Analysis of Financial Condition and

Results of Operations

Item 7A

Quantitative and Qualitative Disclosure About Market Risk

Item 8

Financial Statements and Supplementary Data

Item 9

Changes in and Disagreements with Accountants on Accounting and

Financial Disclosure

Item 9A

Controls and Procedures

Item 9B

Other Information

PART III

Item 10

Directors, Executive Officers and Corporate Governance

Item 11

Executive Compensation

Item 12

Security Ownership of Certain Beneficial Owners and Management

and Related Stockholder Matters

Item 13

Certain Relationships, Related Transactions and Director

Independence

Item 14

Principal Accountant Fees and Services

PART IV

Item 15

Exhibits and Financial Statement Schedules

This annual report on Form 10-K is for the year ended December 31, 2016. The

Securities and Exchange Commission (“SEC”) allows us to “incorporate by reference”

information that we file with the SEC, which means that we can disclose important

information to you by referring you directly to those documents. Information

incorporated by reference is considered to be part of this annual report. In addition,

information that we file with the SEC in the future will automatically update and

supersede information contained in this annual report. In this annual report, “Company,”

“we,” “us” and “our” refer to iGambit Inc. and its subsidiaries.

PART I

This Annual Report on Form 10-K 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. The Company has based these forward-

looking statements on the Company’s current expectations and projections about future

events. These forward-looking statements are subject to known and unknown risks,

uncertainties and assumptions about us and the Company’s subsidiaries that may cause

the Company’s actual results, levels of activity, performance or achievements to be

materially different from any future results, levels of activity, performance or

achievements expressed or implied by such forward-looking statements. In many cases,

you can identify forward-looking statements by terminology such as “anticipate,”

“estimate,” “believe,” “continue,” “could,” “intend,” “may,” “plan,” “potential,”

“predict,” “should,” “will,” “expect,” “objective,” “projection,” “forecast,” “goal,”

“guidance,” “outlook,” “effort,” “target” and other similar words. However, the

absence of these words does not mean that the statements are not forward-looking.

Factors that might cause or contribute to a material difference include, but are not

limited to, those discussed elsewhere in this Annual Report, including the section entitled

“Risk Factors” and the risks discussed in the Company’s other Securities and Exchange

Commission filings. The following discussion should be read in conjunction with the

Company’s audited Consolidated Financial Statements and related Notes thereto

included elsewhere in this report.

ITEM 1. BUSINESS

HISTORY

We were incorporated in the State of Delaware under the name BigVault.com Inc.

on April 13, 2000. On April 18, 2000, we merged with BigVault.com, Inc., a New York

corporation with which we were affiliated. We survived the merger, and on December 19,

2000 changed our name to bigVAULT Storage Technologies, Inc. At that time we were

in the business of providing remote, internet-based storage vaulting services and related

ancillary services to end users and resellers (the “Vault Business”).

On February 28, 2006 we sold all of our assets to Digi-Data Corporation

(“DDC”), an unrelated third party, pursuant to the terms of an Asset Purchase Agreement

dated December 21, 2005 (the “APA”), a copy of which is filed herewith as an exhibit.

As consideration for our transfer of assets under the APA, DDC paid certain of our

liabilities and agreed to make certain quarterly and annual revenue sharing payments to

us, as is further described below. Mr. Salerno and Ms. Luqman accepted employment

with DDC in senior management positions post closing, and continued to work for DDC

until February 2009. As of March 1, 2009 Mr. Salerno and Ms. Luqman returned to their

full time management roles with the Company.

On April 5, 2006, we changed our name to iGambit Inc.

On October 1, 2009, we acquired the assets of Jekyll Island Ventures, Inc., a New

York corporation doing business as Gotham Photo Company (“Jekyll”) through our

wholly owned subsidiary Gotham Innovation Lab, Inc., a New York corporation

(“Gotham”).

On November 4, 2015, we consummated the acquisition of Wala, Inc. doing

business as ArcMail Technology (ArcMail) in accordance with a Stock Purchase

Agreement (the “ArcMail Purchase Agreement”) by and among Wala, Inc. doing

business as ArcMail Technologies (“ArcMail”), Rory T. Welch (the “Seller”) and the

Company. Pursuant to the Stock Purchase, the total consideration to be paid for the outstanding

capital stock of ArcMail is 11,500,000 shares of the Company’s Common stock. 10,500,000

shares of iGambit’s Common stock to the Seller, and/or Seller’s designees at Closing and

the Holdback Amount of 1,000,000 shares of the iGambit’s Common stock to be held in

Escrow and paid to the Seller on later of (i) the first (1^st) anniversary of completion of the

first audit of Purchaser after the Closing, or (ii) that date which is twelve (12) months

from the Closing, provided that in the event iGambit or the Purchaser has any claims for

indemnification against the Seller under the Purchase Agreement, Purchaser shall

continue to withhold the portion of the Holdback Amount subject to such claims until the

parties fully and finally resolve such claims.

The ArcMail Purchase Agreement was disclosed on the Company’s current report

on Form 8-K filed on November 10, 2015.

On November 5, 2015, through our wholly owned subsidiary Gotham Innovation

Lab, Inc. (“Gotham”), we completed the sale of certain assets of Gotham to VHT Inc.

(“VHT”) in accordance with an Asset Purchase Agreement (the “VHT Purchase

Agreement”) by and between Gotham and VHT. Pursuant to the Purchase Agreement

the Company received $600,000 in consideration, $400,000 of the consideration was

received at closing and the remaining $200,000 portion of the consideration is subject to

twelve (12) equal monthly payments beginning January 2016. The sale included certain

of the assets of the Gotham, including the Elliman customer agreement, all customer

accounts, all vendor agreements and all the intellectual property.

The VHT Purchase Agreement was disclosed on the Company’s current report on

Form 8-K filed on November 11, 2015.

On February 14, 2017, we consummated the acquisition of HubCentrix, Inc.

(HubCentrix) in accordance with a Stock Exchange Agreement (the “Exchange

Agreement”) by and among HubCentrix, Jerry Robinson, Mary-Jo Robinson, Kathleen

Shepherd, Edwin Shepherd, Nora Minor,,and Sandra Gacio (the “Hub Shareholders”) and

the Company. Pursuant to the Exchange Agreement, the total consideration to be paid for

the outstanding capital stock of HubCentrix is 15,000,000 shares of the Company’s

Common stock. 13,500,00 shares of iGambit’s Common stock to the Hub Shareholders at

Closing and the Holdback Amount of 1,500,000 shares of the iGambit’s Common stock

to be held restricted and paid to the Seller on later of (i) the first (1^st) anniversary of

completion of the first audit of Purchaser after the Closing, or (ii) that date which is

twelve (12) months from the Closing, provided that in the event the Company has any

claims for indemnification against the HubCentrix under the Exchange Agreement, the

Company shall continue to withhold the portion of the Holdback Amount subject to such

claims until the parties fully and finally resolve such claims.

The HubCentrix Exchange Agreement was disclosed on the Company’s current

report on Form 8-K filed on February 15, 2017.

On March 27, 2017 we changed the name of HubCentrix, Inc. to HealthDatix, Inc.

On April 5, 2017, the Company, through its wholly owned subsidiary

HealthDatix, Inc. (“HealthDatix”) consummated the acquisition of certain assets of the

CyberCare Health Network Division from EncounterCare Solutions Inc. (ECSL) in

accordance with an Asset Purchase Agreement (the “Agreement”) by and among,

HealthDatix, ECSL and the Company. Pursuant to the Agreement, ECSL will sell,

convey, transfer and assign to HealthDatix certain assets (the “Assets”), and HealthDatix

will purchase and accept from the ECSL all right, title and interest in and to the Assets in

exchange for sixty million 60,000,000 shares of restricted common stock of iGambit.

The ECSL Agreement was disclosed on the Company’s current report on Form 8-

K filed on April 6, 2017.

OUR COMPANY

Introduction

Previously we were a company focused on the technology markets. We have

tailored our strategy to focus on pursuing specific medical technology strategies and

objectives.

Presently we have one operating subsidiary, Wala, Inc. doing business as ArcMail

Technology (ArcMail) which was purchased on November 4, 2015. ArcMail is in the

business of providing simple, secure and cost-effective email and enterprise archiving

and management solutions to businesses of all sizes across a wide range of vertical

markets. On March 7, 2017 we entered into a Letter of Intent (LOI) to sell substantially

all the assets of ArcMail. The LOI has certain binding and non-binding obligations,

including the acquisition consideration which is subject to adjustment and the transaction

is subject to various conditions to closing, including satisfactory completion of due

diligence, approval of the Company’s shareholders, if required, and definitive

documentation. There can be no assurance that the transactions contemplated by the LOI

will be consummated.

As a result of the entry into the LOI, the generally accepted

accounting principles require us to present the ArcMail financial information as

discontinued operations. See financial disclosures below.

Our primary focus is the expansion of our newly acquired medical technology

business HealthDatix Inc.

HealthDatix

Products and Services

HealthDatix is an end to end Software-as-a-Service solution that manages,

reports, and analyzes critical data, enabling healthcare organizations to deliver positive

patient outcomes. We offer a fully-hosted cloud service for healthcare providers to

conduct the Medicare Annual Wellness Visit (AWV) program to their Medicare patients

providing the patient with a 5-10 year Personalized Preventive Plan and physician reports

that meet all Medicare audit requirements. The AWV is a program that allows a

physician to identify those patients that have 2+ chronic conditions that require additional

screening and management.

Competitive Comparison

HealthDatix AWV solution is built on a simple and flexible design that gives

customers ownership and control over their data and offers a single comprehensive

solution for Medicare compliance and data retention. HealthDatix primary competitors

include AWV360 and AWVTotal Solutions. Their primary focus is on just the primary

care physicians and not operating through a downstream channel program

HealthDatix competes effectively against its primary competitors by providing a

simple and scalable application and world-class customer support. HealthDatix’s primary

competitive differentiation includes:

§ Simple User Interface

§ Efficient Reporting

Proprietary algorithm to generate Medicare required patient and practice

reporting

§ HIPAA complaint

§ Fully automated and easy user data capture

§ Channel Program

§ First Class Customer Service

Support is provided at our U.S. headquarters by an experienced technical

team

Future Products and Services

HeathDatix’s product strategy is to provide additional products that will support

the patients that have been identified through the program to require additional chronic

care management with a medical wearable that will allow ease of use for the patient and

effective tracking and management by the physician through our developed chronic care

management solution.

Customers

HealthDatix operates by bringing on Channel Partners to sell the service to

primary care Physicians, ACOs and Managed Care Practices. We currently have 5

Channel Partners with extensive sales arms through established healthcare technology

companies.

Expansion Summary

HealthDatix objective is to be a market leader in providing a world class AWV

software application as well as expand our offering to current and new channel partners

with our new chronic care management and medical wearable technology acquired

pursuant to the recent ECSL transaction.

Employees

We presently have 7 total employees all of which are full-time for operations and

11 full time employees from discontinued operations.

OUR CORPORATE INFORMATION

Our principal offices are located at 1050 W. Jericho Turnpike, Suite A,

Smithtown, New York, 11787. Our telephone number is (631) 670-6777 and our fax

number is (631) 670-6780. We currently operate two corporate websites that can be

found at www.igambit.com, and www.healthdatix.com (the information on the foregoing

websites does not form a part of this report).

ITEM 1A. RISK FACTORS

Not Required.

ITEM 1B.

UNRESOLVED STAFF COMMENTS

None.

ITEM 2. PROPERTIES

Our corporate executive office is located in Smithtown, New York, where we

lease approximately 1000 square feet of office space. Monthly lease payments are

approximately $1,660. The lease is for a term of two (2) years commencing on March 1,

2017 and ending on February 28, 2019. The lease contains annual escalations of 2% of

the annual rent.

Our HealthDatix operations are located in St. Petersbug, Florida where we lease

where office suites with furniture and equipment in the TecGarage shared coworking

incubator office building. Monthly lease payments are $695 paid on a month to month

basis.

Our ArcMail discontinued operations are located in Shreveport, Louisiana, where

we lease approximately 2,989 rentable square feet to be used as office space and 178

rentable square feet to be used as storage space, for a total of 3,167 rentable square feet.

space. The lease is for a term of forty five (35) months beginning February 1, 2015 and

ending October 31, 2018 payable monthly in the following manner:

02-01-15 through 04-30-15

$ 0.00/mth.

05-01-15 through 04-30-16

$ 3,404.19/mth. ($13.25/s.f/yr.-office; $7.00/s.f.Iyr.-storage)

05-01-16 through 04-30-17

$ 3,528.73/mth. ($13.75/s.f/yr.--office; $7.00/s.f./yr.-storage)

05-01-17 through 10-31-18

$ 3,653.27/mth. ($14.25/s.f/yr.--office; $7.00/s.f./yr.-storage)

Our leased properties are suitable for their respective uses and are, in general,

adequate for our present needs. Our properties are subject to various federal, state, and

local statutes and ordinances regulating their operations. Management does not believe

that compliance with such statutes and ordinances will materially affect our business,

financial condition, or results of operations.

ITEM 3. 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

December 31, 2017.

ITEM 4. (REMOVED AND RESERVED)

PART II

ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED

STOCKHOLDER MATTERS, AND ISSUER PURCHASES OF EQUITY

SECURITIES

MARKET INFORMATION

Effective March 19, 2011 the Company’s common stock is quoted on the Over

the Counter Bulletin Board, a service maintained by the Financial Industry Regulatory

Authority, under the ticker symbol “IGMB”.

HOLDERS

As of April 17, 2017, there are 116,868,990 shares of our common stock

outstanding, held of record by approximately 181 persons. There are 27,867,133 shares

held in reserve. We have 400,000 common stock warrants outstanding and 1,034,900

common stock options outstanding.

As of April 17, 2016, approximately 39,683,990 shares of our common stock are

eligible to be sold under Rule 144.

DIVIDENDS

We have never declared or paid any dividends on our common stock. Any

determination to pay dividends in the future will be at the discretion of our Board of

Directors and will be dependent upon our results of operations, financial condition,

capital requirements, contractual restrictions and other factors deemed relevant by the

Board of Directors. The Board of Directors is not expected to declare dividends or make

any other distributions in the foreseeable future, but instead intends to retain earnings, if

any, for use in business operations.

EQUITY COMPENSATION PLAN INFORMATION

We currently do not have an equity compensation plan. In 2006, we adopted the

2006 Long-Term Incentive Plan (the "2006 Plan"). The Plan expired on December 31,

2009. 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.

In addition to the 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.

RECENT SALES OF UNREGISTERED SECURITIES

During 2016 we sold securities in transactions not registered under the Securities

Act of 1933, as amended (the “Securities Act”).

ITEM 6. SELECTED FINANCIAL DATA

Not Required

ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL

CONDITION AND RESULTS OF OPERATIONS

CRITICAL ACCOUNTING POLICIES

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.

Principles of Consolidation

The consolidated financial statements include the accounts of the Company and

its wholly-owned subsidiaries Wala, Inc. and Gotham Innovation Lab, Inc. All

intercompany accounts and transactions have been eliminated.

Use of Estimates in the Preparation of Financial Statements

The preparation of financial statements in conformity with generally accepted

accounting principles requires management to make estimates and assumptions that affect

the reported amounts of assets and liabilities and disclosure of contingent assets and

liabilities at the date of the consolidated financial statements and the reported amounts of

revenues and expenses during the period. Actual results could differ from those estimates.

Long-Lived Assets

We assess the valuation of components of its property and equipment and other

long-lived assets whenever events or circumstances dictate that the carrying value might

not be recoverable. We base our evaluation on indicators such as the nature of the assets,

the future economic benefit of the assets, any historical or future profitability

measurements and other external market conditions or factors that may be present. If such

factors indicate that the carrying amount of an asset or asset group may not be

recoverable, we determine whether an impairment has occurred by analyzing an estimate

of undiscounted future cash flows at the lowest level for which identifiable cash flows

exist. If the estimate of undiscounted cash flows during the estimated useful life of the

asset is less than the carrying value of the asset, we recognize a loss for the difference

between the carrying value of the asset and its estimated fair value, generally measured

by the present value of the estimated cash flows.

Revenue Recognition

We recognize revenue from product sales when the following four revenue

recognition criteria are met: persuasive evidence of an arrangement exists, an equipment

order has been placed with the vendor, the selling price is fixed or determinable, and

collectability is reasonably assured. Revenues from maintenance contracts covering

multiple future periods are recognized during the current periods and deferred revenue is

recorded for future periods and classified as current or noncurrent, depending on the

terms of the contracts.

Deferred Revenue

Deposits from customers are not recognized as revenues, but as liabilities, until

the following conditions are met: revenues are realized when cash or claims to cash

(receivable) are received in exchange for goods or services or when assets received in

such exchange are readily convertible to cash or claim to cash or when such

goods/services are transferred. When such income item is earned, the related revenue

item is recognized, and the deferred revenue is reduced. To the extent revenues are

generated from our support and maintenance services, we recognize such revenues when

services are completed and billed. We have received deposits from various customers that

have been recorded as deferred revenue in the amount of $1,092,388 and $1,190,270 as

of the years ended December 31, 2016 and 2015, respectively.

Accounts Receivable

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 $8,345 at December 31, 2016 and 2015,

respectively. Bad debt expense of $0 and $5,971 was charged to operations for the years

ended December 31, 2016 and 2015, respectively.

Goodwill and Intangible Assets

Goodwill represents the excess of liabilities assumed over assets acquired of

ArcMail and the fair market value of the common shares we issued for the acquisition of

ArcMail. 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 ArcMail’s operations may cause impairment. During the

year ended December 31, 2016, goodwill was reallocated to intangible assets acquired as

follows:

Workforce

138,783

Non-compete

145,315

Customer relations

3,357,756

3,641,854

Goodwill

3,063,303

$ 6,705,157

In connection with management’s decision to sell Arcmail, we recorded an

impairment charge to discontinued operations of $6,263,320, and amortization of

$441,837 was charged to discontinued operations during the year ended December 31,

2016.

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 pricing model to estimate the

fair value of our 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 assumptions can materially

affect the fair value estimate of the Company’s stock options and warrants.

Options

In 2006, we 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 December 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.

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.

Convertible Debenture

During the year ended December 31, 2016, we issued convertible debentures to

two individuals. The debentures are convertible into 50,000 shares of common stock for

up to 5 years, at the holders’ option, at an exercise price of $.50 and $.25, respectively.

The debentures mature on the earlier of the closing of a subsequent financing event by

the Company resulting in gross proceeds of at least $10,000,000 or three years from the

date of issuance. The debentures bear interest at a rate of 10% and is deferred until 2017.

A beneficial conversion feature was not recorded as the fair market value of the

Company’s common stock was less than the exercise prices at the dates of issuance and

through the end of the year.

Income Taxes

We follow Accounting Standards Codification subtopic 740, Income Taxes (“ASC

740”) which requires the recognition of deferred tax liabilities and assets for the expected

future tax consequences of events that have been included in the financial statements or

tax returns. Under such method, deferred tax assets and liabilities are recognized for the

future tax consequences attributable to differences between the financial statement

carrying amounts of existing assets and liabilities and their respective tax bases using

enacted tax rates in effect for the year 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.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL

CONDITION AND RESULTS OF OPERATIONS

Introduction

iGambit is a company focused on the medical technology markets. Our primary

focus is the expansion of our newly acquired medical technology business HealthDatix

Inc.

Year Ended December 31, 2016 as Compared to Year Ended December 31, 2015

Assets. At December 31, 2016, we had $507,932 in current assets and $510,835

in total assets, compared to $7,634,620 in current assets and $7,637,996 in total assets as

of December 31, 2015. The decrease in total assets was primarily due to a decrease in

assets from discontinued operations as a result of impairment of goodwill and intangible

assets.

Liabilities. At December 31, 2016, we had total liabilities of $6,380,260

compared to $6,076,680 at December 31, 2015. Our total liabilities at December 31, 2016

consisted of current liabilities including accounts payable and accrued expenses of

$356,005, amounts due to related parties of $508, convertible debentures of $50,000 and

labilities from discontinued operations of $5,905,666, whereas our total liabilities at

December 31, 2015 consisted of current liabilities including accounts payable of

$168,971, amounts due to related parties of $2,043, and liabilities from discontinued

operations of $5,905,666. We had no long term liabilities for the year ended December

31, 2016. The increase in liabilities was primarily due to an increase in accounts payable

and accrued interest

Stockholders’ Equity (Deficiency). Our Stockholders’ Deficiency was

$(5,869,425) at December 31, 2016 compared to Stockholders’ Equity of $1,561,316 at

December 31, 2015 This decrease was due to an increase in accumulated deficit from

$(2,798,390) at December 31, 2015 to $(10,230,631) at December 31, 2016 resulting

from net loss from continuing operations of $(451,060) and a net loss from discontinued

operations of $(6,981,181) primarily due to impairment of goodwill and intangible assets.

Net Income (Loss). We had a loss from continuing operations of $(451,060) and

$(536,130) for the years ended December 31, 2016 and December 31, 2015, respectively,

and a loss from discontinued operations of $(6,981,181) compared to income from

discontinued operations of $619,939 for the year ended December 31, 2016 and

December 31, 2015, respectively.

General and Administrative Expenses. General and Administrative Expenses

decreased to $448,595 for the year ended December 31, 2016 from $532,988 for the year

ended December 31, 2015. For the year ended December 31, 2016 our General and

Administrative Expenses consisted of corporate administrative expenses of $90,617, legal

and accounting fees of $115,660, payroll expenses of $91,155, Directors and Officers

Insurance of $10,053 employee benefits expenses of $24,217 (medical and life insurance)

filing fees of $11,779, financing expense of $10,000, and $95,114 in marketing and

finder’s fees. For the year ended December 31, 2015 our General and Administrative

Expenses consisted of corporate administrative expenses of $98,085, legal and

accounting fees of $124,555, payroll expenses of $111,838, Directors and Officers

Insurance of $42,206, employee benefits expenses of $20,790 (medical and life

insurance), filing fees of $12,489, and $123,025 in in marketing and finder’s fees.

Therefore the decreases from the year ended December 31, 2015 to the year ended

December 31, 2016 relate primarily to a decrease in payroll, legal and professional fees

and in marketing and finder’s fees. In 2017 we anticipate an increase in General

Administrative Expenses associated with the HealthDatix acquisition.

LIQUIDITY AND CAPITAL RESOURCES

General

As reflected in the accompanying consolidated financial statements, at December

31, 2016, we had $10,522 of cash and stockholders’ deficiiency of $(5,869,425). At

December 31, 2015, we had $122,291 of cash and stockholders’ equity of $1,561,316.

Our primary capital requirements in 2017 are likely to arise from the expansion of

our HealthDatix operations, It is not possible to quantify those costs at this point in time,

in that they depend on HealthDatix’s business opportunities and the state of the overall

economy. We anticipate raising capital in the private markets to cover any such costs,

though there can be no guaranty we will be able to do so on terms we deem to be

acceptable. We do not have any plans at this point in time to obtain a line of credit or

other loan facility from a commercial bank.

While we believe in the viability of our strategy to improve HealthDatix’s sales

volume, and in our ability to raise additional funds, there can be no assurances that we

will be able to fully effectuate our business plan.

We believe we will continue to increase our cash position and liquidity for the

foreseeable future. We believe we have enough capital to fund our present operations.

Cash Flow Activity

Net cash used in operating activities was $274,223, for the year ended December

31, 2016, compared to net cash provided by operating activities of $44,907 for the year

ended December 31, 2015. Net cash used in continuing operating activities was

$142,092 for the year ended December 31, 2016, compared to $313,932 for the year

ended December 31, 2015. Our primary use of operating cash flows from continuing

operating activities was from net losses of $451,060 and $536,130 for the years ended

December 31, 2016 and 2015, respectively. Additional contributing factors to the change

were from a decrease in prepaid expenses of $119,961, and an increase in accounts

payable and accrued expenses of $187,034. Net cash used in discontinued operating

activities was $132,131 for the year ended December 31, 2016 and net cash provided by

discontinued operations was $358,839 for the year ended December 31, 2015. Cash used

in discontinued operations for the year ended December 31, 2016 consisted of $1,990,490

in revenue from our ArcMail subsidiary and $180,849 in cash payments received from

VHT Inc. pursuant to the VHT Purchase Agreement. Cash provided by discontinued

operations for the year ended December 31, 2015 consisted of $495,930 in cash payments

received from VHT Inc. pursuant to the VHT Purchase Agreement.

Cash used in investing activities was $9,990 for the year ended December 31, 2016

and cash provided by investing activities was $1,828 for the year ended December 31,

2015. For the year ended December 31, 2016 the primary source of cash from investing

activities was from an increase in note receivable of $15,000. For the year ended

December 31, 2015 the primary source of cash from investing activities was from a

decrease in deposits of $10,413.

Cash provided by financing activities was $172,444 for the year ended December

31, 2016 compared to cash used in financing activities of $(51,277) for the year ended

December 31, 2015. The cash flows provided by financing activities for the year ended

December 31, 2016 was primarily from proceeds from convertible debentures. The cash

flows used in financing activities for the year ended December 31, 2015 was primarily

from repayment of stockholders loans and a note payable from discontinued operations..

Plan of Operation and Funding

We expect that working capital requirements will continue to be funded through a

combination of our existing funds and further issuances of securities. Our working capital

requirements are expected to increase in line with the growth of our business. Existing

working capital, further advances and debt instruments, and anticipated cash flow are

expected to be adequate to fund our operations over the next twelve months. We have no

lines of credit or other bank financing arrangements. Generally, we have financed

operations to date through the proceeds of the private placement of equity and debt

instruments. In connection with our business plan, management anticipates additional

increases in operating expenses and capital expenditures relating to: (i) developmental

expenses associated with a start-up business and (ii) marketing expenses. We intend to

finance these expenses with further issuances of securities, and debt issuances.

Thereafter, we expect we will need to raise additional capital and generate revenues to

meet long-term operating requirements. Additional issuances of equity or convertible

debt securities will result in dilution to our current shareholders. Further, such securities

might have rights, preferences or privileges senior to our common stock. Additional

financing may not be available upon acceptable terms, or at all. If adequate funds are not

available or are not available on acceptable terms, we may not be able to take advantage

of prospective new business endeavors or opportunities, which could significantly and

materially restrict our business operations.

OFF BALANCE SHEET ARRANGEMENTS

We have no off balance-sheet arrangements.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT

MARKET RISK

Not Required.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

The Financial Statements required by this Item 8 are included in this Report beginning

on page F-1, as follows:

Report of Independent Registered Public Accounting Firm

F-1

Consolidated Balance Sheet as of December 31, 2016 and 2015

F-2

Consolidated Statement of Income for the years ended December 31, 2016 and

F-3

2015

Consolidated Statement of Changes in Stockholder’s Equity for the years ended

F-4

December 31, 2016 and 2015

Consolidated Statement of Cash Flows for the years ended December 31, 2016

F-5

and 2015

Notes to Financial Statements

F-7

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON

ACCOUNTING AND FINANCIAL DISCLOSURE

None.

ITEM 9A. CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

Our management, with the participation of our chief executive officer and chief

financial officer, evaluated the effectiveness of our disclosure controls and procedures

pursuant to Rule 13a-15 under the Exchange Act, as of the end of the period covered by

this Annual Report on Form 10-K.

Based on this evaluation, our chief executive officer and chief financial officer

concluded that, as of December 31, 2016, our disclosure controls and procedures are

designed at a reasonable assurance level and are effective to provide reasonable assurance

that information we are required to disclose in reports that we file or submit under the

Exchange Act is recorded, processed, summarized, and reported within the time periods

specified in the SEC’s rules and forms, and that such information is accumulated and

communicated to our management, including our chief executive officer and chief

financial officer, as appropriate, to allow timely decisions regarding required disclosure.

Changes in Internal Control over Financial Reporting

There were no changes in our internal control over financial reporting that

occurred during the quarter ended December 31, 2016 that have materially affected, or

are reasonably likely to materially affect, our internal control over financial reporting.

Management’s Report on Internal Control over Financial Reporting

Our management is responsible for establishing and maintaining adequate internal

control over financial reporting, as defined in Rule 13a-15(f) of the Exchange Act. Our

management conducted an evaluation of the effectiveness of our internal control over

financial reporting based on the framework in Internal Control—Integrated Framework

issued by the Committee of Sponsoring Organizations of the Treadway Commission

(2013 framework). Based on this evaluation, management concluded that our internal

control over financial reporting was effective as of December 31, 2016.

Limitations on Effectiveness of Controls and Procedures

In designing and evaluating the disclosure controls and procedures, management

recognizes that any controls and procedures, no matter how well designed and operated,

can provide only reasonable assurance of achieving the desired control objectives. In

addition, the design of disclosure controls and procedures must reflect the fact that there

are resource constraints and that management is required to apply its judgment in

evaluating the benefits of possible controls and procedures relative to their costs.

ITEM 9B. OTHER INFORMATION

None.

PART III

ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE

GOVERNANCE

DIRECTORS AND EXECUTIVE OFFICERS

Our board of directors manages our business and affairs. Under our Articles of

Incorporation and Bylaws, the Board will consist of not less than one, nor more than

seven directors. Currently, our Board consists of five directors.

The names, ages, positions and dates appointed of our current directors and

executive officers are set forth below.

Name

Age

Position

Appointed

John Salerno

78 Chief Executive Officer, President, March 2009

Chairman of the Board, and

(appointed Chairman

Director

and Director in

April 2000)

Elisa Luqman

52 Chief Financial Officer, Executive March 2009

Vice President, General Counsel,

(appointed Director

and Director

in August 2009)

George G. Dempster

77 Director

January 2001

John Salerno, Chief Executive Officer, President, Chairman of the Board,

and Director. Mr. Salerno is a seasoned hands-on executive with over 40 years of

experience with public and private computer software and service companies.

Mr. Salerno built a multi-million dollar business from a start up, servicing the real estate

industry. The business was sold in 1984 and Mr. Salerno provided consulting services to

a wide range of clients through 1995. In 1996, along with his daughter and a small group

of private accredited investors, he co-founded the Company. Mr. Salerno was President

and CEO of the Company from April 1, 2000 until February 28, 2006. After signing

contracts with Verizon and Cablevision, the Company sold its assets in 2006 to Digi-Data

Corporation. From March 1, 2006 thru February 2009 Mr. Salerno served as President of

the Vault Services Division of Digi-Data Corporation. Upon the expiration of his 3 year

contract the Vault Services Division was at a revenue run rate of $12 million annually. As

of March 1, 2009, Mr. Salerno returned to his full time management roll at the Company.

Mr. Salerno is an ex — US Marine Corps, Crypto/ Communications Officer and has a BS

in Mathematics from Fordham University. Mr. Salerno is Elisa Luqman’s father.

Mr. Salerno was nominated as a Director because if his intimate knowledge of the

Company and its history as a founder. Additionally, Mr. Salerno’s mathematical and

technical background as a data center manager early in his professional career and later as

a software developer offers the board hand’s on technical experience in both operations

and software analysis. Mr. Salerno utilized his experience and contacts to secure the

major customers driving the sales that generate the Company’s payment stream from

DDC. Moreover, Mr. Salerno adds value to Gotham through his 40 plus years serving

the New York Real Estate industry. He is thoroughly familiar with the unique workings

of the New York real estate industry and has many contacts within that community that

are a benefit to Gotham.

Elisa Luqman, Chief Financial Officer, Executive Vice President, General

Counsel, and Director. Ms. Luqman is a computer literate attorney with over 18 years

experience with intellectual property and computer software. Prior to co-founding the

Company, Ms. Luqman was president of University Software Corp., a software

development company focused on a wide range of student educational and intellectual

applications. Ms. Luqman was Chief Operating Officer of the Company, from April 1,

2000 until February 28, 2006. From March 1, 2006 through February 28, 2009

Ms. Luqman was employed as Chief Operating Officer of the Vault Services Division of

Digi-Data Corporation, the company that acquired the Company’s assets in 2006, and

subsequently during her tenure with Digi-Data Corporation she became the in-house

general counsel for the entire corporation. In that capacity she was responsible for

acquisitions, mergers, patents, and employee contracts, and worked very closely with

Digi-Data’s outside counsel firms, DLA-Piper, the Law Offices of Sandra T. Carr and the

patent firm of Jordan and Hamburg. As of March 1, 2009, Ms. Luqman rejoined the

Company in her current capacities. Ms. Luqman received a BA degree in Marketing, a JD

in Law, and a MBA Degree in Finance from Hofstra University. Ms. Luqman is a

member of the bar in New York and New Jersey. Ms. Luqman is John Salerno’s

daughter.

Ms. Luqman was nominated as a Director because of her intimate knowledge of

the Company and its history as a founder. Additionally, as an attorney, Ms. Luqman’s

legal background enables her to provide counsel to the Company. Her experience as

general counsel to the Company provides her with a unique insight into the Company’s

contracts with customers and vendors, intellectual property assets and issues, financing

transactions and shareholder transactions. Moreover, having been through the merger

and acquisition process on both sides of the table, Ms. Luqman offers the Company in-

house guidance throughout the acquisition process. That combined with Ms. Luqman’s

MBA in Finance aids in providing the Board with more efficient analysis of input from

outside auditors and legal advisors.

George G. Dempster, Director. Mr. Dempster was Commissioner of Commerce

for the State of New York from 1979 to 1983. He served as the Chairman of the Finance

Committee for Hofstra University for 25 years from 1976 through 2001, and is currently

Chairman Emeritus of the Board of Trustees. Mr. Dempster has been the Chairman of

Tran-Leisure Corp. since 1983, and was its CEO from 1983-2002. Tran -Leisure Corp is

a diversified holding company with interests ranging from helicopter services to

manufacturing. From 1969 to 1973 Mr. Dempster served as the CEO of Cybernetics, a

major computer software developer. Mr. Dempster served as a marketing manager for

IBM from 1961 to 1968. Mr. Dempster has a BA in business administration from Hofstra

University.

Mr. Dempster was nominated as a Director because of his strong administrative,

financial and economic background. Having served as Commissioner of Commerce for

the State of New York for 4 years and on the Board of Hofstra University for over 25

years, Mr. Dempster provides the Company with extensive experience in commerce and

administration in both the private and public sectors. Moreover, during his tenure at

Hofstra University Mr. Dempster was intimately involved in several financing

transactions to maintain the University in a solvent and profitable manner. Additionally,

having been CEO of a diversified holding company, Mr. Dempster is thoroughly familiar

with the merger and acquisition process. He offers years of experience analyzing

business, their models and economics, and identifying the appropriate financing vehicles.

COMMITTEES OF THE BOARD

The Board has established an Audit Committee and a Compensation Committee.

The Board does not currently have a Nominating Committee. The work typically

conducted by a Nominating Committee is conducted by the full Board.

Audit Committee

The Audit Committee consisted of Messrs. Charles, Keefe and Dempster, with

Mr. Charles serving as chairman. On September 14, 2016 Mr. Charles resigned from the

Board, as disclosed on the Company’s current report on Form 8-K filed on September 19,

2016. Our Board is actively seeking a suitable replacement that qualifies as an “audit

committee financial expert” as defined under the federal securities laws. The Audit

Committee is responsible for monitoring and reviewing our financial statements and

internal controls over financial reporting. In addition, they recommend the selection of

the independent auditors and consult with management and our independent auditors

prior to the presentation of financial statements to stockholders and the filing of our

forms 10-Q and 10-K. The Audit Committee has adopted a charter and it is posted on our

web site at www.igambit.com.

Compensation Committee

The Compensation Committee consisted of Messrs. Charles, Keefe and Dempster,

with Mr. Keefe serving as chairman. On September 14, 2016 Mr. Keefe resigned from

the Board, as disclosed on the Company’s current report on Form 8-K filed on September

19, 2016. Our Board is actively seeking a suitable replacement. The Compensation

Committee is responsible for reviewing and recommending to the Board the

compensation and over-all benefits of our executive officers. The Compensation

Committee may, but is not required to, consult with outside compensation consultants.

The Compensation Committee has adopted a charter and the charter is posted on our web

site at www.igambit.com.

COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT.

Based solely upon a review of Forms 3 and 4 and amendments thereto furnished

to the Company under Rule 16a-3(e) under the Exchange Act during its most recent fiscal

year and Forms 5 and amendments thereto furnished to the Company with respect to its

most recent fiscal year, and any written representation to the Company from the reporting

person that no Form 5 is required, no person who, at any time during the fiscal year, was

a director, officer, beneficial owner of more than ten percent of the Company’s Common

Stock, or any other person known to the Company to be subject to section 16 of the

Exchange Act with respect to the Company, failed to file on a timely basis, as disclosed

in the above Forms, reports required by section 16(a) of the Exchange Act during the

most recent fiscal year or prior fiscal years.

CODE OF ETHICS

The Company has adopted a Code of Ethics that applies to its principal executive

officer, principal financial officer, principal accounting officer or controller, or persons

performing similar functions. A copy of the Code of Ethics is attached as an exhibit to

this report. A copy of the Code of Ethics is available on the Company’s website at

www.igambit.com. Any amendments to, or waivers from, the Code of Ethics will be

disclosed on the Company’s website at www.igambit.com.

ITEM 11. EXECUTIVE COMPENSATION

Summary Compensation Table

The following table sets forth the compensation received by our executive

officers, for their service, during the year ended December 31, 2016.

Current

Nonqualified

Officers

Non-equity

Deferred

Name &

Option Incentive Plan Compensation

All Other

Principal

Salary

Bonus Stock Awards Compensation

Earnings

Compensation

Total

Position

Year

($)

John

Salerno

2016

37,846

27,454 (1)

65,300

CEO,

President 2015

46,635

20,790 (2)

67,425

Chairman

2014 131,250

13,206(3)

144,456

Director

Elisa

Luqman

2016

60,459

CFO,

EVP, GC 2015

60,577

and

Director

2014 143,746

36,514(4)

180,260

(1) Includes $3,237 in health insurance premiums and $24,217 in life insurance premiums.

(2) Includes $5,220 in health insurance premiums and $15,670 in life insurance premiums.

(3) Includes $6,264 in health insurance premiums and $6,942 in life insurance premiums.

(4) Includes $36,514 in health and dental insurance premiums.

Employment Arrangements with Named Executive Officers

Effective November 4, 2015, along with the acquisition ArcMail, we entered into an

employment agreement with Rory T. Welch (the Welch Employment Agreement). Under the

five-year agreement, Mr. Welch is entitled to (a) a base salary of $180,000 per year, (b) an annual

bonus of $45,000, and (c) participation in all benefit programs generally made available to

ArcMail employees. The Welch Employment Agreement also contains provisions designed to

protect the confidentiality of the Company’s confidential information and restricting Mr. Welch

from engaging in certain competitive activities for the greater of 60 months from the date of the

agreement or two years following the termination of his employment.

Mr. Welch has diverse management experience in growing international businesses

across multiple industries, Rory Welch is ushering ArcMail into the next phase of the Company’s

lifecycle with emphasis on expanding global sales, marketing and distribution strategies. A senior

executive with more than 20 years of experience in strategy, supply chain, sourcing, distribution,

logistics, marketing and sales management, he has success in expanding profits through both

revenue growth and cost savings.

Prior to joining ArcMail, he managed his own consulting firm, and then before that held

leadership positions at Movado Group, Inc., including COO for the boutique division and Senior

Vice President of wholesale operations. Earlier in his career, Welch served as VP of strategic

planning and analysis at Arrow Electronics, where he was responsible for building performance

models across all aspects of the organization. While at Arrow, Welch also held positions as VP of

product management for Asia-Pacific, with responsibility for overseeing all aspects of product

management for the $1 billion division; as well as general manager of aerospace/military program

accounts; product manager; and asset and logistics manager.

A graduate of Indiana University’s Kelley School of Business with a master’s degree in

business administration, Welch holds a bachelor’s degree in economics from Furman University.

We do not currently have any other employment agreements with our executive officers.

Compensation of the Board of Directors

OUTSTANDING EQUITY AWARDS AT FISCAL YEAR-END

OPTION AWARDS

STOCK AWARDS

Equity

Market Equity

Equity

Incentive

Number Value Incentive Incentive

Plan

Awards:

Shares Shares Awards: Awards:

Number of

or Units

Number Market or

Securities

of Stock Units

Payout

Underlying Underlying

Underlying

That

Unearned Value of

Unexercised Unexercised Unexercised Option

Have

Stock

Shares, Unearned

Options

Unearned Exercise

Option

Not

That

Units or

Shares,

(#)

Options

Price

Expiration

Vested Have

Other

Units or

Exercisable Unexercisable

(#)

($)

Date

(#)

Not

Rights

Other

Name (a)

(b)

(c)

(d)

(e)

(f)

(g)

Vested

That

Rights

($)

Have Not

That

(h)

Vested Have Not

(#)

Vested

(i)

(#)

(j)

James Charles

59,000

$0.03

06/09/2024

James Charles

100,000

$0.03

06/09/2024

George

Dempster

113,000

$0.03

06/09/2024

George

Dempster

100,000

$0.03

06/09/2024

John Keefe

600,000

$0.03

06/09/2024

The following table sets forth the compensation received by our directors, for their

service as directors, during the year ended December 31, 2016.

Nonqualified

Fees

Non-equity

deferred

earned or

Stock

Option

incentive plan

compensation

All other

paid in

awards

compensation

earnings

compensation

Total

Name

cash ($)

($)

John Salerno (1)

Elisa Luqman (1)

George G. Dempster

$4,000

(1) These individuals serve as executive officers of the Company, and do not

receive any compensation for the services they provide as directors of the

Company.

Members of our Board receive $1,000 per quarter for their service to the Company.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS

AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS

The following table sets forth information known to us, as of April 17, 2017,

relating to the beneficial ownership of shares of common stock by: (i) each person who is

known by us to be the beneficial owner of more than 5% of the Company’s outstanding

common stock; (ii) each director; (iii) each executive officer; and (iv) all executive

officers and directors as a group. Under securities laws, a person is considered to be the

beneficial owner of securities owned by him (or certain persons whose ownership is

attributed to him) or securities that can be acquired by him within 60 days, including

upon the exercise of options, warrants or convertible securities. The Company determines

a beneficial owner’s percentage ownership by assuming that options, warrants and

convertible securities that are held by the beneficial owner and which are exercisable

within 60 days, have been exercised or converted. The Company believes that all persons

named in the table have sole voting and investment power with respect to all shares of

common stock shown as being owned by them. Unless otherwise indicated, the address

of each beneficial owner in the table set forth below is care of iGambit Inc., 1050 W.

Jericho Turnpike, New York, 11787. The percentages in the following table are based

upon 25,044,056 shares outstanding as of April 17, 2017.

Amount and Nature

of Beneficial

Name of Beneficial Owner

Ownership

Percent of Class

John Salerno, C.E.O., President, Chairman

of the Board, and Director

5,000,000

Elisa Luqman, C.F.O., Executive Vice

President, General Counsel and Director

5,685,000,(1)

George G. Dempster, Director

605,000(2)

Rory T. Welch, CEO & President ArcMail

10,000,000

HealthDatix Management

11,250,000

Executive Officers and Directors as Group:

32,540,000 (3)

1 Includes 685,000 shares of common stock held by Muhammad Luqman, Ms. Luqman’s husband.

2. Includes options to purchase 213,000 shares of the common stock at $0.03 per share.

3. Includes the disclosures in footnotes 1 through 4 above.

ITEM 13. CERTAIN RELATIONSHIPS, RELATED TRANSACTIONS AND

DIRECTOR INDEPENDENCE

RELATED PARTY TRANSACTIONS

None.

BOARD INDEPENDENCE

The Company has elected to use the independence standards of the NYSE AMEX

Equities Exchange in its determination of whether the members of its Board are

independent. Based on the foregoing, the Company has concluded that Mr. Dempster is

independent. The Board has established an Audit Committee and a Compensation

Committee. The Board does not currently have a Nominating Committee. The work

typically conducted by a Nominating Committee is conducted by the full Board.

ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES

The following table shows what Paritz and Company P.A. and Michael F.

Albanese, CPA billed for the audit and other services for the year ended December 31,

2016 and December 31, 2015 respectively.

Year Ended Year Ended

12/31/ 2016 12/31/2015

Audit Fees

47,500 $

38,500

Audit-Related Fees

---

All Tax Fees

---

—

Other Fees

---

—

Total

47,500 $

38,500

Audit Fees — This category includes the audit of the Company’s annual financial

statements, review of financial statements included in the Company’s Form 10-Q

Quarterly Reports and services that are normally provided by the independent auditors in

connection with engagements for those years.

Audit-Related Fees — This category includes assurance and related services by

the independent auditor that are reasonably related to the performance of the audit or

review of the Company’s financial statements and that are not reported under the caption

“Audit Fees.”

Tax Fees — This category includes services rendered by the independent auditor

for tax compliance, tax advice, and tax planning.

All Other Fees — This category includes products and services provided by the

independent auditor other than the services reported under the captions “Audit Fees,”

“Audit-Related Fees,” and “Tax Fees.”

Overview — The Company’s Audit Committee, reviews, and in its sole

discretion pre-approves, our independent auditors’ annual engagement letter including

proposed fees and all audit and non-audit services provided by the independent auditors.

Accordingly, all services described under “Audit Fees,” “Audit-Related Fees,” “Tax

Fees,” and “All Other Fees” were pre-approved by our Company’s Audit Committee. The

Audit Committee may not engage the independent auditors to perform the non-audit

services proscribed by law or regulation. The Company’s Audit Committee may delegate

pre-approval authority to a member of the Board of Directors, and authority delegated in

such manner must be reported at the next scheduled meeting of the Board of Directors.

PART IV

ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

(a) Financial Statements

Report of Independent Registered Public Accounting Firm

F-1

Consolidated Balance Sheet as of December 31, 2016 and 2015

F-2

Consolidated Statement of Income for the years ended December 31, 2016 and

F-3

2015

Consolidated Statement of Changes in Stockholder’s Equity for the years

F-4

ended December 31, 2016 and 2015

Consolidated Statement of Cash Flows for the years ended December 31, 2016

F-5

and 2015

Notes to Financial Statements

F-7

(b) Exhibits

Exhibit No. Description

3.1(i) Certificate of Incorporation, filed with the Delaware Secretary of State on

April 13, 2000 (1)

3.1(ii)

Certificate of Merger, filed with the Delaware Secretary of State on April 18,

2000 (1)

3.1(iii)

Certificate of Amendment Changing Name, filed with the Delaware

Secretary of State on December 19, 2000 (1)

3.1(iv)

Certificate of Merger filed with the Delaware Secretary of State on

February 17, 2006 (1)

3.1(v)

Certificate of Amendment Changing Name filed with the Delaware Secretary

of State on April 5, 2006 (1)

3.1(vi)

Certificate of Amendment Increasing Authorized Common Stock to 75

Million Shares, filed with the Delaware Secretary of State on December 2,

2009 (1)

3.1(vii)

Certificate of Amendment Increasing Authorized Common Stock to300

Million shares of Common Stock and to create a new class of stock entitled

“Preferred Stock, filed with the Delaware Secretary of State on November

24, 2014.

3.2

Bylaws (1)

4.1

Form of Stock Certificate (2)

4.2

Common Stock Purchase Warrant issued to Roetzel & Andress (3)

10.1

iGambit Inc. 2006 Long Term Incentive Plan, Amended 12/31/2006 (1)

10.2

Employment Agreement between Digi-Data Corporation and Mr. Salerno (2)

10.3

Employment Agreement between Digi-Data Corporation and Mrs. Luqman

(2)

Code of Ethics (5)

Subsidiaries (1)

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 incorporated by reference into any other filing

under the Security Act of 1933, as amended, or by the Security Exchange Act

of 1934, as amended.)

32.2

Certification of the 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 incorporated by reference into any other filing

under the Security Act of 1933, as amended, or by the Security Exchange Act

of 1934, as amended.)

(1) Incorporated by reference to Form 10 filed on December 31, 2009.

(2) Incorporated by reference to Amendment No. 1 to Form 10 filed on June 11, 2010.

(3) Filed with initial Form 10-K on June 15, 2010.

(4) We hereby agree to furnish the SEC with any omitted schedule or exhibit upon request.

(5) Filed with Form 10-K/A (Amendment No. 1) on September 13, 2010.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the

registrant has duly caused this Annual Report on Form 10-K to be signed on its behalf by

the undersigned, thereunto duly authorized, in the City of Hauppauge, New York, on

April 17, 2017.

iGambit Inc.

April 17, 2017

By: /s/ John Salerno

John Salerno, Chief Executive

Officer

Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, this

Annual Report on Form 10-K has been signed by the following persons in the capacities

indicated:

Signature

Title

Date

/s/ John Salerno

Chief Executive Officer and

Director

April 17, 2017

John Salerno

/s/ Elisa Luqman

Chief Financial Officer, Executive

April 17, 2017

Vice President, General Counsel,

Elisa Luqman

Principal Accounting Officer and

Director

15 Warren Street, Suite 25

^{Hackensack, New Jersey}⁰⁷⁶⁰¹

(201) 342-7753

aritz

^{Fax: (201) 342-7598}

& Company, P.A

E-Mail: PARITZ@paritz.com

Certified Public Accountants

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Stockholders’

iGambit, Inc.

We have audited the accompanying consolidated balance sheets of iGambit, Inc. as of December 31, 2016

and 2015 and the related consolidated statements of operations, changes in stockholders’ equity

(deficiency) and cash flows for the years ended December 31, 2016 and 2015. These financial statements

are the responsibility of the Company's management. Our responsibility is to express an opinion on these

financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight

Board (United States). Those standards require that we plan and perform the audits to obtain reasonable

assurance about whether the financial statements are free of material misstatement. The Company is not

required to have, nor were we engaged to perform, an audit of its internal control over financial reporting.

Our audit included consideration of internal control over financial reporting as a basis for designing audit

procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on

the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no

such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and

disclosures in the financial statements, assessing the accounting principles used and significant estimates

made by management, as well as evaluating the overall financial statement presentation. We believe that

our audit provides a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material

respects, the financial position of iGambit, Inc.as of December 31, 2016 and 2015, and the results of its

operations and cash flows for the years ended December 31, 2016 and 2015 in conformity with accounting

principles generally accepted in the United States of America.

The accompanying consolidated financial statements have been prepared on a going concern basis, which

contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. As

discussed in Note 4, the Company is in the process of disposing of its operating subsidiary and has a

stockholders' deficiency of $5,869,425 at December 31, 2016. These factors, among others, raise substantial

doubt about the ability of the Company to continue as a going concern. Management plans are also

discussed in Note 4.The financial statements do not include any adjustments that might result from the

outcome of this uncertainty.

/S/Paritz & Company, P.A.

Hackensack, New Jersey

April 17, 2017

F-1

IGAMBIT INC.

CONSOLIDATED BALANCE SHEETS

DECEMBER 31,

2016

2015

ASSETS

Current assets

Cash

10,522

122,291

Prepaid expenses and other current assets

108,941

228,902

Note receivable

15,000

Assets from discontinued operations, net

373,469

7,283,427

Total current assets

507,932

7,634,620

Property and equipment, net

1,183

1,656

Other assets

Deposits

1,720

510,835

7,637,996

LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIENCY)

Current liabilities

Accounts payable and accrued expenses

356,005

168,971

Amounts due to related parties

508

2,043

Convertible debentures

50,000

Liabilities from discontinued operations

5,973,747

5,905,666

Total current liabilities

6,380,260

6,076,680

Stockholders' equity (deficiency)

Preferred stock, $.001 par value; authorized - 100,000,000 shares;

issued and outstanding - 0 shares in 2016 and 2015, respectively

Common stock, $.001 par value; authorized - 200,000,000 shares;

issued and outstanding - 39,708,990 shares in 2016 and

39,683,990 shares in 2015, respectively

39,709

39,684

Additional paid-in capital

4,321,497

4,320,022

Accumulated deficit

(10,230,631)

(2,798,390)

Total stockholders' equity (deficiency)

(5,869,425)

1,561,316

510,835

7,637,996

See accompanying notes to the consolidated financial statements.

F-2

IGAMBIT INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

YEARS ENDED DECEMBER 31,

2016

2015

Sales

-- $

Cost of sales

Gross profit

Operating expenses

General and administrative expenses

448,595

532,988

Operating loss from continuing operations

(448,595)

(532,988)

Other income (expenses)

Interest expense

(2,579)

(3,146)

Interest income

114

Total other income (expenses)

(2,465)

(3,142)

Loss from continuing operations

(451,060)

(536,130)

Income (loss) from discontinued operations

(6,981,181)

619,939

Net income (loss)

$ (7,432,241) $

83,809

Basic and fully diluted earnings (loss) per common share:

Continuing operations

(.01) $

(.02)

Discontinued operations

(.18) $

.02

Net income (loss) per common share

(.19) $

.00

Weighted average common shares outstanding - basic and fully diluted

39,687,747 29,168,374

See accompanying notes to the consolidated financial statements.

F-3

IGAMBIT INC.

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIENCY)

YEARS ENDED DECEMBER 31, 2016 AND 2015

Additional

Common stock

Paid-in

Accumulated

Amount

Capital

Deficit

Totals

Balances, December 31, 2014

26,583,990 $ 26,584 $ 2,851,124 $ (2,882,199) $

(4,491)

Compensation for vested stock options

11,998

Common stock issued for services

1,600,000

1,600

318,400

320,000

Common stock issued in business acquisition

11,500,000

11,500

1,138,500

1,150,000

Net income

83,809

Balances, December 31, 2015

39,683,990

39,684

4,320,022

(2,798,390)

1,561,316

Common stock issued for services

25,000

1,475

1,500

Net loss

(7,432,241) (7,432,241)

Balances, December 31, 2016

39,708,990 $ 39,709 $ 4,321,497 $ (10,230,631) $ (5,869,425)

See accompanying notes to the consolidated financial statements.

F-4

IGAMBIT INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

YEARS ENDED DECEMBER 31,

2016

2015

CASH FLOWS FROM OPERATING ACTIVITIES:

Net income (loss)

$ (7,432,241) $ 83,809

(Income) loss from discontinued operations

6,981,181 (619,939)

Net earnings from continuing operations

(451,060) (536,130)

Adjustments to reconcile net income (loss) to net

cash provided by (used in) operating activities

Sale of discontinued property and equipment

6,118

Depreciation

473

662

Stock-based compensation expense

1,500

331,998

Increase (Decrease) in cash flows as a result of

changes in asset and liability account balances:

Prepaid expenses and other current assets

119,961 (194,374)

Accounts payable and accrued expenses

187,034

77,794

Net cash used in continuing operating activities

(142,092) (313,932)

Net cash provided by (used in) discontinued operating activities

(132,131)

358,839

NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES (274,223)

44,907

CASH FLOWS FROM INVESTING ACTIVITIES:

Issuance of note receivable

(15,000)

Decrease in deposits

10,413

Net cash provided by (used in) continuing investing activities

(15,000)

10,413

Net cash provided by (used in) discontinued investing activities

5,010

(8,585)

NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES

(9,990)

1,828

CASH FLOWS FROM FINANCING ACTIVITIES:

Proceeds from stockholders' loans

2,043

Repayments of stockholders' loans

(1,535)

Proceeds from convertible debentures

50,000

Net cash provided by continuing financing activities

48,465

2,043

Net cash provided by (used in) discontinued financing activities

123,979 (53,320)

F-5

NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES

172,444 (51,277)

NET DECREASE IN CASH

(111,769)

(4,542)

CASH - BEGINNING OF YEAR

122,291

126,833

CASH - END OF YEAR

10,522 $ 122,291

SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:

Cash paid during the year for:

Interest

2,579 $

3,146

Non-cash investing and financing activities:

Common stock issued in business acquisition

-- $ 1,150,000

See accompanying notes to the consolidated financial statements.

F-6

IGAMBIT INC.

Notes to Consolidated Financial Statements

Years Ended December 31, 2016 and 2015

Note 1 - Organization and Basis of Presentation

The consolidated financial statements presented are those of iGambit Inc., (the

“Company”) and its wholly-owned subsidiaries, Wala, Inc. doing business as Arcmail

Technology (“ArcMail”) and Gotham Innovation Lab Inc. (“Gotham”). The Company

was incorporated under the laws of the State of Delaware on April 13, 2000. The

Company was originally incorporated as Compusations Inc. under the laws of the State of

New York on October 2, 1996. The Company changed its name to BigVault.com Inc.

upon changing its state of domicile on April 13, 2000. The Company changed its name

again to bigVault Storage Technologies Inc. on December 21, 2000 before changing to

iGambit Inc. on April 5, 2006. Gotham was incorporated under the laws of the state of

New York on September 23, 2009. The Company is a holding company which seeks out

acquisitions of operating companies in technology markets. ArcMail provides email

archive solutions to domestic and international businesses through hardware and software

sales, support, and maintenance. Gotham is in the business of providing media

technology services to real estate agents and brokers in the New York metropolitan area.

Business Acquisition

On November 4, 2015, the Company acquired Wala, Inc. doing business as ArcMail

Technology in accordance with a stock purchase agreement. Pursuant to the stock

purchase agreement, the total consideration paid for the outstanding capital stock of Wala

was 11,500,000 shares of iGambit common stock, valued at $.10 per share.

The

following table presents the allocation of the value of the common shares issued for

ArcMail to the acquired identifiable assets, liabilities assumed and goodwill:

Fair Value

Cash

10,198

Accounts receivable, net

205,208

Inventories

21,160

Prepaid expenses

276

Fixed assets

41,235

Accounts payable and accrued expenses

(442,300)

Accrued interest

(254,718)

Deferred revenue

(1,254,865)

Notes payable

(3,881,351)

Workforce

138,783

Non-compete

145,315

Customer relations

3,357,756

Goodwill

3,063,303

Purchase price

1,150,000

F-7

The results of operations of ArcMail have been included in the consolidated statements of

operations as discontinued operations from the acquisition date. The following table presents pro forma results of operations of the Company and ArcMail as if the companies had been combined as of January 1, 2015. The pro forma condensed combined financial information is presented

for informational purposes only. The unaudited pro forma results of operations are not

necessarily indicative of results that would have occurred had the acquisition taken place

at the beginning of the earliest period presented, or of future results.

December 31,

2015

Pro forma revenue

2,165,646

Pro forma gross profit

2,080,851

Pro forma loss from operations

(414,366)

Pro forma net loss

(207,014)

Note 2 – Discontinued Operations

Sale of Business

Effective October 1, 2016, management decided to dispose of its subsidiary Arcmail and

entered into a letter of intent on March 1, 2017 to sell Arcmail in a stock exchange to the

CEO of Arcmail.

On November 5, 2015, pursuant to an asset purchase agreement Gotham sold assets

consisting of fixed assets, client and supplier lists, trade names, software, social media

accounts and websites, and domain names to VHT, Inc., a Delaware corporation for a

purchase price of $600,000. Gotham received $400,000 and commencing on January 29,

2016, VHT, Inc. shall pay twelve equal monthly installments of $16,667 on the last

business day of each month (the “Installment Payments” and each, an “Installment

Payment”), each Installment Payment to consist of (1) an earn-out payment of $10,000

(the “Earn-Out Payments” and each, an “Earn-Out Payment”), and (2) an additional

payment of $6,667 (the “Additional Payments” and each, an “Additional Payment”);

provided that VHT, Inc. shall only be required to make the Earn-Out Payments for as

long as it maintains its relationship with Gotham’s major client, unless it is dissatisfied

with VHT, Inc. The terms of the installment payments were fulfilled as of December 31,

2016.

The assets and liabilities of the discontinued operations are presented in the consolidated

balance sheets under the captions “Assets from discontinued operations” and “Liabilities

from discontinued operations”, respectively. The underlying assets and liabilities of the

discontinued operations as of December 31, 2016 and 2015 are presented as follows:

2016

2015

Assets:

Cash

17,323

23,590

F-8

Accounts receivable, net

321,033

477,554

Inventory

1,160

21,160

Prepaid expenses

15,300

17,189

Property and equipment

18,653

38,777

Workforce

138,783

Non-compete

145,315

Customer relations

3,357,756

Goodwill

3,063,303

Total assets

373,469

$ 7,283,427

Liabilities:

Accounts payable and accrued expenses

359,996

585,079

Accrued interest on notes payable

558,183

302,278

Amounts due to related party

64,509

72,827

Deferred revenue

1,092,388

1,190,279

Notes payable

3,119,001

Notes payable - other

153,404

Note payable - related party

626,266

636,202

$ 5,973,747

$ 5,905,666

The components of income (loss) from discontinued operations presented in the

consolidated statements of operations for the years ended December 31, 2016 and 2015

are presented as follows:

2016

2015

Sales

$ 1,990,490

$ 1,549,564

Cost of sales

(179,312)

(524,249)

General and administrative expenses

(1,626,355)

(941,987)

Depreciation and amortization

(463,217)

(6,164)

Gain on sale of assets

590,764

Interest expense

(439,467)

(47,989)

Impairment expense

(6,263,320)

Income (loss) from discontinued operations

$ (6,981,181)

619,939

Note 3 – Summary of Significant Accounting Policies

Principles of Consolidation

The consolidated financial statements include the accounts of the Company and its

wholly-owned subsidiaries, Wala, Inc. and Gotham Innovation Lab, Inc., which are

F-9

presented as discontinued operations (See Note 2). 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, accounts receivable,

prepaid expenses, 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

iGambit is a holding company and has no sources of revenue.

Arcmail recognizes revenue from product sales when the following four revenue

recognition criteria are met: persuasive evidence of an arrangement exists, an equipment

order has been placed with the vendor, the selling price is fixed or determinable, and

collectability is reasonably assured. Revenues from maintenance contracts covering

multiple future periods are recognized during the current periods and deferred revenue is

recorded for future periods and classified as current or noncurrent, depending on the

terms of the contracts.

Gotham’s revenues were derived primarily from the sale of products and services

rendered to real estate brokers. Gotham recognized revenues when the services or

products have been provided or delivered, the fees charged are fixed or determinable,

Gotham and its customers understood the specific nature and terms of the agreed upon

transactions, and collectability was reasonably assured.

Advertising Costs

The Company expenses advertising costs as incurred. There were no advertising costs

for the years ended December 31, 2016 and 2015, respectively.

Cash and Cash Equivalents

For purposes of reporting cash flows, cash and cash equivalents include checking and

money market accounts and any highly liquid debt instruments purchased with a maturity

of three months or less.

F-10

Accounts Receivable

The Company analyzes the collectability of accounts receivable from continuing

operations each accounting period and adjusts its allowance for doubtful accounts

accordingly. A considerable amount of judgment is required in assessing the realization

of accounts receivables, including the creditworthiness of each customer, current and

historical collection history and the related aging of past due balances. The Company

evaluates specific accounts when it becomes aware of information indicating that a

customer may not be able to meet its financial obligations due to deterioration of its

financial condition, lower credit ratings, bankruptcy or other factors affecting the ability

to render payment. Allowance for doubtful accounts was $8,345 at December 31, 2016

and 2015, respectively. Bad debt expense of $0 and $5,971 was charged to discontinued

operations for the years ended December 31, 2016 and 2015, respectively.

Inventories

Inventories consisting of finished products are stated at the lower of cost or market and

are presented in assets from discontinued operations. Cost is determined on an average

cost basis.

Property and equipment and depreciation

Property and equipment are stated at cost. Maintenance and repairs are charged to

expense when incurred. When property and equipment are retired or otherwise disposed

of, the related cost and accumulated depreciation are removed from the respective

accounts and any gain or loss is credited or charged to income. Depreciation for both

financial reporting and income tax purposes is computed using combinations of the

straight line and accelerated methods over the estimated lives of the respective assets as

follows:

Office equipment and fixtures

5 - 7 years

Computer hardware

5 years

Computer software

3 years

Development equipment

5 years

Amortization

Intangible assets are amortized using the straight line method over the estimated lives of

the respective assets as follows:

Non-compete

5 years

Workforce

10 years

Customer relations

10 years

Goodwill and Intangible Assets

Goodwill represents the excess of liabilities assumed over assets acquired of ArcMail and

F-11

the fair market value of the common shares issued by the Company for the acquisition of