Nutex Health, Inc. - Annual Report: 2011 (Form 10-K)

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.

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, as is further described below. Mr. Salerno and Ms. Luqman accepted employment with DDC in senior management positions post closing, and continued to work for DDC until February 2009. As of March 1, 2009 Mr. Salerno and Ms. Luqman returned to their full time management roles with the Company.

 

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

 

     On October 1, 2009, we acquired the assets of Jekyll Island Ventures, Inc., a New York corporation doing business as Gotham Photo Company (“Jekyll”) through our wholly owned subsidiary Gotham Innovation Lab, Inc., a New York corporation (“Gotham”). 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.

 

 

Selecting Acquisition Targets

 

     Our management has virtually unrestricted flexibility in identifying prospective target business and diligently reviews all of the proposals we receive.

  

 The criteria we look for in a potential acquisition include the following:

 

                Company Characteristics

 

·         Established Company with proven track record

o    Company with history of strong operating and financial performance, or

o    Company undergoing a turnaround that demonstrates strong prospects for future growth

·         Strong Cash Flow Characteristics.

o    Cash flow neutral or positive,

o    Predictable recurring revenue stream,

o    High gross margins over 60%, and

o    Low working capital and capital expenditure needs

·         Strong Competitive Industry Position

o    Leading or niche market position, and/or

o    Strong channel relationships that promote barriers to entry

·         Strong Management Team

o    Experienced, proven track record in delivering  revenue and ability to execute, or

o    A management team that can be complemented  with our contacts and team

·         Diversified Customer and Supplier base

·         Proprietary products or marketing position

Industry Characteristics

 

·         Non-cyclical

·         Services Consumer or niche market

·         Fragmented with potential for consolidation or growth

·         Emerging markets

Industries of Interest

·         Real Estate Services

·         Hospitality Services

·         Health and Medical records management and billing systems

·         Internet         

o    Cloud Computing

o    Social Networks

o    Media Distribution

o    Travel Services

Investment Criteria

 

·         Sales Volumes: $500 thousand to $30 million

·         Cash Flow: Neutral or positive

·         Structure: Controlled ownership. Closely held private company

·         Geography: North America,  Asia

·         Investment size: $1 million to $5 Million

·         Involvement: Board oversight 

·         Controlling Interest: Acquire 100% of controlling interest in target

·         Marketing:

o    Target captures a particular segment of the market

o    Target has a focused strategic marketing plan.

     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.

 

Diligence Process

 

                Upon receipt of a business plan, the procedure is for management to review the business plan and determine if it satisfies the Company’s acquisition criteria, and whether the business plan should be rejected or pursued further. If the plan satisfies the requirements, then Management meets with the target’s management to determine if there is a synergy that can work and to explore the business plan in greater detail. Generally this occurs over several meetings and can take some time. Depending on the nature of the business, management may enlist certain technical or industry consultants to meet with the target and provide feedback and analysis. Management will also review the target’s financials.  If the analysis suggests the target should be explored further Management will present the opportunity to the BOD for approval to pursue the opportunity further. One or two outside directors may meet with the target to make an independent assessment. If the opportunity is approved for further exploration management will discuss potential purchase structure with target’s management to be sure that a meeting of the minds exists for a potential deal.   At this point management will request that our investment banking advisors give their opinion of the industry, the market and potential financing options of the deal. Often, the investment bankers will meet with target’s management.  The investment banker’s feedback is presented to the board and, if positive, the Board analyzes the proposed financing structure, discusses effects of a transaction on the Company as they relate to taxes, capitalization, stock value etc., engaging the necessary outside consultants. If all appears positive a letter of intent is negotiated and executed, additional diligence is conducted, and definitive transaction documents are negotiated and executed.

 

Evaluation of the Target’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.

 

Companies Currently Under Review

 

     We are constantly in the process of reviewing potential target companies.  Currently, we are not under contract to acquire any companies, but we are actively engaged in discussions with four potential acquisition candidates.

 

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.

 

     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.

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. In the opinion of management, 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.

 

     Customers

 

    Gotham currently has less than 996 client accounts, including 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. The following five customers constituted approximately 81% of the Company’s sales in 2011:  EGR International, Inc. – 5% of sales; Cambridge Who’s Who – approximately 9% of sales; Prudential Douglas Elliman Real Estate, LLC – approximately 38% of sales; Halstead Property Development Marketing LLC – approximately 4% of sales; and Christies Great Estates, Inc. – approximately 24% of sales.    The loss of any of the foregoing client accounts could have a material adverse affect on the company’s financial condition.

 

     Expansion 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 of realtors and brokers in the New York Metropolitan area including, but not limited to, Prudential Douglas Elliman (“PDE”), Corcoran and others. We plan to increase our marketing and client base in the NYC 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.

 

    Management meets with Gotham’s management on a bi-weekly basis and has refocused Gotham’s business model towards a recurring revenue model. The strategy is multi-fold. First to leverage the subsidiary’s strong development reputation in the New York real estate market by expanding its client base, thus creating a stronger niche in this market. This involves some transition away from non-real estate development activities. Management is assisting Gotham in its transition by creating budgets, helping to reassign personnel, and aiding in the creation of targeted marketing material.   Second to the strategy, is to complete the next version EXPO product which includes the EXPO Media Manager system. Gotham is working in partnership with PDE in the design and implementation of the launce of this new version.  Management is assisting in the launch planning process and often attends meeting with PDE and Gotham’s management.  Upon the successful launch of the PDE Expo Media Management system the third phase of the strategy is to expand and offer the EXPO Media Manage system to the other PDE offices through New York State and other real estate firms.   Management has already set up and participated in meetings with Gotham at Prudential Westchester, PDE in the Hamptons, New York, and Coach Realty.  The fourth phase after successful penetration throughout New York State is to identify other US cities’ real estate markets to target.  Management has been evaluating the various markets and has had discussions with Condo-Domain and Fore3. In addition, when analyzing other acquisitions we take into consideration companies that can complement the subsidiary’s products and services or expedite the expansion into other cities.

     Simultaneous to the EXPO strategy, management has assisted in successfully negotiating a revenue share agreement for Gotham with RealPlus LLC for All Access NYC (AANYC). All Access NYC is a "Virtual Office Website", or VOW.  A VOW allows real estate firms to market listings that are represented exclusively by other real estate companies within a given geographic or listing system controlled area. This is all done within the brand of the VOW real estate firm, allowing the firm to better service buyers by showing them ALL listings in one place, as opposed to the current model in NYC, which has buyers reaching out to un-regulated 3rd parties (street easy, NY Times, craigslist), and waiting on antiquated forms of listing delivery. NYC has a need for VOW services since there is no MLS service in Manhattan.  Currently, no REBNY controlled firm has the right to display or advertise another firm’s listings, leaving buyers in a place where they have to fend for themselves on unregulated sites, or wait on the agents they are dealing with to delivery listings to them. The partnership with RealPlus LLC is significant because RealPlus LLC is one of only a handful of companies in NYC pulling and centralizing the listing data from the various agents in NYC.  RealPlus provides the listing data and Access to clients.

DDC Revenue Share Payments and Annual Increase Payments

 

                In connection with the sale of our assets to DDC in February 2006, DDC agreed to make certain ongoing payments to us, which payments have constituted a material amount of our revenues over the last several periods.  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 agreement with DDC ended on February 28, 2011. We expect the balance of the amounts due to be paid during 2012.  

 

* $180,000 paid on 6/21/2010, and $182,202 paid on 7/26/2010.**$100,000 paid on 9/29/2010 $75,000 paid on 10/27/2010, $75,000 paid on 11/29/2010, $25,000 paid on 12/24/2010, $25,000 paid on 12/28/2010, $50,000 paid on 1/31/2011, $50,000 paid on 2/24/2011, $50,000 paid on 3/28/2011 $60,000 paid on 4/29/2011,  and $26,349 paid on 5/31/2011.

***Partial payments received. $33,651 paid on 5/31/2011, $60,000 paid on 6/30/2011, $5,000 paid on 7/29/2011, $5,000 paid on 8/31/2011, $25,000 paid on 9/29/2011, $25,000 paid on 10/14/2011, $25,000 paid on 10/28/2011, $25,000 paid on 11/14/2011, $25,000 paid on 12/7/2011 and $25,000 paid on 12/15/2011.

**** Not yet received.

 

 

Employees

     We presently have14 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 1050 W. Jericho Turnpike, Suite A, Smithtown, New York, 11787. Our telephone number is (631) 670-6777 and our fax number is (631) 670-6780. We currently operate two corporate websites that can be found at www.igambit.com and www.gothamphotocompany.com (the information on the foregoing websites does not form a part of this report).

 

     Not Required.

     Not Required.

     Our principal executive office is located in Smithtown, New York, where we lease approximately 1000 square feet of office space. Monthly lease payments are approximately $1,500. The lease is for a term of five (5) years commencing on March 1, 2012 and ending on February 28, 2017.  The lease contains annual escalations of 2% of the annual rent.

 

    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 renews annually on October 31.  

     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.

 On November 1, 2011, we filed a lawsuit in the Circuit Court in and for Broward County, Florida, asserting claims against Allied Airbus, Inc. ( as "Borrower") and Michael Polo, Kishore Taneja and Alberto Gonzalez (collectively, as "Guarantors") for monetary damages arising from the breach of multiple promissory notes owed by Borrower to  us and to enforce guaranty agreements executed by Guarantors to secure payment of the promissory notes.    On or about January 20, 2012,  we filed an Amended Complaint after additional promissory notes owed by Borrower became due and following Borrower's and Guarantors' default on payment of same.  In response to the lawsuit, Borrower and Guarantors Polo and Taneja, filed a counterclaim that was subsequently amended on or about February 9, 2012.  The Amended Counterclaim asserts claims against  us for alleged fraud and for alleged violations of Florida's deceptive and unfair trade practices act for, amongst other things, the alleged failure to loan Allied $1,500,000.00 following an alleged prior commitment to do so.

PART II

MARKET INFORMATION

     Effective March 19, 2011 the Company’s common stock is quoted on the Over the Counter Bulletin Board, a service maintained by the Financial Industry Regulatory Authority, under the ticker symbol “IGMB”.  To date there has not been an established public trading market in the Company’s common stock.

HOLDERS

     As of March 30, 2012, there are 23,954,056 shares of our common stock outstanding, held of record by 159 persons.  We have 2,335,000 common stock warrants outstanding and 2,468,900 common stock options outstanding.  

     As of March 30, 2012, 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, 2011, there were 8,617,520 shares available for issuance under the Plan.

     In addition to our 2006 Long Term Incentive Plan, we have issued and outstanding compensatory warrants to two consultants entitling the holders to purchase a total of 275,000 shares of our common stock at an average exercise price of $per share. Warrants to purchase 25,000 shares of common stock vest upon 6 months after the Company engages in an IPO, have an exercise price of $3.00 per share, and expire 2 years after the Company engages in an IPO . Warrants to purchase 250,000 shares of common stock vest 100,000 shares on issuance (June 1, 2009), and 50,000 shares on each of the following three anniversaries of the date of issuance, have exercise prices ranging from $0.50 per share to $1.15 per share, and expire on June 1, 2019. The issuance of the compensatory warrants was not submitted to our shareholders for their approval.

     The following table describes our equity compensation plans as of December 31, 2011:

 

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)

2,768,900

$

0.03

8,617,520

Equity compensation plans not approved by our stockholders

275,000

$

0.83

0

 

(1)		Equity compensation plans approved by our stockholders consist of our 2006 Long Term Incentive Plan.

RECENT SALES OF UNREGISTERED SECURITIES

 

During 2011 we sold the following securities in transactions not registered under the Securities Act of 1933, as amended (the “Securities Act”):

 

On February 18, 2011 the Company cancelled the Consulting Agreement between the Company and Aquililla and entered a Business advisory Agreement with J.P. Turner and Company, where Aquililla was employed.  We issued warrants to purchase 2,000,000 shares of our common stock to JP Turner pursuant to the terms of the Business Advisory agreement between the Company and JP Turner. The warrants were issued as part consideration for the services rendered by JP Turner  under the consulting agreement, and were valued at $1,759 using the Black-Scholes pricing model.  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.  At the time of the issuance JP Turner  was able to evaluate the risks and merits of the investment, had access to information regarding the Company, was given the opportunity to ask the Company’s management questions about the Company, and was able to bear the economic risk of the investment.  The securities were issued in reliance on Section 4(2) of the Securities Act, and contained a standard restrictive legend. On November 14, 2011 the company entered an agreement with JPTurner cancelling the warrants to purchase 2,000,000 shares of our common stock issued to JP Turner. On February 18, 2012 the Business Advisory agreement with JPTurner terminated.

 

On July 11, 2011, we issued options to purchase 300,000 shares of our common stock, at $0.01 per share, to our three outside Directors, George Dempster (100,000), James Charles (100,000) and John Waters (100,000). The options were issued in connection with services rendered.  The Company determined the fair value of the stock to be $.06 per share, and the fair value of the options at issuance to be $.0087 per share, based on the Black-Scholes pricing model. At the time of the issuances each of the three Directors, Dempster, Charles and Waters, were able to evaluate the risks and merits of the investment, had access to information regarding the Company, was given the opportunity to ask the Company’s management questions about the Company, and was able to bear the economic risk of the investment.  The securities were issued in reliance on Section 4(2) of the Securities Act, and contained a standard restrictive legend.

 

     Not Required

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.

Accounts receivable includes 50% of contingency payments earned for the previous quarter.  Reserve for bad debts of $250,000 was charged to operations for the year ended December 31, 2010.  No reserve for bad debts was charged to operations for the year ended December 31, 2011.

 

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, 2011, the Company purchased computer equipment totaling $19,391. 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 $5,915 and $1,496 was charged to operations for the years ended December 31, 2011 and 2010, respectively.

 

Goodwill

          Goodwill represents the fair market value of the common shares issued and common stock options granted by the Company for the acquisition of Jekyll by the Company’s subsidiary, Gotham.  In accordance with ASC Topic No. 350 “Intangibles – Goodwill and Other”), the goodwill is not being amortized, but instead will be subject to an annual assessment of impairment by applying a fair-value based test, and will be reviewed more frequently if current events and circumstances indicate a possible impairment. An impairment loss is charged to expense in the period identified. If indicators of impairment are present and future cash flows are not expected to be sufficient to recover the asset’s carrying amount, an impairment loss is charged to expense in the period identified. A lack of projected future operating results from Gotham’s operations may cause impairment.   At December 31, 2011, the Company performed an impairment study and determined that there is no indication that present and future cash flows are not expected to be sufficient to recover the carrying amount of goodwill.  Based on the Company’s evaluation of goodwill, no impairment was recorded during the year ended December 31, 2011.

Stock-Based Compensation

     We account for our stock-based employee compensation plan in accordance with ASC Topic No. 718-20, Awards Classified as Equity, which requires the measurement of compensation expense for all share-based compensation granted to employees and non-employee directors at fair value on the date of grant and recognition of compensation expense over the related service period for awards expected to vest.  We use the Black-Scholes option valuation model to estimate the fair value of our stock options and warrants. The Black-Scholes option valuation model requires the input of highly subjective assumptions including the expected stock price volatility of the Company’s common stock.  Changes in these subjective input assumptions can materially affect the fair value estimate of our stock options and warrants.

 

Income Taxes

 

     We account for income taxes using the asset and liability method in accordance with ASC Topic No. 740, Income Taxes. Under this method, deferred tax assets and liabilities are determined based on differences between financial reporting and tax bases of assets and liabilities, and are measured using the enacted tax rates and laws that are expected to be in effect when the differences are expected to reverse.

 

     We apply the provisions of ASC Topic No. 740 for the financial statement recognition, measurement and disclosure of uncertain tax positions recognized in the Company’s financial statements. In accordance with this provision, tax positions must meet a more-likely-than-not recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position.

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 years ended December 31, 2011 and December 31, 2010 Gotham produced approximately $1,623,654 and $850,222 of revenue, respectively. We are focused on expanding the operations of Gotham by marketing the company to existing and potential new clients. Currently Gotham has several proposals outstanding to franchisees of one of its main customers, as well as other potential new clients. In addition to Gotham’s operations, we earned $160,250 in technical consulting fees, and we received Quarterly Revenue Share Payments and Annual Increase Payments from Digi-Data Corporation, which are payable pursuant to the terms of an agreement under which we sold certain assets to DDC in 2006. Contingency Payments earned from DDC under the agreement totaled $1,898,435 during the year ended December 31, 2010, of which $1,724,838 was for the four quarters of 2010 Contingency Payments and $173,597 was accrued revenue for the 5% year to year Contingency Payment for the year ended December 31, 2010.   We earned $247,860 under our arrangement with DDC during the year ended December 31, 2011 all of which was for  the January and February 2011Contingency Payments The agreement with DDC ended on February 28, 2011. We expect the balance of the amounts due to be paid during 2012.   We also continue to focus on acquiring or partnering with additional companies.

 

Year Ended December 31, 2011 as Compared to Year Ended December 31, 2010

     Assets. At December 31, 2011, we had $1,759,089 in current assets and $1,891,178 in total assets, compared to $2,218,175 in current assets and $2,336,788  in total assets as of December 31, 2010. The decrease in total assets was primarily due to the decrease in cash used to fund the loss.

 

 

     Liabilities. At December 31, 2011, we had total liabilities of $288,585 compared to $351,617 at December 31, 2010. Our total liabilities at December 31, 2011 consisted of accounts payable of $263,195, and a note to a related party of $25,390, whereas our total liabilities as of December 31, 2010 consisted of accounts payable of $­­­­­­­­­­­­­326,227, and a note to a related party of $25,390, The decrease in total liabilities was primarily due to the decrease in the income tax provision.

 

     Stockholders’ Equity (Deficit). Our Stockholders’ Equity decreased to $1,602,593 at December 31, 2011 from $,1,985,171 at December 31, 2010. This decrease was primarily due to an increase in accumulated deficit from $(441,058) at December 31, 2010 to $(824,451) at December 31, 2011 resulting from the end of the contingency payments from Digi-Data Corp.

 

     Revenue and Net Income. We had revenue of $1,783,904 for the year ended December 31, 2011, compared to revenue of $874,774 for the year ended December 31, 2010. The increase in revenue was due primarily to revenue generated by our acquired subsidiary Gotham ($1,623,654).  We also earned revenue of $160,250 in technical consulting fees for the year ended December 31, 2011. In addition, we had income from discontinued operations of $163,588 for the year ended December 31, 2011, compared to $997,303 (net of taxes and reserve for bad debt) for the year ended December 31, 2010. Our net loss was ($383,393) for the year ended December 31, 2011, compared to a net income of $158,137 for the year ended December 31, 2010.  Our decrease in income from discontinued operations was due to the Digi-Data agreement ending on February 28, 2011. The decrease in net income was due primarily to the termination of the DDC agreement..    

 

     General and Administrative Expenses. General and Administrative Expenses increased to $1,863,732 for the year ended December 31, 2011 from $1,829,401 for the year ended December 31, 2010. For the year ended December 31, 2011 our General and Administrative Expenses consisted of corporate administrative expenses of $471,281, legal and accounting fees of $160,907 consulting fees of $36,752, payroll expenses of $1,163,979, Directors and Officers Insurance of $15,813, and IPO business advisory expense of $15,000. For the year ended December 31, 2010 our General and Administrative Expenses consisted of corporate administrative expenses of $483,005, legal and accounting fees of $199,924, consulting fees of $27,738, payroll expenses of $1,111,931, and bad debt expenses of $6,803 related to doubtful accounts receivable of our Gotham subsidiary.. The increases from the year ended December 31, 2010 to the year ended December 31, 2011 relate primarily to: (i) 1; (i) professional costs associated with   the preparation and filing of a registration statement with the SEC; and (ii) an increase in insurance, business advisory, and accounting fees associated with being a reporting company under the Securities Exchange Act of 1934.  Further, in the event the company effectuates an acquisition in 2012 we anticipate additional professional fees associated with the acquisition.

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, 2011. 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, 2011

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, 2011. 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 concluded that, as of December 31, 2011, our internal control over financial reporting was effective. 

 

Change in Internal Controls

 

                      During the quarter ended December 31, 2011, 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.

 

     None.

PART III

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			73			Chief Executive Officer, President, Chairman of the Board, and Director		March 2009 (appointed Chairman and Director in April 2000)
Elisa Luqman			47			Chief Financial Officer, Executive Vice President, General Counsel, and Director		March 2009 (appointed Director in August 2009)
James J. Charles			69			Director		March 2006
George G. Dempster			72			Director		January 2001
John Waters			66			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.

 

Mr. Salerno was nominated as a Director because if his intimate knowledge of the Company and its history as a founder.  Additionally, Mr. Salerno’s mathematical and technical background as a data center manager early in his professional career and later as a software developer offers the board hand’s on technical experience in both operations and software analysis.   Mr. Salerno utilized his experience and contacts to secure the major customers driving the sales that generate the Company’s payment stream from DDC.  Moreover, Mr. Salerno adds value to Gotham through his 40 plus years serving the New York Real Estate industry.  He is thoroughly familiar with the unique workings of the New York real estate industry and has many contacts within that community that are a benefit to Gotham.

 

     Elisa Luqman, Chief Financial Officer, Executive Vice President, General Counsel, and Director. Ms. Luqman is a computer literate attorney with over 18 years experience with intellectual property and computer software. Prior to co-founding the Company, Ms. Luqman was president of University Software Corp., a software development company focused on a wide range of student educational and intellectual applications. Ms. Luqman was Chief Operating Officer of the Company, from April 1, 2000 until February 28, 2006. From March 1, 2006 through February 28, 2009 Ms. Luqman was employed as Chief Operating Officer of the Vault Services Division of Digi-Data Corporation, the company that acquired the Company’s assets in 2006, and subsequently during her tenure with Digi-Data Corporation she became the in-house general counsel for the entire corporation. In that capacity she was responsible for acquisitions, mergers, patents, and employee contracts, and worked very closely with Digi-Data’s outside counsel firms, DLA-Piper, the Law Offices of Sandra T. Carr and the patent firm of Jordan and Hamburg. As of March 1, 2009, Ms. Luqman rejoined the Company in her current capacities. Ms Luqman received a BA degree in Marketing, a JD in Law, and a MBA Degree in Finance from Hofstra University. Ms. Luqman is a member of the bar in New York and New Jersey. Ms. Luqman is John Salerno’s daughter.

 

Ms. Luqman was nominated as a Director because of her intimate knowledge of the Company and its history as a founder.  Additionally, as an attorney, Ms. Luqman’s legal background enables her to provide counsel to the Company. Her experience as general counsel to the Company provides her with a unique insight into the Company’s contracts with customers and vendors, intellectual property assets and issues, financing transactions and shareholder transactions.  Moreover, having been through the merger and acquisition process on both sides of the table, Ms. Luqman offers the Company in-house guidance throughout the acquisition process. That combined with Ms. Luqman’s  MBA in Finance aids in providing the Board with more efficient analysis of input from outside auditors and  legal advisors.  

 

     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.  Interpharm Holdings, Inc., through its subsidiary, Interpharm, Inc., engages in the development, manufacture, and marketing of generic prescription strength and over-the-counter pharmaceuticals in the United States. It also focuses on the development of products in the areas of female hormone, scheduled narcotic, soft gelatin capsule, oral liquid, products coming off patent, and other products. 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.

 

Mr. Charles was nominated as a Director because of his financial expertise. He has been involved in the practice of public accounting for over forty years.  During his tenure as a Senior Managing Partner at Ernst & Young he spent considerable years analyzing potential acquisition targets for corporate clients and has particular experience and skills on matter such as mergers and acquisitions, stock restructuring and spin-offs.  He has also been a Chief Financial Officer of a public company. 

 

     George G. Dempster, Director. Mr. Dempster was Commissioner of Commerce for the State of New York from 1979 to 1983. He served as the Chairman of the Finance Committee for Hofstra University for 25 years from 1976 through 2001, and is currently Chairman Emeritus of the Board of Trustees. Mr. Dempster has been the Chairman of Tran-Leisure Corp. since 1983, and was its CEO from 1983-2002.  Tran -Leisure Corp is a diversified holding company with interests ranging from helicopter services to manufacturing. From 1969 to 1973 Mr. Dempster served as the CEO of Cybernetics, a major computer software developer. Mr. Dempster served as a marketing manager for IBM from 1961 to 1968. Mr. Dempster has a BA in business administration from Hofstra University.

 

Mr. Dempster was nominated as a Director because of his strong administrative, financial and economic background.  Having served as Commissioner of Commerce for the State of New York for 4 years and on the Board of Hofstra University for over 25 years, Mr. Dempster provides the Company with extensive experience in commerce and administration in both the private and public sectors.   Moreover, during his tenure at Hofstra University Mr. Dempster was intimately involved in several financing transactions to maintain the University in a solvent and profitable manner.  Additionally, having been CEO of a diversified holding company, Mr. Dempster is thoroughly familiar with the merger and acquisition process. He offers years of experience analyzing business, their models and economics, and identifying the appropriate financing vehicles.

 

     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) Avantair Inc., 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.  ADAT is a worldwide provider of solutions that enhance the secure exchange of health information and related administrative and clinical workflows.  In the United States ADAT offers its patent pending content authentication technology in the form of the United States Postal Service® Electronic Postmark® (EPM).He was previously the Chief Administrative Officer of that company from July 2004 to December 31, 2005. Mr. Waters has been a self employed Consultant from December 31, 2005 to present. 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.

 

Mr. Waters was nominated as a Director because of his financial expertise. He was involved in the practice of public accounting for thirty-four years.  During his tenure as a Senior Partner at Arthur Andersen he spent considerable years analyzing potential acquisition targets for corporate clients. He has also been a Chief Financial Officer of a public company, and has served as a Director of another public company for over six years and presently serves on the audit committee of that company.

 

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 Audit Committee has adopted a charter and it is posted on our web site at www.igambit.com.

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  adopted a charter and the charter is  posted on our web site at www.igambit.com.

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

     Based solely upon a review of Forms 3 and 4 and amendments thereto furnished to the Company under Rule 16a-3(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, 2011.

CODE OF ETHICS

     The Company has adopted a Code of Ethics that applies to its principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions.   A copy of the Code of Ethics is attached as an exhibit to this report.  A copy of the Code of Ethics is available on the Company’s website at www.igambit.com.  Any amendments to, or waivers from, the Code of Ethics will be disclosed on the Company’s website at www.igambit.com.

Summary Compensation Table

Employment Arrangements with Named Executive Officers

 

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

 

Compensation of the Board of Directors

   

 

The following table sets forth the compensation received by our directors, for their service as directors, during the year ended December 31, 2011.

 

   

(1) These individuals serve as executive officers of the Company, and do not receive any   compensation for the services they provide as directors of the Company.

 

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

     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.

     The following table shows what Michael F. Albanese, CPA billed for the audit and other services for the years ended December 31, 2011 and December 31, 2010.

 

		Year Ended				Year Ended
		12/31/ 2011				12/31/2010
Audit Fees		$	35,183			$	35,030
Audit-Related Fees			---				---
Tax Fees			---				—
All Other Fees			---				—
Total		$	35,183			$	35,030

     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

(a) Financial Statements

Report of Independent Registered Public Accounting Firm		F-1
Consolidated Balance Sheet as of December 31, 2011 and 2010		F-2
Consolidated Statement of Income for the years ended December 31, 2011 and 2010		F-3
Consolidated Statement of Changes in Stockholder’s Equity for the years ended December 31, 2011 and 2010		F-4
Consolidated Statement of Cash Flows for the years ended December 31, 2011 and 2010		F-5
Notes to Financial Statements		F-6

(b) Exhibits

Exhibit No.				Description
	3.1	(i)		Certificate of Incorporation, filed with the Delaware Secretary of State on April 13, 2000 (1)
3.1(ii)				Certificate of Merger, filed with the Delaware Secretary of State on April 18, 2000 (1)
3.1(iii)				Certificate of Amendment Changing Name, filed with the Delaware Secretary of State on December 19, 2000 (1)
3.1(iv)				Certificate of Merger filed with the Delaware Secretary of State on February 17, 2006 (1)
	3.1	(v)		Certificate of Amendment Changing Name filed with the Delaware Secretary of State on April 5, 2006 (1)
3.1(vi)				Certificate of Amendment Increasing Authorized Common Stock to 75 Million Shares, filed with the Delaware Secretary of State on December 2, 2009 (1)
	3.2			Bylaws (1)
	4.1			Form of Stock Certificate (2)
	4.2			Common Stock Purchase Warrant issued to Douglas Aquilila (6)
	4.3			Common Stock Purchase Warrant issued to Roetzel & Andress (3)
	10.1			iGambit, Inc. 2006 Long Term Incentive Plan, Amended 12/31/2006 (1)
	10.2			Douglas Aquililla Consulting Agreement (6)
	10.3			Employment Agreement between Digi-Data Corporation and Mr. Salerno (2)
	10.4			Employment Agreement between Digi-Data Corporation and Mrs. Luqman (2)
	14			Code of Ethics (5)
	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.)

 

(1)		Incorporated by reference to Form 10 filed on December 31, 2009.
(2)		Incorporated by reference to Amendment No. 1 to Form 10 filed on June 11, 2010.
(3)		Filed with initial Form 10-K on June 15, 2010.