Nutex Health, Inc. - Annual Report: 2009 (Form 10-K)

 

 

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-K

þ		ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the Fiscal Year Ended December 31, 2009

OR

o		TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission File Number: 000-53862

iGAMBIT, INC.

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

1600 Calebs Path Extension, Suite 114
Hauppauge, New York 11788
(Address of principal executive offices)

(631) 780-7055
(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 o     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. þ

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer o		Accelerated filer o		Non-accelerated filer o		Smaller reporting 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

There is not currently a market for the Registrant’s common stock.

As of May 31, 2010, there were 23,954,056 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, 2009

TABLE OF CONTENTS

					Page No.
PART I
Item 1				Business			3
Item 1A				Risk Factors			8
Item 1B				Unresolved Staff Comments			8
Item 2				Properties			8
Item 3				Legal Proceedings			8
Item 4				(Removed and Reserved)			8
PART II
Item 5				Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities			9
Item 6				Selected Financial Data			10
Item 7				Management’s Discussion and Analysis of Financial Condition and Results of Operations			11
Item 7A				Quantitative and Qualitative Disclosure About Market Risk			14
Item 8				Financial Statements and Supplementary Data			14
Item 9				Changes in and Disagreements with Accountants on Accounting and Financial Disclosure			14
Item 9A				Controls and Procedures			14
Item 9B				Other Information			15
PART III
Item 10				Directors, Executive Officers and Corporate Governance			16
Item 11				Executive Compensation			17
Item 12				Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters			18
Item 13				Certain Relationships and Related Transactions, and Director Independence			19
Item 14				Principal Accountant Fees and Services			20
PART IV
Item 15				Exhibits and Financial Statement Schedules			21
EX-4.2
EX-4.3
EX-31.1
EX-31.2
EX-32.1
EX-32.2

Exhibit Index

     This annual report on Form 10-K is for the year ended December 31, 2009. 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 21, 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. Specifically, DDC agreed to make quarterly payments to us, for a period of 5 years, in the amount equal to 10% of the Vault Net Revenues received by DDC through its operation of the Vault Business (the “Quarterly Revenue Share Payments”). “Vault Net Revenues” is defined in the APA as the gross revenue of DDC actually received by DDC that is solely and directly attributable to the Vault Business, to the extent that such revenue is derived from the provision of vault services and/or vault appliances which use the Big Vault core technology, less the sum of (i) any discount given by DDC in compensation for early payment, (ii) returns, allowances, quantity discounts and credits, (iii) any accounting reserve amount, as determined in accordance with GAAP, and (iv) shipping and mailing costs, duties, taxes and insurance. In addition, DDC agreed to make an annual payment to us after the 2^nd, 3^rd, 4^th, and 5^th anniversaries of the closing of the transaction, in an amount equal to 5% of any increase in the annual Vault Net Revenue over the immediately prior year’s Vault Net Revenue (the “Annual Increase Payments”, and together with the Quarterly Revenue Share Payments the “Revenue Share Payments”). A schedule of the Quarterly Revenue Share Payments and Annual Increase Payments received to date is set forth below. The final Annual Increase Payment and the final Quarterly Revenue Share Payment are each due on or before May 31, 2011. 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.

Period Covered		Amount				Date Received
March 1, 2006 - December 31, 2006 Quarterly Revenue Share Payment		$	18,576.42			2/14/2007
1st Quarter 2007 Quarterly Revenue Share Payment		$	20,085.64			7/18/2007
2nd Quarter 2007 Quarterly Revenue Share Payment		$	54,429.29			9/18/2007
3rd Quarter 2007 Quarterly Revenue Share Payment		$	81,761.49			12/17/2007
4th Quarter 2007 Quarterly Revenue Share Payment		$	112,343.36			2/22/2008
1st Quarter 2008 Quarterly Revenue Share Payment		$	142,403.25			5/1/2008
March 2007 — February 2008 Annual Increase Payment		$	159,190.30			5/1/2008
2nd Quarter 2008 Quarterly Revenue Share Payment		$	143,815.13			8/9/2008
3rd Quarter 2008 Quarterly Revenue Share Payment		$	168,844.36			11/10/2008
4th Quarter 2008 Quarterly Revenue Share Payment		$	246,005.85			3/10/2009
1st Quarter 2009 Quarterly Revenue Share Payment		$	286,976.65			6/30/2009
March 2008 — February 2009 Annual Increase Payment		$	222,322.00			6/30/2009
2nd Quarter 2009 Quarterly Revenue Share Payment		$	325,514.21			9/25/2009
3rd Quarter 2009 Quarterly Revenue Share Payment		$	365,194.95			12/24/2009
4th Quarter 2009 Quarterly Revenue Share Payment		$	414,851.58			2/28/2010
1st Quarter 2010 Quarterly Revenue Share Payment		$	472,384			5/26/2010
March 2009 — February 2010 Annual Increase Payment		$	362,202			Anticipated in June 2010
		$	3,596,900.20

     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”). Pursuant to the terms of the Asset Purchase Agreement and Plan of Reorganization (“APAPR”), we (i) issued 500,000 shares of our common stock to Jekyll at closing; (ii) assumed $10,410.59 of Jekyll accounts payable relating to office rent and health insurance premiums; and (iii) issued Jekyll warrants to purchase 1,500,000 shares of our common stock, at $0.01 per share, subject to a 3 year vesting schedule and the attainment by Gotham of certain revenue targets during said 3 year period.

     On December 2, 2009, we amended our Certificate of Incorporation increasing our authorized shares of common stock to 75 million shares.

OUR COMPANY

Introduction

     We are a company focused on the technology markets. Presently we have one operating subsidiary in the business of providing media technology services to the real estate industry. At this point we have limited revenues consisting solely of revenues from the operation of our Gotham subsidiary ($166,661 in the 4^th quarter of 2009) and the receipt of Quarterly Revenue Share Payments and Annual Increase Payments from DDC (totaling $1,614,859.39 in 2009 ($414,851.58 of which was paid in the first quarter of 2010), and $834,586 for the first quarter of 2010 ($362,202 of which is anticipated to be paid in June 2010 )).

     Our primary focus is the acquisition of additional technology companies. We believe that the background of our management and of our Board of Directors in the technology markets is a valuable resource that makes us a desirable business partner to the companies that we are seeking to acquire. When we acquire a company, we work to assume an active role in the development and growth of the company, providing both strategic guidance and operational support. We provide strategic guidance to our partner companies relating to, among other things, market positioning, business model and product development, strategic capital expenditures, mergers and acquisitions and exit opportunities. Additionally, we provide operational support to help our partner companies manage day-to-day business and operational issues and implement best practices in the areas of finance, sales and marketing, business development, human resources and legal services. Once a company joins our partner company network, our collective expertise is leveraged to help position that company to produce high-margin, recurring and predictable earnings and generate long-term value for our stockholders.

     At this point we do not have any plans or agreements to acquire any companies, have not initiated any contact or negotiations with any possible acquisitions, and have not targeted any possible acquisitions. Our current intention is to fund the purchase price of acquisitions through a combination of the issuance of our common stock at closing and the issuance of common stock purchase warrants that would become exercisable only in the event certain earn-out conditions are satisfied by the acquired company. In addition to acquiring entire companies, we would also consider entering into joint ventures and acquiring less than 100 percent of a target company.

Sources of target businesses

     We anticipate that target business candidates will be brought to our attention from various sources, including our management team, investment bankers, venture capital funds, private equity funds, leveraged buyout funds, management buyout funds, consulting firms and other members of the financial community who will become aware that we are seeking business partners via public relations and marketing efforts, direct contact by management or other similar efforts, who may present solicited or unsolicited proposals. Any finder or broker would only be paid a fee upon the completion of a business combination. While we do not presently anticipate engaging the services of professional firms that specialize in acquisitions on any formal basis, we may decide to engage such firms in the future or we may be approached on an unsolicited basis. Our officers and directors, as well as their affiliates, may also bring to our attention target business candidates that they become aware of through their business contacts. While our officers and directors make no commitment as to the amount of time they will spend trying to identify or investigate potential target businesses, they believe that the various relationships they have developed over their careers together with their direct inquiry, will generate a number of potential target businesses that will warrant further investigation. In no event will we pay any of our existing officers, directors, special advisors or stockholders or any entity with which they are affiliated any finder’s fee or other compensation for services rendered to us prior to or in connection with the completion of a business combination. In addition, none of our officers, directors, special advisors or existing stockholders will receive any finder’s fee, consulting fees or any similar fees from any person or entity in connection with any business combination involving us other than any compensation or fees that may be received for any services provided following such business combination.

Selection of a target business and structuring of a business combination

     Our management has virtually unrestricted flexibility in identifying and selecting a prospective target business. We expect that our management will diligently review all of the proposals we receive with respect to a prospective target business. In evaluating a prospective target business, our management will conduct the necessary business, legal and accounting due diligence on such target business and will consider, among other factors, the following:

	•		financial condition and results of operations;
	•		earnings and growth potential;
	•		experience and skill of management and availability of additional personnel;
	•		capital requirements;
	•		competitive position;
	•		barriers to entry into the industry;
	•		breadth of services offered;
	•		degree of current or potential market acceptance of the technology;
	•		regulatory environment; and
	•		costs associated with effecting the business combination.

     These criteria are not intended to be exhaustive. Any evaluation relating to the merits of a particular business combination will be based, to the extent relevant, on the above factors as well as other considerations deemed relevant by our management in effecting a business combination consistent with our business objective. In evaluating a prospective target business, we will conduct an extensive due diligence review which will encompass, among other things, meetings with incumbent management, where applicable, and inspection of facilities, as well as review of financial and other information which will be made available to us.

Evaluation of the target business’s management

     We would condition any acquisition on the commitment of management of the target business to remain in place post closing. Following a business combination, we may seek to recruit additional managers to supplement the incumbent management of the target business. We cannot assure you that we will have the ability to recruit additional managers, or that any such additional managers will have the requisite skills, knowledge or experience necessary to enhance the incumbent management. Although we intend to closely scrutinize the management of a prospective target business when evaluating the desirability of effecting a business combination, we cannot assure you that our assessment of the target business’s management will prove to be correct.

Competition

     In identifying, evaluating and selecting a target business, we may encounter intense competition from other entities having a business objective similar to ours. Many of these entities are well established and have extensive experience identifying and effecting business combinations directly or through affiliates. Many of these competitors possess greater technical, human and other resources than us and our financial resources will be relatively limited when contrasted with those of many of these competitors, which may limit our ability to compete in acquiring certain target businesses. This inherent competitive limitation gives others an advantage in pursuing the acquisition of a target business.

Our Partner Company — Gotham Photo Company

     Products and Services

     Gotham’s business is directed at providing media technology services to the real estate community. The range of media services includes the exclusive Gotham EXPO Full Screen Experience. Gotham also provides website development services, sales office technology and data interchange services for many of the real estate firms in New York City. Gotham’s roster of no less than 996 client accounts includes accounts ranging from single agent accounts to large “master accounts” with large firms such as Prudential Douglas Elliman and Halstead. Taking these and other master accounts into consideration, Gotham does business with over 3,000 New York City real estate agents.

     When it comes to selling real estate every broker or seller listing has to have pictures. Utilizing the latest technology Gotham’s EXPO product provides a full screen listing experience. It allows brokers and sellers to present their listing in the largest format possible while giving the viewer control of the show. EXPO integrates images, photos, floor plans, agent and key listing details in an engaging format that immerses the viewer. Currently, Gotham is capable of integrating up to 16 images into a full screen presentation for any listing.

     EXPO is available for all NYC realtors and will be made available nationwide within the coming months. All systems are built on accessible web platforms that integrate quickly and seamlessly into the agent’s workflow. EXPO is available on a per unit basis, as an add-on to photography services, or on a subscription basis. We price the product on a per-unit basis at $50 per unit, and offer subscription rates ranging from $400 per month to $2500 per month depending on the average yearly listing volume of the subscriber. EXPO was a key factor in our securing of a semi-exclusive media services agreement with Prudential Douglas Elliman.

     In addition to natural expansion into the areas surrounding NYC, Gotham is actively working to expand by further providing services to large accounts that exist in both Manhattan and targeted secondary markets, and through the selective hiring of one-off service providers who are currently operating in other markets.

     Competitive Comparison

     Gotham competes with others in the industry by focusing on user interaction, technology and delivery. Gotham maintains strict standards of photography and a roster of accomplished photographers who we engage in between their premium assignments such as fashion shoots, architectural projects, etc.

     In addition to superior media, in the opinion of management, Gotham’s technology tools set us apart from our competition. For example, our expo product offering utilizes the pre-generation of a multitude of media sets to deliver images sized perfectly for the users screen, wasting no bandwidth or file size, thereby enabling us to maintain the speed and efficiency of the product at an optimal level. A majority of our competitors either don’t seem to employ similar measures in their full screen product offerings or do so on a more limited basis.

     Future Products and Services

     Future offerings will include enhanced products that focus on social media interaction, mobile applications and tools for realtors, as well as multi touch augmented reality technologies for presentations, etc. Gotham will continue to expand its media offerings, integrating with and adopting technologies as they become available.

     Strategy and Implementation Summary

     Gotham’s objective is to be a market leader in offering EXPO, Virtual Tours, and e-Brochures, type services to the real estate industry. Gotham is currently providing services to a number realtors and brokers in the New York Metropolitan area including, but not limited to, Prudential Douglas Elliman, Cocoran and others. We plan to increase our marketing and client base in the NY area and expand to other major cities and markets such as Boston, Philadelphia, Washington DC, Chicago, etc. Within 3 years we expect to be offering our services to over 250 US metropolitan statistical areas.

Employees

     We presently have 9 total employees, all of which are full-time.

SEC FILINGS

     We are classified as a “Smaller Reporting Company” for the purpose of filings with the Securities and Exchange Commission. Certain Form 10-K report disclosures previously included that are not required under the disclosure requirements of a smaller reporting company have been omitted in this report.

     Interested parties may access our public filing free of charge on the SEC’s EDGAR website located at www.sec.gov.

OUR CORPORATE INFORMATION

     Our principal offices are located at 1600 Calebs Path Extension, Suite 114, Hauppauge, New York, 11788. Our telephone number is (631) 780-7055 and our fax number is (631) 656-1055. We currently operate two corporate websites that can be found at www.igambit.com and www.gothamphotocompany.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

     Not Required.

ITEM 2.		PROPERTIES

     Our principal executive office is located in Hauppauge, New York, in an executive center, where we lease approximately 300 square feet of office space. Monthly lease payments are approximately $2,600 and the lease term expires June 30, 2010.

     Our Gotham operations are located in New York, New York, where we lease approximately 3,000 square feet of office space. Monthly lease payments are approximately $5,000 and the lease term expires October 31, 2010.

     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

     None.

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

     To date there has not been an established public trading market in the Company’s common stock. The Company’s securities are not listed on any exchange or over the counter market. The Company does not have a ticker symbol.

HOLDERS

     As of May 31, 2010, there are 23,954,056 shares of our common stock outstanding, held of record by 149 persons. We have 2,335,000 common stock warrants outstanding, and 1,796,900 common stock options outstanding.

     As of May 31, 2010, approximately 21,737,018 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 have one equity compensation plan outstanding which is our 2006 Long Term Incentive Plan. The Plan was adopted by our directors and approved by our stockholders on March 26, 2006. The Plan permits the award of incentive stock options, non-qualified stock options, stock appreciation rights, and stock grants. We have reserved 10 million shares for issuance under the Plan, plus an annual increase equal to 10% of the number of outstanding shares of our common stock on the first day of each year, but in no event more than 15 million shares of common stock in the aggregate. As of December 31, 2009, there were 4,798,708 shares available for issuance under the Plan.

     In addition to our 2006 Long Term Incentive Plan, we have issued and outstanding compensatory warrants to five consultants entitling the holders to purchase a total of 2,310,000 shares of our common stock at an average exercise price of $0.75 per share. Warrants to purchase 60,000 shares of common stock vested upon issuance, have an exercise price of $0.01 per share, and expire December 31, 2010. Warrants to purchase 2,000,000 shares of common stock vest in four equal installments on the date of issuance (May 26, 2009) and 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 May 26, 2019. 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.

     The following table describes our equity compensation plans as of December 31, 2009:

Number of Securities

Remaining Available

for Future Issuance

Number of Securities

under Equity

to be Issued Upon

Weighted Average

Compensation Plans

Exercise of

Exercise Price of

(excluding securities

Outstanding Options,

Outstanding Options,

referenced in

Warrants and Rights

Warrants and Rights

column (a))

Plan Category

(a)

(b)

(c)

Equity compensation plans approved by our stockholders (1)

1,796,900

$

0.01

4,798,708

Equity compensation plans not approved by our stockholders

2,310,000

$

0.75

0

RECENT SALES OF UNREGISTERED SECURITIES

     In August 2009, we issued a total of 735,000 shares of our common stock to 6 individuals upon their exercise of common stock purchase options. The foregoing securities were issued in reliance on Section 4(2) of the Securities Act, and were restricted when issued.

     On May 26, 2009, we issued warrants to purchase 2,000,000 shares of our common stock to Newbridge Securities pursuant to the terms of a consulting agreement between the Company and Newbridge. 500,000 warrants, at an exercise price of $0.50 per share, vested upon issuance; 500,000 warrants, at an exercise price of $0.65 per share, vest on the 1 year anniversary of issuance; 500,000 warrants, at an exercise price of $0.80 per share, vest on the 2 year anniversary of issuance; and 500,000 warrants, at an exercise price of $1.15 per share, vest on the 3 year anniversary of issuance. The securities were issued in reliance on Section 4(2) of the Securities Act. The issued securities are restricted, and the agreements representing the securities contain a standard restrictive legend.

     On June 1, 2009, we issued warrants to purchase 250,000 shares of our common stock to Roetzel & Andress pursuant to the terms of an engagement letter between the Company and Roetzel. 100,000 warrants, at an exercise price of $0.50 per share, vested upon issuance; 50,000 warrants, at an exercise price of $0.65 per share, vest on the 1 year anniversary of issuance; 50,000 warrants, at an exercise price of $0.85 per share, vest on the 2 year anniversary of issuance; and 50,000 warrants, at an exercise price of $1.15 per share, vest on the 3 year anniversary of issuance. The securities were issued in reliance on Section 4(2) of the Securities Act. The issued securities are restricted, and the agreements representing the securities contain a standard restrictive legend.

     On October 1, 2009, we issued 500,000 shares of our common stock and options to purchase 1,500,000 shares of our common stock, at $0.01 per share, to Jekyll in connection with our acquisition of the assets of Jekyll. The securities were issued in reliance on Section 4(2) of the Securities Act. The issued securities are restricted, and the certificates representing the shares contain a standard restrictive legend.

ITEM 6.		SELECTED FINANCIAL DATA

     Not Required

ITEM 7.		MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

CRITICAL ACCOUNTING ESTIMATES

     Our management’s discussion and analysis of our financial condition and results of operations are based on our financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America. The preparation of financial statements may require us to make estimates and assumptions that may affect the reported amounts of assets and liabilities and the related disclosures at the date of the financial statements. We do not currently have any estimates or assumptions where the nature of the estimates or assumptions is material due to the levels of subjectivity and judgment necessary to account for highly uncertain matters or the susceptibility of such matters to change or the impact of the estimates and assumptions on financial condition or operating performance is material, except as described below.

Fair Value of Financial Instruments

     For certain of the our financial instruments, including cash and cash equivalents, accounts receivable, accounts payable, and amounts due to related parties, the carrying amounts approximate fair value due to their short maturities.

Revenue Recognition

     Contingency payment income is recognized quarterly from a percentage of Digi-Data’s vaulting service revenue, and is included in discontinued operations. Our revenues from continuing operations consist of revenues primarily from sales of products and services rendered to real estate brokers. Revenues are recognized upon delivery of the products or services.

Cash and Cash Equivalents

     For purposes of reporting cash flows, cash and cash equivalents include checking and money market accounts and any highly liquid debt instruments purchased with a maturity of three months or less.

Accounts Receivable

     We analyze the collectability of accounts receivable each accounting period and adjust our allowance for doubtful accounts accordingly. A considerable amount of judgment is required in assessing the realization of accounts receivables, including the current creditworthiness of each customer, current and historical collection history and the related aging of past due balances. We evaluate specific accounts when we become aware of information indicating that a customer may not be able to meet its financial obligations due to deterioration of its financial condition, lower credit ratings, bankruptcy or other factors affecting the ability to render payment.

     As of December 31, 2009, we had charged $65,000 of bad debts to operations for uncollectible accounts.

Property and equipment and depreciation

     Property and equipment are stated at cost. Depreciation for both financial reporting and income tax purposes is computed using combinations of the straight line and accelerated methods over the estimated lives of the respective assets. During the 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.

     Depreciation expense of $596 and $373 was charged to operations for the years ended December 31, 2009 and 2008, respectively.

Goodwill

     Goodwill represents the fair market value of the common shares issued and common stock options granted by the Company for the acquisition of Jekyll by the Company’s subsidiary, Gotham. In accordance with ASC Topic No. 350 “Intangibles — Goodwill and Other”, the goodwill is not being amortized, but instead will be subject to an annual assessment of impairment by applying a fair-value based test, and will be reviewed more frequently if current events and circumstances indicate a possible impairment. An impairment loss is charged to expense in the period identified. If indicators of impairment are present and future cash flows are not expected to be sufficient to recover the asset’s carrying amount, an impairment loss is charged to expense in the period identified. A lack of projected future operating results from Gotham’s operations may cause impairment. 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 year ended December 31, 2009.

Stock-Based Compensation

     As of December 31, 2009, we had a stock-based employee compensation plan which we account for applying SFAS No. 123(R) (“SFAS 123(R)”), “Share-Based Payment.” Under SFAS 123(R), we are required to select a valuation technique or option-pricing model that meets the criteria as stated in the standard, which includes a binomial model and the Black-Scholes model. At the present time, we apply the Black-Scholes model. SFAS 123(R) also requires us to estimate forfeitures in calculating the expense relating to stock-based compensation as opposed to only recognizing these forfeitures and the corresponding reduction in expense as they occur.

Income Taxes

     Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the consolidated financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to reverse. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in the consolidated statement of income in the period that includes the enactment date.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Introduction

     iGambit is a company focused on the technology markets. Our sole operating subsidiary, Gotham Innovation Lab, Inc., is in the business of providing media technology services to the real estate industry. During the year ended December 31, 2009 Gotham produced approximately $166,661 of revenue. 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. Payments received from DDC under the agreement totaled $1,446,014 in the year ended December 31, 2009, and $887,236 in the three months ended March 31, 2010. We earned an additional $362,202 under our arrangement with DDC during the three months ended March 31, 2010, which we anticipate will be paid in June 2010. 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.

Year Ended December 31, 2009 as Compared to Year Ended December 31, 2008

     Assets. At December 31, 2009, we had $1,655,228 in current assets and $1,994,608 in total assets, compared to $985,927 in current assets and $1,450,176 in total assets as of December 31, 2008.

     Liabilities. At December 31, 2009, we had total liabilities of $206,991 compared to $496,292 at December 31, 2008. Our total liabilities at December 31, 2009 consisted primarily of accounts payable in the amount of $204,487, whereas our total liabilities as of December 31, 2008 consisted primarily of liabilities from discontinued operations in the amount of $491,538.

     Stockholders’ Equity (Deficit). Our Stockholders’ Equity (Deficit) increased to $1,787,617 at December 31, 2009 from $953,884 at December 31, 2008. This increase was primarily due to the receipt of contingency payments from Digi-Data Corp. and a decrease in accumulated deficit from $(1,204,483) at December 31, 2008, to $(758,724) at December 31, 2009.

     Revenue and Net Incomes. We had revenue of $173,011 for the year ended December 31, 2009, versus no revenue for the year ended December 31, 2008. In addition, we had income from discontinued operations (net of taxes) of $923,739 for the year ended December 31, 2009, compared to $553,363 for the year ended December 31, 2008. Our net income was $445,759 for the year ended December 31, 2009, compared to $403,393 for the year ended December 31, 2008. These increases were due to primarily to the success of the agreement with Digi-Data Corporation. 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 $861,512 for the year ended December 31, 2009 from $196,589 for the year ended December 31, 2008. For the year ended December 31, 2009 our General and Administrative Expenses consisted of corporate administrative expenses of $167,517, legal and accounting fees of $168,095 and, consulting fees of $114,000, and payroll expenses of $168,377. For the year ended December 31, 2008 our General and Administrative Expenses consisted of corporate administrative expenses of $26,808, legal and accounting fees of $23,500, and consulting fees of $146,281. The increases from the year ended December 31, 2008 to the year ended December 31, 2009 relate primarily to: (i) salaries for officers hired by the Company in 2009; (ii) professional costs associated with the acquisition of certain assets of Jekyll Island Ventures, Inc., and 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 do anticipate an increase in legal and accounting fees in 2010 once we become a reporting company under the Securities Exchange Act of 1934.

LIQUIDITY AND CAPITAL RESOURCES

     As reflected in the accompanying consolidated financial statements, at December 31, 2009, we had $857,074 cash and stockholders’ equity of $1,787,617. At December 31, 2009 we had $1,994,608 in total assets. We currently have two sources of revenue. First, 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. In addition to revenues from Gotham, 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. Payments received from DDC under the agreement totaled $1,446,014 in the year ended December 31, 2009, and $887,236 in the three months ended March 31, 2010. We earned an additional $362,202 under our arrangement with DDC during the three months ended March 31, 2010, which we anticipate will be paid in June 2010. 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.

     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.

     While we believe in the viability of our strategy to improve Gotham’s sales volume and to acquire companies, and in our ability to raise additional funds, there can be no assurances that we will be able to fully effectuate our business plan.

     We believe we will continue to increase our cash position and liquidity for the foreseeable future. We believe we have enough capital to fund our present operations during the next 12 months.

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, 2009 and 2008			F-2
Consolidated Statement of Income for the years ended December 31, 2009 and 2008			F-3
Consolidated Statement of Changes in Stockholder’s Equity for the years ended December 31, 2009 and 2008			F-4
Consolidated Statement of Cash Flows for the years ended December 31, 2009 and 2008			F-5
Notes to Financial Statements			F-6

ITEM 9.		CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

     None.

ITEM 9A(T).		CONTROLS AND PROCEDURES

Conclusion Regarding the Effectiveness of Disclosure Controls and Procedures

     We carried out an evaluation, as required by paragraph (b) of Rule 13a-15 and 15d-15 of the Exchange Act under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of our disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act as of December 31, 2009. Based upon that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective as of December 31, 2009.

Management’s Annual Report on Internal Control over Financial Reporting.

     We are responsible for establishing and maintaining adequate internal control over financial reporting. Internal control over financial reporting is defined in Rule 13a-15(f) and Rule 15d-15(f) promulgated under the Exchange Act as a process designed by, or under the supervision of, our Chief Executive Officer (our principal executive officer) and Chief Financial Officer (our principal accounting and financial officer), and effected by our board of directors, management and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. Our internal control over financial reporting includes those policies and procedures that:

Pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of our assets; Provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that our receipts and expenditures are being made only in accordance with authorizations of our management and our directors; and Provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of our assets that could have a material effect on the financial statements.

     Our internal control system was designed to provide reasonable assurance to our management and board of directors regarding the preparation and fair presentation of published financial statements. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

     Our management assessed the effectiveness of the Company’s internal control over financial reporting as of December 31, 2009. In making this assessment, management used the criteria set forth in the Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Based on management’s assessment, we believe that, as of December 31, 2009, our internal control over financial reporting is effective.

Change in Internal Controls

     During the quarter ended December 31, 2009, there were no changes in our internal control over financial reporting that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Report of the Company’s Independent Registered Public Accounting Firm

     This annual report on Form 10-K does not include an attestation report of the Company’s independent registered public accounting firm regarding internal control over financial reporting. Management’s report was not subject to attestation by the Company’s independent registered public accounting firm pursuant to temporary rules of the Securities and Exchange Commission that permit the Company to provide only management’s report in this annual report.

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			71			Chief Executive Officer, President, Chairman of the Board, and Director		March 2009 (appointed Chairman and Director in April 2000)
Elisa Luqman			45			Chief Financial Officer, Executive Vice President, General Counsel, and Director		March 2009 (appointed Director in August 2009)
James J. Charles			67			Director		March 2006
George G. Dempster			70			Director		January 2001
John Waters			64			Director		August 2009

     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.

     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.

     James J. Charles, Director. Mr. Charles is a high profile financial executive with a broad base of experience with firms ranging in size from $24MM to $180MM in annual revenue. He worked closely with management and Boards of Directors on matters ranging from mergers and acquisitions to stock restructurings and spin-offs. Mr. Charles has been a self employed Certified Public Accountant from 1999 to present. From 1994 to 1999 Mr. Charles was the chief financial officer of Interpharm Holdings, Inc. From 1966 to 1994 Mr. Charles was a Senior Managing Partner with Ernst & Young. Mr. Charles’ education includes studies and management programs at Harvard University and Williams College. Mr. Charles received his BBA in Accounting at Manhattan College.

     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 is currently Chairman and was the prior CEO (1983-2002) of Tran-Leisure Corp, 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.

     John Waters, Director. Mr. Waters was a Senior Partner at Arthur Andersen from 1967 to 2001, with exceptional leadership skills in mergers and acquisitions (particularly reverse mergers) and 1933 Act fillings with the Securities and Exchange Commission. Mr. Waters was involved in raising over $60 million for a special purpose acquisition company (SPAC) and was that company’s Chief Financial Officer from February 2006 to April 2008. Mr. Waters serves on the audit committee and on the board of Authentidate Holding Corp. (ADAT) since July 2004. He was previously the Chief Administrative Officer of that company from July 2004 to December 31, 2005. He also serves on the board of two privately held companies. My Waters is a Certified Public Accountant and has a BBA degree from Iona College.

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 presently consists of Messrs. Charles, Waters, and Dempster, with Mr. Charles serving as chairman. Our Board has determined that Mr. Charles 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 Company has not adopted a charter. When a charter is adopted, it will be posted on our web site. The Audit Committee was established in August 2009, and thus had no meeting in 2008.

Compensation Committee

     The Compensation Committee presently consists of Messrs. Charles, Waters, and Dempster, with Mr. Waters serving as chairman. The Compensation Committee is responsible for reviewing and recommending to the Board the compensation and over-all benefits of our executive officers, including administering the Company’s 2006 Long Term Incentive Plan. The Compensation Committee may, but is not required to, consult with outside compensation consultants. The Compensation Committee has not adopted a charter. When a charter is adopted, it will be posted on our web site. The Compensation Committee was established in August 2009, and thus had no meetings in 2008.

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(d) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”) the Company is not aware of any person that failed to file on a timely basis, as disclosed in the aforementioned Forms, reports required by Section 16(a) of the Exchange Act during the year ended December 31, 2009.

CODE OF ETHICS

     The Company has not 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.

ITEM 11.		EXECUTIVE COMPENSATION

SUMMARY COMPENSATION TABLE

     Effective September 1, 2009 Mr. Salerno and Ms. Luqman became full time employees of the Company with annual salaries of $225,000 and $200,000 respectively. Prior to September 1, 2009 Mr. Salerno and Ms. Luqman were employees of Digi-Data Corp.

     During 2006 and 2007, Mr. Salerno exercised options to acquire 1,800,000 common shares of the Company and during 2007 Ms. Luqman exercised options to acquire 1,500,000 common shares of the Company.

     Prior to December 31, 2006, the Company was indebted to officers, John Salerno and Elisa Luqman for unpaid compensation accrued totaling $350,000. John Salerno received advances against the deferred compensation in the amounts of $74,281.25 and $44,000 as of December 31, 2007, and December 31, 2008, respectively. Elisa Luqman received advances against the deferred compensation in the amounts of $5,000 and $75,000 as of December 31, 2007, and December 31, 2008, respectively. The advances against deferred compensation totaling $79,281 and $198,281 as of December 31, 2007, and December 31, 2008, respectively were in the form of a note payable to the Company and were collateralized with the officers common shares issued and outstanding of 5,470,000 shares each. During the nine months ended September 30, 2009, the Company paid the total amount of unpaid compensation accrued to the officers, who subsequently repaid the advances received.

Current																						Non-Equity
Officers																						Incentive				Nonqualified
Name &																		Option				Plan				Deferred				All Other
Principal						Salary				Bonus				Stock				Awards				Compensation				Compensation				Compensation				Total
Position		Year				($)				($)				($)(1)				($)				($)				Earnings ($)				($)				($)
John Salerno			2009				77,885	(1)			0				0				0				0				0				8,739	(2)			86,624
CEO, President,			2008				0				0				0				0				0				0				0				0
Chairman & Director
Elisa Luqman			2009				69,231	(3)			0				0				0				0				0				0				69,231
CFO, EVP, General			2008				0				0				0				0				0				0				0				0
Counsel, & Director

EMPLOYMENT AGREEMENTS WITH NAMED EXECUTIVE OFFICERS

     The Company does not currently have any employment agreements with it executive officers.

ITEM 12.		SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS

EQUITY COMPENSATION PLAN

     The following table sets forth information, as of December 31, 2009, with respect to the Company’s compensation plans under which equity securities are authorized for issuance.

Number of

Number of Securities

Securities to

Remaining Available

be Issued

Weighted-Average

for Future Issuance

Upon Exercise

Exercise Price of

Under Equity

of Outstanding

Outstanding

Compensation Plan

Options, Warrants

Options, Warrants

(Excluding Securities

Plan Category

and Rights

and Rights

Reflected in Column)

Equity compensation plan approved by security holders

3,143,000

$

1.14

2,457,000

•

Additionally, the Company has in place an ESOP plan in which 255,000 shares of the Company’s stock are held on behalf of qualifying participants.

SECURITY OWNERSHIP

     The following table sets forth information known to us, as of May 31, 2010, 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., 1600 Calebs Path Extension, Suite 114, Hauppauge, New York, 11788. The percentages in the following table are based upon 23,954,056 shares outstanding as of May 31, 2010.

		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			5,616,900	(1)			23.3	%
Elisa Luqman, C.F.O., Executive Vice President, General Counsel and Director			5,715,000	(2)			23.9	%
James J. Charles, Director			441,000				1.8	%
George G. Dempster, Director			392,000				1.6	%
John Waters, Director			-0-				*
Mehul Mehta			2,450,000				10.2	%
Executive Officers and Directors as a Group (5):			12,164,900				50.5	%

ITEM 13.		CERTAIN RELATIONSHIPS, RELATED TRANSACTIONS AND DIRECTOR INDEPENDENCE

RELATED PARTY TRANSACTIONS

     Pursuant to the terms of the agreements governing the sale of our assets to DDC in 2006, we will continue to receive Revenue Share Payments from DDC until 2011. In connection with said asset sale, Mr. Salerno and Ms. Luqman entered into employment agreements with DDC and worked for DDC until those agreements terminated in February 2009. Notwithstanding the termination of said employment agreements, Mr. Salerno is entitled, pursuant to the terms thereof, to receive a share of the net proceeds of any sale or other disposition of all or substantially all of the stock or assets of DDC that occurs on or before February 2011.

     Director George Dempster was engaged as an Independent Consultant to Digi-Data Corporation from the period June 1, 2006 through April 30, 2009. The Company agreed to share equally in the fees paid to Mr. George Dempster. From the period of February 2006 through February 2009 George Dempster was paid $179,448 directly from Digi-Data. The $89,724 representing the Company’s 50% share of that expense was deducted by Digi-Data from amounts Digi-Data owed to the Company.

     Prior to December 31, 2006, the Company was indebted to officers, John Salerno and Elisa Luqman for unpaid compensation accrued totaling $350,000. John Salerno received advances against the deferred compensation in the amounts of $74,281.25 and $44,000 as of December 31, 2007, and December 31, 2008, respectively. Elisa Luqman received advances against the deferred compensation in the amounts of $5,000 and $75,000 as of December 31, 2007, and December 31, 2008, respectively. The advances against deferred compensation totaling $79,281 and $198,281 as of December 31, 2007, and December 31, 2008, respectively, were in the form of a note payable to the Company and were collateralized with the officers’ common shares issued and outstanding of 5,470,000 shares each. During the nine months ended September 30, 2009, the Company paid the total amount of unpaid compensation to the officers, who subsequently repaid the advances received.

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. Charles, Mr. Waters, and Mr. Dempster are 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 Michael F. Albanese, CPA billed for the audit and other services for the years ended December 31, 2009 and December 31, 2008.

		Year Ended				Year Ended
		12/31/ 2009				12/31/08
Audit Fees		$	14,000			$	25,000
Audit-Related Fees			—				—
Tax Fees			—				—
All Other Fees			—				—
Total		$	14,000			$	25,000

     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, 2009 and 2008		F-2
Consolidated Statement of Income for the years ended December 31, 2009 and 2008		F-3
Consolidated Statement of Changes in Stockholder’s Equity for the years ended December 31, 2009 and 2008		F-4
Consolidated Statement of Cash Flows for the years ended December 31, 2009 and 2008		F-5
Notes to Financial Statements		F-6

(b) Exhibits

Exhibit No.				Description
	2.1			Asset Purchase Agreement between the Company and Digi-Data Corporation, dated December 21, 2005 (1)
	2.2			Asset Purchase Agreement and Plan of Reorganization between Jekyll Island Ventures Inc. and Gotham Innovation Lab Inc., dated September 30, 2009 (1)
	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)
	3.2			Bylaws (1)
	4.1			Form of Stock Certificate (2)
	4.2			Common Stock Purchase Warrant issued to Newbridge Securities
	4.3			Common Stock Purchase Warrant issued to Roetzel & Andress
	10.1			iGambit, Inc. 2006 Long Term Incentive Plan, Amended 12/31/2006 (1)
	10.2			Newbridge Consulting Agreement (2)
	10.3			Employment Agreement between Digi-Data Corporation and Mr. Salerno (2)
	10.4			Employment Agreement between Digi-Data Corporation and Mrs. Luqman (2)
	10.5			Agreement between the Company and Digi-Data Corporation regarding the payment of consulting fees to Mr. Dempster (2)
	21			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.)

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 Haupauge, New York, on June 15, 2010.

     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   John Salerno		Chief Executive Officer and Director		June 15, 2010
/s/ Elisa Luqman   Elisa Luqman		Chief Financial Officer and Director		June 15, 2010
/s/ James J. Charles   James J. Charles		Director		June 15, 2010
/s/ George G. Dempster   George G. Dempster		Director		June 15, 2010
/s/ John Waters   John Waters		Director		June 15, 2010

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTANT

To the Board of Directors and Shareholders of:

iGambit Inc.

I have audited the accompanying consolidated balance sheets of iGambit Inc. as of December 31, 2009 and December 31, 2008 and the related statements of income, changes in stockholders’ equity, and cash flows for the years then ended. These consolidated financial statements are the responsibility of the Company’s management. My responsibility is to express an opinion on these consolidated financial statements based on my audits.

I conducted my audits in accordance with standards of the Public Company Accounting Oversight Board (United States). Those standards require that I plan and perform the audits to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the consolidated financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall consolidated financial statement presentation. I believe that my audits provide a reasonable basis for my opinion.

In my opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of iGambit Inc. as of December 31, 2009 and December 31, 2008, and the results of its operations and cash flows for the years then ended in conformity with accounting principles generally accepted in the United States of America.

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 Company’s internal control over financial reporting. Accordingly, we express no such opinion.

 

/s/ Michael F. Albanese, CPA
Parsippany, NJ

May 6, 2010

IGAMBIT INC.
CONSOLIDATED BALANCE SHEETS

		DECEMBER 31,
		2009				2008
ASSETS
Current assets
Cash		$	857,074			$	322,439
Accounts receivable			56,743				—
Prepaid expenses			8,838				—
Notes receivable — stockholders			17,000				17,000
Assets from discontinued operations			715,573				646,488
Total current assets			1,655,228				985,927
Property and equipment, net			895				1,491
Other assets
Notes receivable — stockholders			—				198,281
Goodwill			185,000				—
Deposits			2,500				—
Assets from discontinued operations			150,985				264,477
Total other assets			338,485				462,758
		$	1,994,608			$	1,450,176
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities
Accounts payable		$	204,487			$	4,754
Loans payable — stockholders			2,504				—
Total current liabilities			206,991				4,754
Long-term liabilities
Liabilities from discontinued operations			—				491,538
Total liabilities			206,991				496,292
Stockholders’ equity
Common stock, $.001 par value; authorized - 75,000,000 shares in 2009 and 30,000,000 in 2008; issued and outstanding - 23,954,056 shares in 2009 and 22,719,056 in 2008			23,954				22,719
Additional paid-in capital			2,522,387				2,135,648
Accumulated deficit			(758,724	)			(1,204,483	)
Total stockholders’ equity			1,787,617				953,884
		$	1,994,608			$	1,450,176

IGAMBIT INC.
CONSOLIDATED STATEMENTS OF INCOME
YEARS ENDED DECEMBER 31,

		2009				2008
Sales		$	173,011			$	—
Cost of sales			47,458				—
Gross profit			125,553				—
Operating expenses
General and administrative expenses			861,512				196,589
Loss from operations			(735,959	)			(196,589	)
Other income
Interest income			3,908				2,554
Loss from continuing operations before income tax benefit			(732,051	)			(194,035	)
Income tax benefit			(254,071	)			(44,065	)
Loss from continuing operations			(477,980	)			(149,970	)
Income from discontinued operations (net of taxes of $806,898 and $361,286)			923,739				553,363
Net income		$	445,759			$	403,393
Basic and fully diluted earnings (loss) per common share:
Continuing operations		$	(.02	)		$	(.01	)
Discontinued operations, net of tax		$	.04			$	.03
Net earnings per common share		$	.02			$	.02
Weighted average common shares outstanding			23,009,029				22,402,104

IGAMBIT INC.
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY
YEARS ENDED DECEMBER 31, 2009 AND 2008

										Additional
		Common Stock								Paid-in				Accumulated
		Shares				Amount				Capital				Deficit				Totals
Balances, December 31, 2007			21,737,018			$	21,737			$	1,987,749			$	(1,607,876	)		$	401,610
Compensation for vested stock options			—				—				72,900				—				72,900
Common stock issued in consideration of cashless exercise of options, valued at $.01 per share			788,100				788				7,093				—				7,881
Common stock issued in exercise of warrants, valued at $.01 per share			60,000				60				540				—				600
Common stock issued in exercise of warrants, valued at $.50 per share			135,000				135				67,365				—				67,500
Common stock retired			(1,062	)			(1	)			1				—				—
Net income															403,393				403,393
Balances, December 31, 2008			22,719,056				22,719				2,135,648				(1,204,483	)			953,884
Compensation for vested stock options			—				—				67,500				—				67,500
Compensation for vested warrants			—				—				54,000				—				54,000
Common stock issued in consideration of cashless exercise of options, valued at $.01 per share			735,000				735				6,765				—				7,500
Assets of acquired business			—				—				73,974				—				73,974
Common stock issued in business acquisitions			500,000				500				49,500				—				50,000
Stock options granted for acquired business resulting in goodwill											135,000								135,000
Net income															445,759				445,759
Balances, December 31, 2009			23,954,056			$	23,954			$	2,522,387			$	(758,724	)		$	1,787,617

IGAMBIT INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31,

		2009				2008
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income		$	445,759			$	403,393
Adjustments to reconcile net income to net cash provided (used) by operating activities
Income from discontinued operations			(923,739	)			(553,363	)
Depreciation			596				373
Stock-based compensation expense			121,500				72,900
Cashless exercises of stock options			7,500				7,881
Assets of acquired business			73,974				—
Increase (Decrease) in cash flows as a result of changes in asset and liability account balances:
Accounts receivable			(56,743	)			—
Prepaid expenses			(8,838	)			—
Accounts payable			(199,733	)			2,095
Net cash used by continuing operating activities			(140,258	)			(66,721	)
Net cash provided by discontinued operating activities			29,665				187,811
NET CASH PROVIDED (USED) BY OPERATING ACTIVITIES			(110,593	)			121,090
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment			—				(1,864	)
Increase in deposits			(2,500	)			—
Repayments of loans to stockholders			198,281				(126,000	)
Net cash provided (used) by continuing investing activities			195,781				(127,864	)
Net cash provided by discontinued investing activities			938,481				434,811
NET CASH PROVIDED BY INVESTING ACTIVITIES			1,134,262				306,947
CASH FLOWS FROM FINANCING ACTIVITIES:
Loans from shareholders			2,504				—
Proceeds from exercise of warrants			—				68,100
Net cash provided by continuing financing activities			2,504				68,100
Net cash used by discontinued financing activities			(491,538	)			(214,605	)
NET CASH USED BY FINANCING ACTIVITIES			(489,0334	)			(146,505	)
NET INCREASE IN CASH			534,635				281,532
CASH — BEGINNING OF YEAR			322,439				40,907
CASH — END OF YEAR		$	857,074			$	322,439
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the year for:
Interest		$	1,189			$	—
Income taxes			4,698				67
Non-cash investing and financing activities:
Stock-based compensation expense		$	121,500			$	72,900
Cashless exercise of common stock options			7,500				7,881
Common stock issued in business acquisition resulting in goodwill			50,000				—
Stock options granted in business acquisition resulting in goodwill			135,000				—

IGAMBIT INC.
NOTES TO FINANCIAL STATEMENTS

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.

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:

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

Following is a presentation of pro forma balance sheets and statements of operations for the nine months ended September 30, 2009 and for the year ended December 31, 2008:

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

On December 19, 2005, the Company executed a certificate of merger whereby BigVault Inc. (a Nevada corporation) merged into the Company leaving the Company as the surviving corporation. Pursuant to the certificate of merger, each share of Big Vault Inc.’s common stock issued and outstanding was converted to one share of the Company’s common stock.

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.

The assets and liabilities of the discontinued operations are presented in the balance sheets under the captions “Assets of discontinued operations” and “Liabilities of discontinued operations.” The underlying assets and liabilities of the discontinued operations for the years ended December 31 are as follows:

		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

Accounts receivable includes 50% of contingency payments earned for the previous quarter.

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 $150,985 and $165,727 at December 31, 2009 and 2008, respectively.

Prepaid contingency includes cash and expenses advanced by Digi-Data prior to the sale. The balance is being repaid with 25% of quarterly contingency payments earned that is retained by Digi-Data. The prepaid contingency balance was $0 and $141,538 as of December 31, 2009 and 2008, respectively.

The Company was indebted to two former officers for unpaid compensation totaling $350,000 at December 31, 2008. The officers received advances against the deferred compensation totaling $198,281 as of December 31, 2008. In 2009, compensation was fully repaid to the former officers who subsequently repaid the advances against the deferred compensation.

The consolidated financial statements include the accounts of the Company and its wholly-owned subsidiary, Gotham Innovation Lab, Inc. All significant intercompany accounts and transactions have been eliminated.

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.

For certain of the Company’s financial instruments, including cash and cash equivalents, accounts receivable, accounts payable, and amounts due to related parties, the carrying amounts approximate fair value due to their short maturities.

Contingency payment income is recognized quarterly from a percentage of Digi-Data’s vaulting service revenue, and is included in discontinued operations.

The Company’s revenues from continuing operations consists of revenues primarily from sales of products and services rendered to real estate brokers. Revenues are recognized upon delivery of the products or services.

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.

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.

a. Property and equipment and depreciation

Property and equipment are stated at cost. Depreciation for both financial reporting and income tax purposes is computed using combinations of the straight line and accelerated methods over the estimated lives of the respective assets. During the 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.

Depreciation expense of $596 and $373 was charged to operations for the years ended December 31, 2009 and 2008, respectively.

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 year ended December 31, 2009.

As of December 31, 2009, the Company has a stock-based employee compensation plan which it accounts for applying SFAS No. 123(R) (“SFAS 123(R)”), “Share-Based Payment.” Under SFAS 123(R), the Company is required to select a valuation technique or option-pricing model that meets the criteria as stated in the standard, which includes a binomial model and the Black-Scholes model. At the present time, the Company applies the Black-Scholes model. SFAS 123(R) also requires the Company to estimate forfeitures in calculating the expense relating to stock-based compensation as opposed to only recognizing these forfeitures and the corresponding reduction in expense as they occur.

Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the consolidated financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to reverse. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in the consolidated statement of income in the period that includes the enactment date.

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.

		Year Ended
		December 31,
		2009				2008
Stock options			1,796,900				1,046,900
Common stock warrants			3,085,000				835,000
Total shares excluded from calculation			4,881,900				1,881,900

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 December 31, 2009, 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 1.42 years.

The 2006 Plan provides for the granting of options to purchase up to 5,510,000 shares of common stock. 5,213,100 options have been exercised to date. There are 1,796,900 options outstanding under the 2006 Plan.

Warrant activity during the years ended December 31, 2009 and 2008 follows:

														Weighted
														Average
										Weighted				Remaining
										Average				Contractual
						Average				Grant-Date				Life
		Warrants				Exercise Price				Fair Value				(Years)
Warrants outstanding at January 1, 2008			1,652,518			$	0.67			$	0.10
Granted during 2008			60,000				0.01				0.10
Exercised during 2008			(195,000	)			0.35				0.10
Expired during 2008			(682,518	)			0.32				0.10
Warrants outstanding at December 31, 2008			835,000				0.99				0.10
Granted during 2009			2,250,000				0.77				0.10
Warrants outstanding at December 31, 2009			3,085,000			$	0.83			$	0.10				7.07

Stock Option Plan activity during the years ended December 31, 2009 and 2008 follows:

														Weighted
														Average
										Weighted				Remaining
										Average				Contractual
						Average				Grant-Date				Life
		Warrants				Exercise Price				Fair Value				(Years)
Options outstanding at January 1, 2008			1,835,000			$	0.01			$	0.10
Exercised during 2008			(788,100	)			0.01				0.10
Options outstanding at December 31, 2008			1,046,900				0.01				0.10
Exercised during 2009			(750,000	)			0.01				0.10
Granted during 2009			1,500,000				0.01				0.10
Options outstanding at December 31, 2009			1,796,900			$	0.01			$	0.10				5.85