SEC Filing Summary: iGambit, Inc. (10-Q)
Business Context and Reporting Period
This is a Quarterly Report (Form 10-Q) for iGambit, Inc. for the period ended June 30, 2010. The Company is a smaller reporting company incorporated in Delaware. Its primary operating subsidiary is Gotham Innovation Lab, Inc., which provides media technology services to the real estate industry. The Company also generates significant income from discontinued operations related to a 2006 asset sale to Digi-Data Corporation.
Key Financial Metrics (Six Months Ended June 30, 2010)
| Metric | Value |
|---|---|
| Revenue (Continuing Operations) | $413,659 |
| Gross Profit | $269,334 (65.1% Margin) |
| Net Income | $361,024 |
| Net Income from Discontinued Operations | $720,447 |
| Loss from Continuing Operations | ($359,423) |
| Cash and Cash Equivalents | $967,518 |
| Total Assets | $2,520,873 |
| Total Liabilities | $372,232 |
| Stockholders' Equity | $2,148,641 |
| Net Cash Used in Operating Activities | ($643,648) |
Material Changes vs. Prior Period
- Revenue Growth: Continuing operations revenue increased from $0 in the prior year period to $413,659, driven entirely by the operations of the Gotham subsidiary.
- Expense Surge: General and administrative expenses increased significantly to $858,740 (from $139,819 in the prior year), primarily due to payroll for new officers, SEC registration costs, and Gotham operational costs. This resulted in a loss from continuing operations of $359,423.
- Discontinued Operations: Income from discontinued operations (contingency payments from Digi-Data) increased to $720,447 from $494,392 in the prior year period.
- Liquidity: Cash balances increased by $110,444 to $967,518, largely funded by investing cash flows from discontinued operations ($720,034) and a related party loan ($34,058).
- Tax Payments: Cash paid for income taxes rose sharply to $384,934 from $3,344 in the prior year, as the Company exhausted its Net Operating Loss carryovers.
Outlook, Risks, and Management Commentary
- Revenue Dependency: Management highlights a critical risk: the Company's primary source of income is contingency payments from Digi-Data Corporation. If Digi-Data fails to generate sufficient revenue or ceases to exist, the Company's ability to continue as a going concern is in substantial doubt.
- Agreement Expiration: The revenue-sharing agreement with Digi-Data is set to expire on February 28, 2011.
- Subsidiary Performance: While Gotham generated revenue, it is not yet cash flow positive, reporting a net loss of $152,549 for the six months ended June 30, 2010.
- Future Acquisitions: On July 20, 2010 (subsequent to the period end), the Company entered a letter of intent to acquire Allied Airbus, Inc., contingent on a definitive agreement by September 30, 2010.
- Capital Needs: The Company anticipates raising capital in private markets to fund Gotham's expansion or future acquisitions, though no guarantees exist regarding terms or availability.
Investor Verification Checklist
- Digi-Data Revenue Health: Verify the financial stability and revenue growth of Digi-Data Corporation, as iGambit's profitability relies heavily on these contingent payments.
- Agreement Terms: Confirm the specific terms and renewal possibilities of the Digi-Data agreement expiring in February 2011.
- Gotham Cash Flow: Monitor when, if ever, the Gotham subsidiary achieves positive cash flow to offset the high administrative burn rate.
- Allied Airbus Acquisition: Track the status of the letter of intent with Allied Airbus, Inc., including the potential issuance of 2.75 million shares and assumption of debt.
- Related Party Transactions: Review the $34,058 note payable to a related party and the $17,000 notes receivable from stockholders for terms and repayment schedules.