##### Table of Contents



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.
 (Exact name of registrant as specified in its charter)
 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
 o þ
 o þ
 þ o
 o o
 þ
  Large accelerated filer o
    
    Accelerated filer o
    
    Non-accelerated filer o
    
    Smaller reporting company þ(Do not check if a smaller reporting company)
 o þ
   DOCUMENTS INCORPORATED BY REFERENCE: None




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##### 



iGAMBIT, INC.
FORM 10-K  FOR THE YEAR ENDED DECEMBER 31, 2009
 TABLE OF CONTENTS
 Page No.PART IItem 1
    
    Business
    
    
    3Item 1A
    
    Risk Factors
    
    
    8Item 1B
    
    Unresolved Staff Comments
    
    
    8Item 2
    
    Properties
    
    
    8Item 3
    
    Legal Proceedings
    
    
    8Item 4
    
    (Removed and Reserved)
    
    
    8PART IIItem 5
    
    Market for Registrants Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
    
    
    9Item 6
    
    Selected Financial Data
    
    
    10Item 7
    
    Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    11Item 7A
    
    Quantitative and Qualitative Disclosure About Market Risk
    
    
    14Item 8
    
    Financial Statements and Supplementary Data
    
    
    14Item 9
    
    Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
    
    
    14Item 9A
    
    Controls and Procedures
    
    
    14Item 9B
    
    Other Information
    
    
    15PART IIIItem 10
    
    Directors, Executive Officers and Corporate Governance
    
    
    16Item 11
    
    Executive Compensation
    
    
    17Item 12
    
    Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
    
    
    18Item 13
    
    Certain Relationships and Related Transactions, and Director Independence
    
    
    19Item 14
    
    Principal Accountant Fees and Services
    
    
    20PART IVItem 15
    
    Exhibits and Financial Statement Schedules
    
    
    21EX-4.2EX-4.3EX-31.1EX-31.2EX-32.1EX-32.2
  Exhibit Index
  2




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##### Table of Contents



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
  nd rd th th
 3




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##### Table of Contents



Period Covered
    
    Amount
    
    
    Date ReceivedMarch 1, 2006 - December 31, 2006 Quarterly Revenue Share Payment
    
    $
    18,576.42
    
    
    2/14/20071st Quarter 2007 Quarterly Revenue Share Payment
    
    $
    20,085.64
    
    
    7/18/20072nd Quarter 2007 Quarterly Revenue Share Payment
    
    $
    54,429.29
    
    
    9/18/20073rd Quarter 2007 Quarterly Revenue Share Payment
    
    $
    81,761.49
    
    
    12/17/20074th Quarter 2007 Quarterly Revenue Share Payment
    
    $
    112,343.36
    
    
    2/22/20081st Quarter 2008 Quarterly Revenue Share Payment
    
    $
    142,403.25
    
    
    5/1/2008March 2007  February 2008 Annual Increase Payment
    
    $
    159,190.30
    
    
    5/1/20082nd Quarter 2008 Quarterly Revenue Share Payment
    
    $
    143,815.13
    
    
    8/9/20083rd Quarter 2008 Quarterly Revenue Share Payment
    
    $
    168,844.36
    
    
    11/10/20084th Quarter 2008 Quarterly Revenue Share Payment
    
    $
    246,005.85
    
    
    3/10/20091st Quarter 2009 Quarterly Revenue Share Payment
    
    $
    286,976.65
    
    
    6/30/2009March 2008  February 2009 Annual Increase Payment
    
    $
    222,322.00
    
    
    6/30/20092nd Quarter 2009 Quarterly Revenue Share Payment
    
    $
    325,514.21
    
    
    9/25/20093rd Quarter 2009 Quarterly Revenue Share Payment
    
    $
    365,194.95
    
    
    12/24/20094th Quarter 2009 Quarterly Revenue Share Payment
    
    $
    414,851.58
    
    
    2/28/20101st Quarter 2010 Quarterly Revenue Share Payment
    
    $
    472,384
    
    
    5/26/2010March 2009  February 2010 Annual Increase Payment
    
    $
    362,202
    
    
    Anticipated in June 2010$
    3,596,900.20
    4




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##### Table of Contents



OUR COMPANY
 Introduction
 th
   Sources of target businesses
  5




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##### Table of Contents



Selection of a target business and structuring of a business combination
  
    
    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.
  Evaluation of the target businesss management
  Competition
  6




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##### Table of Contents



Our Partner Company  Gotham Photo Company
 Products and Services
     Competitive Comparison
   Future Products and Services
  Strategy and Implementation Summary
  Employees
  7




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##### Table of Contents



SEC FILINGS
   OUR CORPORATE INFORMATION
  
 ITEM 1A.
    
    RISK FACTORS
  
 ITEM 1B.
    
    UNRESOLVED STAFF COMMENTS
  
 ITEM 2.
    
    PROPERTIES
    
 ITEM 3.
    
    LEGAL PROCEEDINGS
  
 ITEM 4.
    
    (REMOVED AND RESERVED)
 8




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##### Table of Contents



PART II
 
 ITEM 5.
    
    MARKET FOR REGISTRANTS COMMON EQUITY, RELATED STOCKHOLDER
MATTERS, AND ISSUER PURCHASES OF EQUITY SECURITIES
 MARKET INFORMATION
  HOLDERS
   DIVIDENDS
  EQUITY COMPENSATION PLAN INFORMATION
   9




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##### Table of Contents



Number of SecuritiesRemaining Availablefor Future IssuanceNumber of Securities
    
    
    
    
    
    
    under Equityto be Issued Upon
    
    
    Weighted Average
    
    
    Compensation PlansExercise of
    
    
    Exercise Price of
    
    
    (excluding securitiesOutstanding Options,
    
    
    Outstanding Options,
    
    
    referenced inWarrants 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
    
    
    
    4,798,708Equity compensation
plans not approved
by our stockholders
    
    
    2,310,000
    
    
    $
    0.75
    
    
    
    0
 
 (1)
    
    Equity compensation plans approved by our stockholders consist of our 2006 Long Term
Incentive Plan. RECENT SALES OF UNREGISTERED SECURITIES
     
 ITEM 6.
    
    SELECTED FINANCIAL DATA
  10




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##### Table of Contents



ITEM 7.
    
    MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
 CRITICAL ACCOUNTING ESTIMATES
  Fair Value of Financial Instruments
  Revenue Recognition
  Cash and Cash Equivalents
  Accounts Receivable
   Property and equipment and depreciation
   11




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##### Table of Contents



Goodwill
  Stock-Based Compensation
  Income Taxes
  MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
 Introduction
  Year Ended December 31, 2009 as Compared to Year Ended December 31, 2008
 Assets.
 Liabilities.
 12




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##### Table of Contents



Stockholders Equity (Deficit).
 Revenue and Net Incomes .
 General and Administrative Expenses .
 LIQUIDITY AND CAPITAL RESOURCES
     OFF BALANCE SHEET ARRANGEMENTS
  13




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##### Table of Contents



ITEM 7A.
    
    QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
  
 ITEM 8.
    
    FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
  Report of Independent Registered Public Accounting Firm
    
    
    F-1Consolidated Balance Sheet as of December 31, 2009 and 2008
    
    
    F-2Consolidated Statement of Income for the years ended December 31, 2009 and 2008
    
    
    F-3Consolidated Statement of Changes in Stockholders Equity for the years ended December 31, 2009 and 2008
    
    
    F-4Consolidated Statement of Cash Flows for the years ended December 31, 2009 and 2008
    
    
    F-5Notes to Financial Statements
    
    
    F-6
 
 ITEM 9.
    
    CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
  
 ITEM 9A(T).
    
    CONTROLS AND PROCEDURES
 Conclusion Regarding the Effectiveness of Disclosure Controls and Procedures
  Managements Annual Report on Internal Control over Financial Reporting.
  14




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##### Table of Contents



Change in Internal Controls
  Report of the Companys Independent Registered Public Accounting Firm
  
 ITEM 9B.
    
    OTHER INFORMATION
  15




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##### Table of Contents



PART III
 
 ITEM 10.
    
    DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
 DIRECTORS AND EXECUTIVE OFFICERS
   Name
    
    Age
    
    Position
    
    AppointedJohn 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 2006George G. Dempster
    
    
    70
    
    
    Director
    
    January 2001John Waters
    
    
    64
    
    
    Director
    
    August 2009
 John Salerno, Chief Executive Officer, President, Chairman of the Board, and Director.
 Elisa Luqman, Chief Financial Officer, Executive Vice President, General Counsel, and
Director.
 James J. Charles, Director.
 George G. Dempster, Director.
 John Waters, Director
 16




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##### Table of Contents



COMMITTEES OF THE BOARD
  Audit Committee
  Compensation Committee
  COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT.
  CODE OF ETHICS
  
 ITEM 11.
    
    EXECUTIVE COMPENSATION
 SUMMARY COMPENSATION TABLE
   17




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Current
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Non-EquityOfficers
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Incentive
    
    
    NonqualifiedName &
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Option
    
    
    Plan
    
    
    Deferred
    
    
    All OtherPrincipal
    
    
    
    
    
    Salary
    
    
    Bonus
    
    
    Stock
    
    
    Awards
    
    
    Compensation
    
    
    Compensation
    
    
    Compensation
    
    
    TotalPosition
    
    Year
    
    
    ($)
    
    
    ($)
    
    
    ($)(1)
    
    
    ($)
    
    
    ($)
    
    
    Earnings ($)
    
    
    ($)
    
    
    ($)John Salerno
    
    
    2009
    
    
    
    77,885
    (1)
    
    
    0
    
    
    
    0
    
    
    
    0
    
    
    
    0
    
    
    
    0
    
    
    
    8,739
    (2)
    
    
    86,624CEO, President,
    
    
    2008
    
    
    
    0
    
    
    
    0
    
    
    
    0
    
    
    
    0
    
    
    
    0
    
    
    
    0
    
    
    
    0
    
    
    
    0Chairman &
DirectorElisa Luqman
    
    
    2009
    
    
    
    69,231
    (3)
    
    
    0
    
    
    
    0
    
    
    
    0
    
    
    
    0
    
    
    
    0
    
    
    
    0
    
    
    
    69,231CFO, EVP, General
    
    
    2008
    
    
    
    0
    
    
    
    0
    
    
    
    0
    
    
    
    0
    
    
    
    0
    
    
    
    0
    
    
    
    0
    
    
    
    0Counsel, & Director
 
 (1)
    
    Does not include $200,000 in deferred compensation that was earned prior to
December 31, 2006, and paid during 2009.(2)
    
    Includes $5,766 in health insurance premiums and $4,069 in life insurance
premiums.(3)
    
    Does not include $150,000 in deferred compensation that was earned prior to
December 31, 2006, and paid during 2009. EMPLOYMENT AGREEMENTS WITH NAMED EXECUTIVE OFFICERS
  
 ITEM 12.
    
    SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
AND RELATED STOCKHOLDER MATTERS
 EQUITY COMPENSATION PLAN
  Number of
    
    
    
    
    
    
    Number of SecuritiesSecurities to
    
    
    
    
    
    
    Remaining Availablebe Issued
    
    
    Weighted-Average
    
    
    for Future IssuanceUpon Exercise
    
    
    Exercise Price of
    
    
    Under Equityof Outstanding
    
    
    Outstanding
    
    
    Compensation PlanOptions, Warrants
    
    
    Options, Warrants
    
    
    (Excluding SecuritiesPlan 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.
 18




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##### Table of Contents



SECURITY OWNERSHIP
  Amount and Natureof BeneficialName of Beneficial Owner
    
    Ownership
    
    
    Percent of ClassJohn 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
    %
 
 *
    
    Less than 1.0%1.
    
    Includes: options to purchase 46,900 shares of common stock at $0.01 per share held by John
L. Salerno, Mr. Salernos son; and options to purchase 100,000 shares of common stock at $0.01
per share held by Dean T. Salerno, Mr. Salernos son.2.
    
    Includes 245,000 shares of common stock held by Muhammad Luqman, Ms. Luqmans husband. 
 ITEM 13.
    
    CERTAIN RELATIONSHIPS, RELATED TRANSACTIONS AND DIRECTOR INDEPENDENCE
 RELATED PARTY TRANSACTIONS
    19




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##### Table of Contents



BOARD INDEPENDENCE
  
 ITEM 14.
    
    PRINCIPAL ACCOUNTANT FEES AND SERVICES
  Year Ended
    
    
    Year Ended12/31/ 2009
    
    
    12/31/08Audit Fees
    
    $
    14,000
    
    
    $
    25,000Audit-Related Fees
    
    
    
    
    
    
    Tax Fees
    
    
    
    
    
    
    All Other Fees
    
    
    
    
    
    
    Total
    
    $
    14,000
    
    
    $
    25,000
 Audit Fees
 Audit-Related Fees
 Tax Fees
 All Other Fees
 Overview
 20




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##### Table of Contents



PART IV
 
 ITEM 15.
    
    EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
  Report of Independent Registered Public Accounting Firm
    
    F-1Consolidated Balance Sheet as of December 31, 2009 and 2008
    
    F-2Consolidated Statement of Income for the years ended December 31, 2009 and 2008
    
    F-3Consolidated Statement of Changes in Stockholders Equity for the years ended December 31, 2009 and 2008
    
    F-4Consolidated Statement of Cash Flows for the years ended December 31, 2009 and 2008
    
    F-5Notes to Financial Statements
    
    F-6
  Exhibit No.
    
    Description2.1
    
    
    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 Securities4.3
    
    
    Common Stock Purchase Warrant issued to Roetzel & Andress10.1
    
    
    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 200231.2
    
    
    Certification of the Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 200232.1
    
    
    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. 21




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##### Table of Contents



SIGNATURES
  iGAMBIT, INC.By:
    /s/ John SalernoJohn Salerno, Chief Executive Officer  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
 22




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/s/ Michael F. Albanese, CPA
  F-1




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##### Table of Contents



IGAMBIT INC.  CONSOLIDATED BALANCE SHEETS
 DECEMBER 31,2009
    
    
    2008ASSETSCurrent assetsCash
    
    $
    857,074
    
    
    $
    322,439Accounts receivable
    
    
    56,743
    
    
    
    Prepaid expenses
    
    
    8,838
    
    
    
    Notes receivable  stockholders
    
    
    17,000
    
    
    
    17,000Assets from discontinued operations
    
    
    715,573
    
    
    
    646,488Total current assets
    
    
    1,655,228
    
    
    
    985,927Property and equipment, net
    
    
    895
    
    
    
    1,491Other assetsNotes receivable  stockholders
    
    
    
    
    
    
    198,281Goodwill
    
    
    185,000
    
    
    
    Deposits
    
    
    2,500
    
    
    
    Assets from discontinued operations
    
    
    150,985
    
    
    
    264,477Total other assets
    
    
    338,485
    
    
    
    462,758$
    1,994,608
    
    
    $
    1,450,176LIABILITIES AND STOCKHOLDERS EQUITYCurrent liabilitiesAccounts payable
    
    $
    204,487
    
    
    $
    4,754Loans payable  stockholders
    
    
    2,504
    
    
    
    Total current liabilities
    
    
    206,991
    
    
    
    4,754Long-term liabilitiesLiabilities from discontinued operations
    
    
    
    
    
    
    491,538Total liabilities
    
    
    206,991
    
    
    
    496,292Stockholders equityCommon
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
    
    
    
    22,719Additional paid-in capital
    
    
    2,522,387
    
    
    
    2,135,648Accumulated deficit
    
    
    (758,724
    )
    
    
    (1,204,483
    )Total stockholders equity
    
    
    1,787,617
    
    
    
    953,884$
    1,994,608
    
    
    $
    1,450,176
 F-2




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IGAMBIT INC.  CONSOLIDATED STATEMENTS OF INCOME  YEARS ENDED DECEMBER 31,
 2009
    
    
    2008Sales
    
    $
    173,011
    
    
    $
    Cost of sales
    
    
    47,458
    
    
    
    Gross profit
    
    
    125,553
    
    
    
    Operating expensesGeneral and administrative expenses
    
    
    861,512
    
    
    
    196,589Loss from operations
    
    
    (735,959
    )
    
    
    (196,589
    )Other incomeInterest income
    
    
    3,908
    
    
    
    2,554Loss 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
    
    
    
    553,363Net income
    
    $
    445,759
    
    
    $
    403,393Basic and fully diluted earnings (loss) per common share:Continuing operations
    
    $
    (.02
    )
    
    $
    (.01
    )Discontinued operations, net of tax
    
    $
    .04
    
    
    $
    .03Net earnings per common share
    
    $
    .02
    
    
    $
    .02Weighted average common shares outstanding
    
    
    23,009,029
    
    
    
    22,402,104
 F-3




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##### Table of Contents



IGAMBIT INC.  CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS EQUITY  YEARS ENDED DECEMBER 31, 2009 AND 2008
 AdditionalCommon Stock
    
    
    Paid-in
    
    
    AccumulatedShares
    
    
    Amount
    
    
    Capital
    
    
    Deficit
    
    
    TotalsBalances, December 31, 2007
    
    
    21,737,018
    
    
    $
    21,737
    
    
    $
    1,987,749
    
    
    $
    (1,607,876
    )
    
    $
    401,610Compensation for vested stock options
    
    
    
    
    
    
    
    
    
    
    72,900
    
    
    
    
    
    
    
    72,900Common stock issued in consideration
of cashless exercise of options,
valued at $.01 per share
    
    
    788,100
    
    
    
    788
    
    
    
    7,093
    
    
    
    
    
    
    
    7,881Common stock issued in exercise
of warrants, valued at $.01 per share
    
    
    60,000
    
    
    
    60
    
    
    
    540
    
    
    
    
    
    
    
    600Common stock issued in exercise
of warrants, valued at $.50 per share
    
    
    135,000
    
    
    
    135
    
    
    
    67,365
    
    
    
    
    
    
    
    67,500Common stock retired
    
    
    (1,062
    )
    
    
    (1
    )
    
    
    1
    
    
    
    
    
    
    
    Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    403,393
    
    
    
    403,393Balances, December 31, 2008
    
    
    22,719,056
    
    
    
    22,719
    
    
    
    2,135,648
    
    
    
    (1,204,483
    )
    
    
    953,884Compensation for vested stock options
    
    
    
    
    
    
    
    
    
    
    67,500
    
    
    
    
    
    
    
    67,500Compensation for vested warrants
    
    
    
    
    
    
    
    
    
    
    54,000
    
    
    
    
    
    
    
    54,000Common stock issued in consideration
of cashless exercise of options,
valued at $.01 per share
    
    
    735,000
    
    
    
    735
    
    
    
    6,765
    
    
    
    
    
    
    
    7,500Assets of acquired business
    
    
    
    
    
    
    
    
    
    
    73,974
    
    
    
    
    
    
    
    73,974Common stock issued in business
acquisitions
    
    
    500,000
    
    
    
    500
    
    
    
    49,500
    
    
    
    
    
    
    
    50,000Stock options granted for acquired
business resulting in goodwill
    
    
    
    
    
    
    
    
    
    
    135,000
    
    
    
    
    
    
    
    135,000Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    445,759
    
    
    
    445,759Balances, December 31, 2009
    
    
    23,954,056
    
    
    $
    23,954
    
    
    $
    2,522,387
    
    
    $
    (758,724
    )
    
    $
    1,787,617
 F-4




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##### Table of Contents



IGAMBIT INC.  CONSOLIDATED STATEMENTS OF CASH FLOWS  YEARS ENDED DECEMBER 31,
 2009
    
    
    2008CASH FLOWS FROM OPERATING ACTIVITIES:Net income
    
    $
    445,759
    
    
    $
    403,393Adjustments to reconcile net income to net
cash provided (used) by operating activitiesIncome from discontinued operations
    
    
    (923,739
    )
    
    
    (553,363
    )Depreciation
    
    
    596
    
    
    
    373Stock-based compensation expense
    
    
    121,500
    
    
    
    72,900Cashless exercises of stock options
    
    
    7,500
    
    
    
    7,881Assets 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
    )
    
    
    2,095Net cash used by continuing operating activities
    
    
    (140,258
    )
    
    
    (66,721
    )Net cash provided by discontinued operating activities
    
    
    29,665
    
    
    
    187,811NET CASH PROVIDED (USED) BY OPERATING ACTIVITIES
    
    
    (110,593
    )
    
    
    121,090CASH 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
    
    
    
    434,811NET CASH PROVIDED BY INVESTING ACTIVITIES
    
    
    1,134,262
    
    
    
    306,947CASH FLOWS FROM FINANCING ACTIVITIES:Loans from shareholders
    
    
    2,504
    
    
    
    Proceeds from exercise of warrants
    
    
    
    
    
    
    68,100Net cash provided by continuing financing activities
    
    
    2,504
    
    
    
    68,100Net 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
    
    
    
    281,532CASH  BEGINNING OF YEAR
    
    
    322,439
    
    
    
    40,907CASH  END OF YEAR
    
    $
    857,074
    
    
    $
    322,439SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:Cash paid during the year for:Interest
    
    $
    1,189
    
    
    $
    Income taxes
    
    
    4,698
    
    
    
    67Non-cash investing and financing activities:Stock-based compensation expense
    
    $
    121,500
    
    
    $
    72,900Cashless exercise of common stock options
    
    
    7,500
    
    
    
    7,881Common stock issued in business acquisition resulting in goodwill
    
    
    50,000
    
    
    
    Stock options granted in business acquisition resulting in goodwill
    
    
    135,000
    
    
    
    
 F-5




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##### Table of Contents



IGAMBIT INC.
NOTES TO FINANCIAL STATEMENTS
 Note 1  Organization and Basis of Presentation
  Business Acquisition
  Cash
    
    $
    4,023Accounts receivable
    
    
    66,958Fixed assets
    
    
    2,993$
    73,974
 F-6




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##### Table of Contents



Pro Forma Balance Sheets
 iGambit
    
    
    Jekyll
    
    
    CombinedCurrent assets
    
    $
    1,371,447
    
    
    $
    70,981
    
    
    $
    1,442,428Fixed assets
    
    
    1,044
    
    
    
    2,993
    
    
    
    4,037Other assets
    
    
    153,209
    
    
    
    
    
    
    
    153,209Total assets
    
    
    1,525,700
    
    
    
    73,974
    
    
    
    1,599,674Current liabilities
    
    
    2,121
    
    
    
    
    
    
    
    2,121Long-term liabilities
    
    
    
    
    
    
    
    
    
    
    Total liabilities
    
    
    2,121
    
    
    
    
    
    
    
    2,121Stockholders equity
    
    
    1,523,579
    
    
    
    73,974
    
    
    
    1,597,553Total liabilities and stockholders equity
    
    $
    1,525,700
    
    
    $
    73,974
    
    
    $
    1,599,674
 Pro Forma Statements of Operations
 iGambit
    
    
    Jekyll
    
    
    CombinedRevenue
    
    $
    
    
    
    $
    249,925
    
    
    $
    249,925Cost of sales
    
    
    
    
    
    
    43,151
    
    
    
    43,151Gross profit
    
    
    
    
    
    
    206,774
    
    
    
    206,774General and administrative expenses
    
    
    418,772
    
    
    
    208,965
    
    
    
    627,737Loss from operations
    
    
    (418,772
    )
    
    
    (2,191
    )
    
    
    (420,963
    )Other income
    
    
    7,435
    
    
    
    
    
    
    
    7,435Income tax benefit
    
    
    107,059
    
    
    
    
    
    
    
    107,059Loss from continuing operations
    
    
    (304,278
    )
    
    
    (2,191
    )
    
    
    (306,469
    )Income from discontinued operations
    
    
    744,973
    
    
    
    
    
    
    
    744,973Net income (loss)
    
    $
    440,695
    
    
    $
    (2,191
    )
    
    $
    438,504
 F-7




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##### Table of Contents



Pro Forma Balance Sheets
 iGambit
    
    
    Jekyll
    
    
    CombinedCurrent assets
    
    $
    985,927
    
    
    $
    80,650
    
    
    $
    1,066,577Fixed assets
    
    
    1,491
    
    
    
    
    
    
    
    1,491Other assets
    
    
    462,758
    
    
    
    
    
    
    
    462,758Total assets
    
    
    1,450,176
    
    
    
    80,650
    
    
    
    1,530,826Current liabilities
    
    
    4,754
    
    
    
    3,929
    
    
    
    8,683Long-term liabilities
    
    
    491,538
    
    
    
    
    
    
    
    491,538Total liabilities
    
    
    496,292
    
    
    
    3,929
    
    
    
    500,221Stockholders equity
    
    
    953,884
    
    
    
    76,721
    
    
    
    1,030,605Total liabilities and stockholders equity
    
    $
    1,450,176
    
    
    $
    80,650
    
    
    $
    1,530,826
 Pro Forma Statements of Operations
 iGambit
    
    
    Jekyll
    
    
    CombinedRevenue
    
    $
    
    
    
    $
    359,590
    
    
    $
    359,590Cost of sales
    
    
    
    
    
    
    62,100
    
    
    
    62,100Gross profit
    
    
    
    
    
    
    297,490
    
    
    
    297,490General and administrative expenses
    
    
    123,689
    
    
    
    280,198
    
    
    
    403,887(Loss) income from operations
    
    
    (123,689
    )
    
    
    17,292
    
    
    
    (106,397
    )Other income
    
    
    2,554
    
    
    
    
    
    
    
    2,554Income tax benefit
    
    
    44,065
    
    
    
    
    
    
    
    44,065(Loss) income from continuing operations
    
    
    (77,070
    )
    
    
    17,292
    
    
    
    (59,778
    )Income from discontinued operations
    
    
    553,363
    
    
    
    
    
    
    
    553,363Net income
    
    $
    476,293
    
    
    $
    17,292
    
    
    $
    493,585
 Merger Transaction
  Note 2  Discontinued Operations
 Sale of Business
  F-8




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##### Table of Contents



2009
    
    
    2008ASSETSCurrent:Accounts receivable
    
    $
    713,732
    
    
    $
    367,430Deferred income taxes
    
    
    
    
    
    
    279,058Noncurrent:Restricted cash
    
    
    150,985
    
    
    
    165,727Deferred income taxes
    
    
    
    
    
    
    98,750Assets of discontinued operations
    
    $
    864,717
    
    
    $
    910,965LIABILITIESNoncurrent:Prepaid contingency
    
    $
    
    
    
    $
    141,538Deferred compensation
    
    
    
    
    
    
    350,000Liabilities of discontinued operations
    
    $
    
    
    
    $
    491,538
 Accounts Receivable
  Restricted Cash
  Prepaid Contingency
  Deferred Compensation
  F-9




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##### Table of Contents



Note 3  Summary of Significant Accounting Policies
 Principles of Consolidation
  Use of Estimates in the Preparation of Financial Statements
  Fair Value of Financial Instruments
  Revenue Recognition
   Cash and Cash Equivalents
  Accounts Receivable
  Property and
equipment and depreciation
  F-10




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##### Table of Contents



Goodwill
  Stock-Based Compensation
  Income Taxes
  Note 4  Earnings Per Common Share
 Earnings
Per Share
 Year EndedDecember 31,2009
    
    
    2008Stock options
    
    
    1,796,900
    
    
    
    1,046,900Common stock warrants
    
    
    3,085,000
    
    
    
    835,000Total shares excluded from calculation
    
    
    4,881,900
    
    
    
    1,881,900
 F-11




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##### Table of Contents



Note 5  Stock Based Compensation
 CompensationStock Compensation
    WeightedAverageWeighted
    
    
    RemainingAverage
    
    
    ContractualAverage
    
    
    Grant-Date
    
    
    LifeWarrants
    
    
    Exercise Price
    
    
    Fair Value
    
    
    (Years)Warrants outstanding
at January 1, 2008
    
    
    1,652,518
    
    
    $
    0.67
    
    
    $
    0.10Granted during 2008
    
    
    60,000
    
    
    
    0.01
    
    
    
    0.10Exercised during 2008
    
    
    (195,000
    )
    
    
    0.35
    
    
    
    0.10Expired during 2008
    
    
    (682,518
    )
    
    
    0.32
    
    
    
    0.10Warrants outstanding
at December 31, 2008
    
    
    835,000
    
    
    
    0.99
    
    
    
    0.10Granted during 2009
    
    
    2,250,000
    
    
    
    0.77
    
    
    
    0.10Warrants outstanding
at December 31, 2009
    
    
    3,085,000
    
    
    $
    0.83
    
    
    $
    0.10
    
    
    
    7.07
  F-12




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##### Table of Contents



WeightedAverageWeighted
    
    
    RemainingAverage
    
    
    ContractualAverage
    
    
    Grant-Date
    
    
    LifeWarrants
    
    
    Exercise Price
    
    
    Fair Value
    
    
    (Years)Options outstanding
at January 1, 2008
    
    
    1,835,000
    
    
    $
    0.01
    
    
    $
    0.10Exercised during 2008
    
    
    (788,100
    )
    
    
    0.01
    
    
    
    0.10Options outstanding
at December 31, 2008
    
    
    1,046,900
    
    
    
    0.01
    
    
    
    0.10Exercised during 2009
    
    
    (750,000
    )
    
    
    0.01
    
    
    
    0.10Granted during 2009
    
    
    1,500,000
    
    
    
    0.01
    
    
    
    0.10Options outstanding
at December 31, 2009
    
    
    1,796,900
    
    
    $
    0.01
    
    
    $
    0.10
    
    
    
    5.85
  Years ended December 31,2009
    
    
    2008Weighted average risk free rate
    
    
    4.87
    %
    
    
    4.64
    %Average expected life in years
    
    
    6.6
    %
    
    
    5.8
    %Expected dividends
    
    None
    
    NoneVolatility
    
    
    20.0
    %
    
    
    20.0
    %Forfeiture rate
    
    
    0
    %
    
    
    0
    %
 Note 6  Common Stock Issued
    F-13




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##### Table of Contents



Note 7  Income Taxes
  2009
    
    
    2008From operations:Continuing operations:Current tax expense (benefit):
    
    $
    
    
    
    $Federal
    
    
    (254,578
    )
    
    
    (46,228
    )State and local
    
    
    507
    
    
    
    2,163(254,071
    )
    
    
    (44,065
    )Deferred tax expense (benefit):
    
    
    
    
    
    
    Total from continuing operations
    
    
    (254,071
    )
    
    
    (44,065
    )Discontinued operations:Current tax expense (benefit):Federal
    
    
    128,827
    
    
    
    State and local
    
    
    45,773
    
    
    
    174,600
    
    
    
    Deferred tax expense (benefit):Federal
    
    
    508,622
    
    
    
    285,370State and local
    
    
    123,676
    
    
    
    75,916632,298
    
    
    
    361,286Total from discontinued operations
    
    
    806,898
    
    
    
    361,286Total
    
    $
    552,827
    
    
    $
    317,221
  Year EndedDecember 31,2009
    
    
    2008Statutory tax rate
    
    
    34.0
    %
    
    
    34.0
    %Effect of
State income taxes, net of
Federal income tax benefit
    
    
    5.3
    %
    
    
    5.3
    %Effective tax rate
    
    
    39.5
    %
    
    
    39.5
    %
    F-14




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##### Table of Contents



2009
    
    
    2008Current:
    
    $
    
    
    
    $Net operating loss carryforwards
    
    
    
    
    
    
    279,058Non-current:Net operating loss carryforwards
    
    
    
    
    
    
    Deferred compensation
    
    
    
    
    
    
    98,750$
    
    
    
    $
    377,808
  Note 8  Risks and Uncertainties
 Contingency Payment Income  Discontinued Operations
  Uninsured Cash Balances
  Note 9  Related Party Transactions
 Notes Receivable  Stockholders
    Loans Payable  Stockholders
  F-15




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##### Table of Contents



Lease Commitment
    Note 10  Commitments and Contingencies
  Note 11  Recent Accounting Pronouncements
  Business
Combinations Contingencies"
 Fair Value
Measurements and Disclosures" Fair Value Measurements and Disclosures: Overall: Implementation Guidance and Illustrations.
 Intangibles-Goodwill and Other
 F-16




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##### Table of Contents



Intangibles-Goodwill and Other Business Combinations Fair Value
Measurements and Disclosures"
 Financial
Instruments
 Fair Value
Measurements and Disclosures"
 Subsequent
Events" Subsequent Events Amendments to Certain Recognition and Disclosure Requirements"
 Fair Value Measurements and Disclosures -
Measuring Liabilities at Fair Value" Fair Value Measurements and Disclosures
 F-17




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##### Table of Contents



New Accounting Pronouncements Not Yet Effective
 Certain
Arrangements that Include Software Elements, (amendments to ASC Topic 985, Software)
 Improvements to Financial Reporting by
Enterprises Involved with Variable Interest Entities Consolidation
 Improving Disclosures About Fair Value
Measurements" Fair Value Measurements and Disclosures
 Consolidations, Transfers and Servicing"
 F-18