Document_and_Entity_Informatio
Document and Entity Information | 3 Months Ended | |
Mar. 31, 2014 | 15-May-14 | |
Document And Entity Information | ' | ' |
Entity Registrant Name | 'Galaxy Gaming, Inc. | ' |
Entity Central Index Key | '0000013156 | ' |
Document Type | '10-Q | ' |
Document Period End Date | 31-Mar-14 | ' |
Amendment Flag | 'false | ' |
Current Fiscal Year End Date | '--12-31 | ' |
Is Entity a Well-known Seasoned Issuer? | 'No | ' |
Is Entity a Voluntary Filer? | 'No | ' |
Is Entity's Reporting Status Current? | 'Yes | ' |
Entity Filer Category | 'Smaller Reporting Company | ' |
Entity Common Stock, Shares Outstanding | ' | 38,485,591 |
Document Fiscal Period Focus | 'Q1 | ' |
Document Fiscal Year Focus | '2014 | ' |
Balance_Sheets
Balance Sheets (USD $) | Mar. 31, 2014 | Dec. 31, 2013 |
Current assets: | ' | ' |
Cash and cash equivalents | $362,900 | $438,502 |
Restricted cash | 253,455 | 244,416 |
Accounts receivables, net allowance for bad debts of $36,770 and $36,770 | 1,325,016 | 1,273,797 |
Prepaid expenses | 106,171 | 34,973 |
Inventory | 297,859 | 297,480 |
Note receivable related party, current portion | 18,487 | 18,212 |
Deferred tax asset | 27,119 | 27,119 |
Other current assets | 37,226 | 50,510 |
Total current assets | 2,428,233 | 2,385,009 |
Property and equipment, net | 49,866 | 44,952 |
Products leased and held for lease, net | 114,751 | 85,883 |
Intangible assets, net | 16,422,012 | 16,811,511 |
Goodwill | 1,091,000 | 1,091,000 |
Note receivable related party, net of current portion | 364,811 | 365,086 |
Deferred tax assets, net of current portion | 436,669 | 436,669 |
Other assets, net | 48,133 | 7,245 |
Total assets | 20,955,475 | 21,227,355 |
Current liabilities: | ' | ' |
Accounts payable | 292,326 | 241,754 |
Accrued expenses | 329,519 | 322,402 |
Income taxes payable | 101,462 | 34,655 |
Deferred revenue | 554,855 | 526,922 |
Jackpot liabilities | 257,112 | 246,522 |
Notes payable, current portion | 3,095,759 | 2,929,918 |
Total current liabilities | 4,631,033 | 4,302,173 |
Notes payable, net of debt discount, net of current portion | 14,884,619 | 15,645,939 |
Total liabilities | 19,515,652 | 19,948,112 |
Stockholders equity | ' | ' |
Preferred stock, 10,000,000 shares, $.001 par value preferred stock authorized; 0 shares issued and outstanding | ' | ' |
Common stock, 65,000,000 shares authorized; $.001 par value 38,485,591 and 38,310,591 shares issued and outstanding | 38,486 | 38,311 |
Additional paid-in capital | 2,426,738 | 2,330,676 |
Stock warrants | 147,504 | 190,053 |
Accumulated deficit | -851,023 | -1,002,188 |
Accumulated other comprehensive income (loss) | -321,882 | -277,609 |
Total stockholders equity | 1,439,823 | 1,279,243 |
Total liabilities and stockholders equity | $20,955,475 | $21,227,355 |
Balance_Sheets_Parenthetical
Balance Sheets (Parenthetical) (USD $) | Mar. 31, 2014 | Dec. 31, 2013 |
Statement of Financial Position [Abstract] | ' | ' |
Accounts receivables, net allowance for bad debts | $36,770 | $36,770 |
Preferred Stock, Shares Authorized | 10,000,000 | 10,000,000 |
Preferred Stock, Par Value | $0.00 | $0.00 |
Preferred Stock, Issued and outstanding | 0 | 0 |
Common Stock, shares authorized | 65,000,000 | 65,000,000 |
Common Stock, par value (in dollars per share) | $0.00 | $0.00 |
Common Stock, shares issued and outstanding | 38,485,591 | 38,310,591 |
Statements_of_Operations
Statements of Operations (USD $) | 3 Months Ended | |
Mar. 31, 2014 | Mar. 31, 2013 | |
Revenue: | ' | ' |
Product leases and royalties | $2,260,809 | $1,889,430 |
Product sales and service | 4,002 | 6,948 |
Total revenue | 2,264,811 | 1,896,378 |
Costs and expenses: | ' | ' |
Cost of ancillary products and assembled components | 19,320 | 27,251 |
Selling, general and administrative | 1,206,345 | 957,583 |
Research and development | 113,336 | 100,445 |
Depreciation | 14,293 | 10,159 |
Amortization | 389,499 | 397,226 |
Total costs and expenses | 1,742,793 | 1,492,664 |
Income (loss) from operations | 522,018 | 403,714 |
Other income (expense): | ' | ' |
Interest income | 5,627 | 5,863 |
Interest expense | -283,237 | -257,017 |
Gain on settlement | ' | ' |
Total other income (expense) | -277,610 | -251,154 |
Income before provision for income taxes | 244,408 | 152,560 |
Provision for income taxes | -93,243 | -48,763 |
Net income | $151,165 | $103,797 |
Basic income per share | $0 | $0 |
Diluted income per share | $0 | $0 |
Weighted average shares outstanding, Basic | 38,380,816 | 38,310,591 |
Weighted average shares outstanding, Diluted | 38,409,600 | 38,310,591 |
Statements_of_Comprehensive_In
Statements of Comprehensive Income (Loss) (USD $) | 3 Months Ended | |
Mar. 31, 2014 | Mar. 31, 2013 | |
Statements Of Comprehensive Income Loss | ' | ' |
Net income | $151,165 | $103,797 |
Other comprehensive income (loss): | ' | ' |
Foreign currency translation adjustments, net of tax | -44,273 | 517,030 |
Total comprehensive income | $106,892 | $620,827 |
Statements_of_Cash_Flows
Statements of Cash Flows (USD $) | 3 Months Ended | |
Mar. 31, 2014 | Mar. 31, 2013 | |
Cash flows from operating activities: | ' | ' |
Net income for the period | $151,165 | $103,797 |
Adjustments to reconcile net income to net cash provided by operating activities: | ' | ' |
Depreciation expense | 14,293 | 10,159 |
Amortization expense | 389,499 | 397,226 |
Amortization of debt discount | 52,158 | 52,158 |
Deferred income tax provision | ' | 48,763 |
Share-based compensation | 53,688 | 1,451 |
Changes in operating assets and liabilities: | ' | ' |
Increase in restricted cash | -9,039 | -5,145 |
(Increase) decrease in accounts receivable | -51,081 | 31,325 |
Decrease (increase) in other current assets | 13,284 | -6,264 |
Increase in inventory | -36,929 | -111,779 |
(Increase) decrease in prepaid expenses | -94,198 | 10,841 |
(Increase) in other long-term assets | -18,794 | ' |
Increase (decrease) in accounts payable | 50,547 | -23,048 |
Increase (decrease) in accrued expenses | 7,359 | -57,824 |
Increase in income taxes payable | 92,468 | ' |
Increase in deferred revenue | 27,933 | 4,023 |
Increase in jackpot liabilities | 10,590 | 13,772 |
Net cash provided by operating activities | 652,943 | 469,455 |
Cash flows from investing activities: | ' | ' |
Acquisition of property and equipment | -10,619 | -2,791 |
Payments received on note receivable | ' | 4,177 |
Net cash (used in) provided by investing activities | -10,619 | 1,386 |
Cash flows from financing activities: | ' | ' |
Principal payments on notes payable | -722,572 | -571,048 |
Net cash used in financing activities | -722,572 | -571,048 |
Effect of exchange rate changes on cash | 4,646 | -7,474 |
Net decrease in cash and cash equivalents | -75,602 | -107,681 |
Cash and cash equivalents beginning of period | 438,502 | 398,424 |
Cash and cash equivalents end of period | 362,900 | 290,743 |
Supplemental cash flow information: | ' | ' |
Cash paid for interest | 283,237 | 257,017 |
Inventory transferred to leased assets | 36,550 | 13,231 |
Cash paid for income taxes | ' | ' |
Supplemental non-cash financing activities information: | ' | ' |
Effect of exchange rate on note payable in foreign currency | $74,935 | $596,748 |
DESCRIPTION_OF_BUSINESS
DESCRIPTION OF BUSINESS | 3 Months Ended |
Mar. 31, 2014 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | ' |
DESCRIPTION OF BUSINESS | ' |
Unless the context indicates otherwise, references to “Galaxy Gaming, Inc.,” “we,” “us,” “our,” or the “Company,” refers to Galaxy Gaming, Inc., a Nevada corporation. “GGLLC” refers to Galaxy Gaming, LLC, a Nevada limited liability company that was a predecessor of the Company’s business, but is not directly associated with Galaxy Gaming, Inc. | |
Description of business. We are engaged in the business of designing, developing, manufacturing and/or acquiring proprietary casino table games and associated technology, platforms and systems for the global gaming industry. Beginning in 2011, we expanded our product line with the addition of fully automated table games, known as e-Tables and separately, we entered into agreements to license our content for use by internet gaming operators. Casinos use our proprietary products to enhance their gaming floor operations and improve their profitability, productivity and security, as well as offer popular cutting-edge gaming entertainment content and technology to their players. We market our products to land-based, riverboat and cruise ship gaming establishments and to internet gaming companies. The game concepts and the intellectual property associated with these games are typically protected by patents, trademarks and/or copyrights. We market our products primarily via our internal sales force to casinos throughout North America, the Caribbean, the British Isles, Europe, Africa and to cruise ships and internet gaming sites worldwide. We currently have an installed base of our products on over 3,000 gaming tables located in over 500 casinos, which positions us as the second largest provider of proprietary table games in the world. | |
Revenues consist of primarily recurring royalties received from our clients for the licensing of our game content and other products. These recurring revenues generally have few direct costs thereby generating high gross profit margins. In lieu of reporting as gross profit, this amount would be comparable to revenues less cost of ancillary products and assembled components on our financial statements. Additionally, we receive non-recurring revenue from the sale of associated products. | |
We group our products into three product categories we classify as “Proprietary Table Games,” “Enhanced Table Systems” and “e-Tables.” Our product categories are summarized below. Additional information regarding our products may be found on our web site, www.galaxygaming.com. Information found on the web site should not be considered part of this report. | |
Proprietary Table Games. We design, develop and deliver our Proprietary Table Games to enhance our casino clients’ table game operations. Casinos use our Proprietary Table Games in lieu of those games in the public domain (e.g. Blackjack, Craps, Roulette, etc.) because of their popularity with players and to increase profitability. Our Proprietary Table Games are grouped into two product types we call “Side Bets” and “Premium Games.” Side Bets are proprietary features and wagering schemes typically added to public domain games such as poker, baccarat, pai gow poker, craps and blackjack table games. Examples of side bets include such popular titles as Lucky Ladies, 21+3 and Bonus Craps. Premium Games are unique, stand-alone games with their own unique set of rules and strategies. Examples of Premium Games include such popular titles as Texas Shootout, Three Card Poker, Emperor’s Challenge, High Card Flush and WPT Heads’Up Hold’em. Typically, Premium Games command a higher price point per unit than Side Bets. | |
Enhanced Table Systems. Enhanced Table Systems are electronic enhancements used on casino table games to add to player appeal and enhance game security. We include in this product category our Bonus Jackpot System, our Inter-Casino Jackpot System and our MEGA-Share. | |
Our Bonus Jackpot System is designed to compete with our competitors’ progressive jackpot systems and contains special features designed to further enhance the table game player’s experience and in turn, the casino’s profit. The Bonus Jackpot System consists of two independent components known as the Bet Tabulator System, which is used to detect players’ wagers and TableVision, which is an electronic display attached to a gaming table. Our current version of the Bonus Jackpot System is known as the “Andromeda Series.” Advancements in the Andromeda Series includes the ability for two-way communication between gaming tables located anywhere in the world and one or more data processing centers. Currently known as our Inter-Casino Jackpot System, we believe this achievement for casino table games was the first of its kind in the world. The availability of the data processing centers is the result of an agreement we entered into with Amazon Web Services, a unit of Amazon.com. In addition, our clients may use our Andromeda Series to communicate with their data center or internal server using their private network. The Andromeda Series allows up to 16 player positions and 6 betting positions per player. The Andromeda Series was the first of its kind, allowing for the most sensors to be placed on a single gaming gable. Through the TableVision component, the Andromeda Series includes the ability to keep track of and display more than one jackpot. | |
Our Inter-Casino Jackpot System leverages the capabilities of our Bonus Jackpot System to connect and/or aggregate bonus or progressive jackpots from multiple casinos into a common network. This methodology often referred to as a “wide area progressive” has long been practiced in the slot machine industry, but was first introduced to table games in Nevada by us in April 2011. | |
MEGA-Share is a game play methodology invented by us that allows a player of one of our table games to share in the winnings of a jackpot together with other players. An example of this concept would be when multiple table game players are playing in a casino and one player obtains a winning hand entitling them to a jackpot, the event also triggers a second MEGA-Share jackpot that is divided among all players who placed a MEGA-Share qualifying wager. MEGA-Share rewards other players playing on other tables, other games, or even in other casinos with a share of a second jackpot simply for having a wager placed at the time another player won the main jackpot. | |
e-Tables. In February 2011, we entered into a definitive agreement to license the worldwide rights, excluding Oklahoma, Kentucky and the Caribbean, to the TableMAX e-Table system and simultaneously obtained the e-Table rights to the casino table games Caribbean Stud, Caribbean Draw, Progressive Blackjack, Texas Hold’em Bonus and Blackjack Bullets. See Note 16. The TableMAX e-Table system is a fully automated, multi-player electronic table game platform which does not need a human dealer. These platforms allow us to offer our Proprietary Table Game content in markets where live table games are not permitted. The e-Table product enables automation of certain components of traditional table games such as data collection, placement of bets, collection of losing bets and payment of winning bets. This automation provides benefits to both casino operators and players, including greater security and faster speed of play, reduced labor and other game related costs and increased profitability. | |
SIGNIFICANT_ACCOUNTING_POLICIE
SIGNIFICANT ACCOUNTING POLICIES | 3 Months Ended | ||||||
Mar. 31, 2014 | |||||||
Accounting Policies [Abstract] | ' | ||||||
SIGNIFICANT ACCOUNTING POLICIES | ' | ||||||
This summary of our significant accounting policies is presented to assist in understanding our financial statements. The financial statements and notes are representations of our management team, who are responsible for their integrity and objectivity. These accounting policies conform to Generally Accepted Accounting Principles (“GAAP”) and have been consistently applied to the preparation of the financial statements. | |||||||
Basis of presentation. The accompanying unaudited interim financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America and the rules of the Securities and Exchange Commission (“SEC”), and should be read in conjunction with the audited financial statements and notes thereto contained herein and in our Form 10-K filed with the SEC as of and for the year ended December 31, 2013. In the opinion of management, all adjustments necessary in order for the financial statements to be not misleading have been reflected herein. The results of operations for interim periods are not necessarily indicative of the results to be expected for the full year. | |||||||
Basis of accounting. The financial statements have been prepared on the accrual basis of accounting in conformity with accounting principles generally accepted in the United States of America. Revenues are recognized as income when earned and expenses are recognized when they are incurred. We do not have significant categories of cost as our income is recurring with high margins. Expenses such as wages, consulting expenses, legal, regulatory and professional fees and rent are recorded when the expense is incurred. | |||||||
Cash and cash equivalents. We consider cash on hand, cash in banks, certificates of deposit, and other short-term securities with maturities of three months or less when purchased, as cash and cash equivalents. Our bank accounts are deposited in insured institutions. The funds are insured up to $250,000 per account. To date, we have not experienced uninsured losses. | |||||||
Restricted cash. We are required by gaming regulation to maintain sufficient reserves in restricted accounts to be used for the purpose of funding payments to winners of our jackpots offered. Compliance with restricted cash requirements for jackpot funding is reported to gaming authorities in various jurisdictions. | |||||||
Inventory. Inventory consists of ancillary products such as signs, layouts, and bases for the various games and electronic devices and components to support our Enhanced Table Systems. Inventory value is determined by the average cost method and management maintains inventory levels based on historical and industry trends. We regularly assess inventory quantities for excess and obsolescence primarily based on forecasted product demand. See Note 5. | |||||||
Products leased and held for lease. We provide products whereby we maintain ownership and charge a fee for the use of the product. Since we retain title to the equipment, we classify these assets as “products leased and held for lease” and they are shown on the accompanying balance sheets. These assets are stated at cost, net of depreciation. Depreciation on leased products is calculated using the straight-line method over a three year period. | |||||||
Property and equipment. Property and equipment are being depreciated over their estimated useful lives, 3 to 5 years, using the straight-line method of depreciation for book purposes. | |||||||
Intellectual property and intangible assets. These intellectual property and intangible assets have finite lives and are being amortized using the straight-line method over their economic useful lives, five to thirty years. Material assets added over the past several years are as follows: | |||||||
Client installation base | 60 months | ||||||
Patents | 87 - 132 months | ||||||
Trademarks | 144 – 360 months | ||||||
Client relationships | 264 months | ||||||
The intangible assets are analyzed for potential impairment whenever events or changes in circumstances indicate the carrying value may not be recoverable. | |||||||
Goodwill. A goodwill balance of $1,091,000 was created as a result of the PTG asset acquisition. This asset will be assessed for impairment at least annually and if found to be impaired, its carrying amount will be reduced and an impairment loss will be recognized. | |||||||
Impairment of long-lived assets. We continually monitor events and changes in circumstances that could indicate carrying amounts of long-lived assets may not be recoverable. When such events or changes in circumstances are present, we assess the recoverability of long-lived assets by determining whether the carrying value of such assets will be recovered through undiscounted expected future cash flows. If the total of the future cash flows is less than the carrying amount of those assets, we recognize an impairment loss based on the excess of the carrying amount over the fair value of the assets. Assets to be disposed of are reported at the lower of the carrying amount or the fair value less costs to sell. | |||||||
Fair value of financial instruments. The fair value of cash and cash equivalents, restricted cash, accounts receivable, prepaid expenses, other current assets, inventory, notes receivable-related party, deferred tax assets, accounts payable, accrued expenses, deferred revenue, jackpot liabilities and notes payable approximates the carrying amount of these financial instruments due to their short-term nature. The fair value of long-term debt, which approximates its carrying value, is based on current rates at which we could borrow funds with similar remaining maturities. | |||||||
Concentration of risk. We are exposed to risks associated with clients who represent a significant portion of total revenues. As of March 31, 2014 and 2013, we had the following client revenue concentrations: | |||||||
Location | 2014 Revenue | 2013 Revenue | |||||
Client A | United Kingdom | 17.00% | 6.60% | ||||
Client B | North America | 15.30% | 12.50% | ||||
Client C | United Kingdom | 11.30% | 8.40% | ||||
Client D | North America | 5.00% | 4.70% | ||||
We are also exposed to risks associated with the expiration of our patents. In 2015, domestic and international patents will expire on two of our products, which account for approximately $1,298,735 or 57.4% of our revenue for the three months ended March 31, 2014. | |||||||
Revenue recognition. Revenue is primarily derived from the licensing of our products and intellectual property. Consistent with our strategy, revenue is generated from negotiated month-to-month recurring licensing fees or the performance of our products, or both. Revenue from the sale of lifetime licenses, under which we have no continuing obligation, is recorded on the effective date of the license agreement. Revenue from the sale of equipment or ancillary products is recorded in accordance with the contractual shipping terms. | |||||||
Depending upon the product and negotiated terms, our clients may be invoiced monthly in advance, monthly in arrears or quarterly in arrears for the licensing of our products. If billed in advance, the advance billings are recorded as deferred revenue on our balance sheet. If billed in arrears, we recognize the corresponding preceding period’s revenue upon invoicing at the subsequent date. Generally, we begin earning revenue with the installation or “go live” date of the associated product in our clients’ establishment. The monthly recurring invoices are based on executed agreements with each client. | |||||||
Additionally, clients may be invoiced for product sales at the time of shipment or delivery of the product. Revenue from the sale of our associated products is recognized when the following criteria are met: | |||||||
-1 | Persuasive evidence of an arrangement between us and our client exists; | ||||||
-2 | Shipment has occurred; | ||||||
-3 | The price is fixed and or determinable; and | ||||||
-4 | Collectability is reasonably assured or probable. | ||||||
The combination of hardware and software included in our Enhanced Table Systems and e-Tables are essential to the operation of the respective systems. As such, we do not segregate the portion of revenue between manufactured equipment and any software or electronic devices needed to use the equipment when the system is provided. We do not market the software separately from the equipment. | |||||||
Costs of ancillary products and assembled components. Ancillary products include paytables (display of payouts), bases, layouts, signage and other items as they relate to support specific proprietary games in connection with the licensing of our games. Assembled components represent the cost of the equipment, devices and incorporated software used to support the Bonus Jackpot System. | |||||||
Research and development. We incur research and development costs to develop our new and next-generation products. Our products reach technological feasibility shortly before the products are released and therefore R&D costs are expensed as incurred. Employee related costs associated with product development are included in R&D costs. | |||||||
Foreign currency translation. For non-US functional accounts, assets and liabilities are translated at exchange rates in effect at the balance sheet date, and income and expense accounts at the average exchange rates for the year. Resulting currency translation adjustments are recorded as a separate component of shareholders’ equity. We record foreign currency transactions at the exchange rate prevailing at the date of the transaction with resultant gains and losses being included in results of operations. Realized foreign currency transaction gains and losses have not been significant for any period presented. | |||||||
Income taxes. We record deferred tax assets and liabilities based on temporary differences between the financial reporting and tax bases of assets and liabilities, applying enacted tax rates expected to be in effect for the year in which the differences are expected to reverse. We reduce deferred tax assets by a valuation allowance when it is more likely than not that some or all of the deferred tax assets will not be realized. | |||||||
Our provision for income taxes includes interest and penalties related to uncertain tax positions. We only recognize the tax benefit from an uncertain tax position if it is more likely than not that the tax position will be sustained on examination by the taxing authorities, based on the technical merits of the position. The tax benefits recognized in the financial statements from such positions are then measured based on the largest benefit that has a greater than 50% likelihood of being realized upon ultimate settlement. | |||||||
Basic income (loss) per share. Basic earnings per share is calculated by dividing net income by the weighted average number of common shares issued and outstanding during the year. Diluted earnings per share is similar to basic, except that the weighted average number of shares outstanding is increased by the potentially dilutive effect of outstanding stock options and warrants, if applicable, during the year, using the treasury stock method. | |||||||
Stock-based compensation. We measure and recognize all stock-based compensation, including restricted stock and stock-based awards to employees, under the fair value method. We measure the fair value of stock-based awards using the Black-Scholes model and restricted shares using the grant date fair value of the stock. Compensation is attributed to the periods of associated service and such expense is recognized on a straight-line basis over the vesting period of the awards. Forfeitures are estimated at the time of grant, with such estimate updated when the expected forfeiture rate changes. | |||||||
Use of estimates and assumptions. We are required to make estimates, judgments and assumptions that we believe are reasonable based on our historical experience, contract terms, observance of known trends in our company and the industry as a whole, and information available from other outside sources. Our estimates affect reported amounts for assets, liabilities, revenues, expenses and related disclosures. Actual results may differ from initial estimates. | |||||||
Reclassifications. Certain accounts and financial statement captions in the prior periods have been reclassified to conform to the current period financial statements. | |||||||
Recently adopted accounting standards - adopted | |||||||
In March 2013, the Financial Accounting Standards Board (“FASB”) issued an Accounting Standards Update (“ASU”) requiring the release of cumulative translation adjustment into net income when an entity either sells a part or all of its investment in a foreign entity or no longer holds a controlling financial interest in a foreign subsidiary. We adopted this ASU in 2014 first quarter and it has not had a material impact on our financial statements. | |||||||
In February 2013, the FASB issued new accounting guidance for the recognition, measurement, and disclosure of obligations resulting from joint and several liability arrangements for which the total amount of the obligation is fixed at the reporting date, including debt arrangements, other contractual obligations, and settled litigation and judicial rulings. The new guidance is effective for fiscal years, and interim periods within those fiscal years, beginning on or after December 15, 2013. We adopted this guidance in 2014 and does not believe it has a significant impact on its consolidated results of operations, financial condition and cash flows. | |||||||
Recently adopted accounting standards – not adopted | |||||||
The Company believes there is no additional new accounting guidance adopted but not yet effective that is relevant to the readers of our financial statements. However, there are numerous new proposals under development which, if and when enacted, may have a significant impact on its financial reporting. |
NOTE_RECEIVABLE_RELATED_PARTY
NOTE RECEIVABLE - RELATED PARTY | 3 Months Ended | |||||||
Mar. 31, 2014 | ||||||||
Notes to Financial Statements | ' | |||||||
NOTE RECEIVABLE - RELATED PARTY | ' | |||||||
The note receivable balance was as follows: | ||||||||
31-Mar-14 | 31-Dec-13 | |||||||
Note receivable | $ | 383,298 | $ | 383,298 | ||||
Less: current portion | (18,487 | ) | (18,212 | ) | ||||
Long-term note receivable | $ | 364,811 | $ | 365,086 | ||||
A note receivable was acquired as part of the 2007 asset purchase agreement with GGLLC. The note receivable is a ten year unsecured note with a 6% fixed interest rate, monthly principal and interest payments of $6,598 with the unpaid principal and interest due in February 2017. The terms of the note were amended in September 2010 whereby the monthly principal and interest payment was reduced to $3,332 and the unpaid principal and interest is due August 2015. | ||||||||
Interest income associated with this note receivable was $5,545 and $5,820 for the three months ended March 31, 2014 and 2013, respectively. At March 31, 2014, there was an interest receivable balance of $23,119 which is included in other current assets. | ||||||||
Management evaluates collectability on a regular basis and will set up reserves for uncollectible amounts when it has determined that some or all of this receivable may be uncollectible. At March 31, 2014 and December 31, 2013, management believed that 100% of the note receivable principal and interest amounts are collectable. |
PREPAID_EXPENSES
PREPAID EXPENSES | 3 Months Ended | |||||||
Mar. 31, 2014 | ||||||||
Notes to Financial Statements | ' | |||||||
PREPAID EXPENSES | ' | |||||||
Prepaid expenses consisted of the following at: | ||||||||
31-Mar-14 | 31-Dec-13 | |||||||
Professional services | $ | 47,554 | $ | 5,436 | ||||
Rent | 28,985 | 175 | ||||||
Insurance | 12,247 | 12,579 | ||||||
Trade show expense | 8,195 | — | ||||||
IT System | 4,772 | 8,923 | ||||||
Inventory costs | 2,520 | 2,520 | ||||||
Property taxes | 1,460 | 3,325 | ||||||
Other prepaid expenses | 438 | 147 | ||||||
Regulatory compliance expenses | — | 1,868 | ||||||
Prepaid expenses | $ | 106,171 | $ | 34,973 |
INVENTORY
INVENTORY | 3 Months Ended | |||||||
Mar. 31, 2014 | ||||||||
Inventory Disclosure [Abstract] | ' | |||||||
INVENTORY | ' | |||||||
Inventory consisted of the following at: | ||||||||
31-Mar-14 | 31-Dec-13 | |||||||
Raw materials and component parts | $ | 191,372 | $ | 182,351 | ||||
Finished goods | 92,178 | 95,579 | ||||||
Work-in-process | 47,204 | 52,445 | ||||||
330,754 | 330,375 | |||||||
Less: inventory reserve | (32,895 | ) | (32,895 | ) | ||||
Inventory | $ | 297,859 | $ | 297,480 |
PROPERTY_AND_EQUIPMENT
PROPERTY AND EQUIPMENT | 3 Months Ended | |||||||
Mar. 31, 2014 | ||||||||
Property, Plant and Equipment [Abstract] | ' | |||||||
PROPERTY AND EQUIPMENT | ' | |||||||
Property and equipment, recorded at cost, consisted of the following at: | ||||||||
31-Mar-14 | 31-Dec-13 | |||||||
Computer equipment | $ | 80,581 | $ | 69,960 | ||||
Furniture and fixtures | 76,031 | 76,031 | ||||||
Office equipment | 12,270 | 12,270 | ||||||
Leasehold improvements | 6,367 | 6,367 | ||||||
175,249 | 164,628 | |||||||
Less: accumulated depreciation | (125,383 | ) | (119,676 | ) | ||||
Property and equipment, net | $ | 49,866 | $ | 44,952 | ||||
Included in depreciation expense was $5,707 and $4,516 related to property and equipment for the three months ended March, 2014 and 2013, respectively. |
PRODUCTS_LEASED_AND_HELD_FOR_L
PRODUCTS LEASED AND HELD FOR LEASE | 3 Months Ended | |||||||
Mar. 31, 2014 | ||||||||
Notes to Financial Statements | ' | |||||||
PRODUCTS LEASED AND HELD FOR LEASE | ' | |||||||
Products leased and held for lease consisted of the following at: | ||||||||
31-Mar-14 | 31-Dec-13 | |||||||
Enhanced table systems | $ | 194,411 | $ | 157,861 | ||||
Less: accumulated depreciation | (79,660 | ) | (71,978 | ) | ||||
Products leased and held for lease, net | $ | 114,751 | $ | 85,883 | ||||
Included in depreciation expense was $7,682 and $4,737 related to products leased and held for lease for the three months ended March 31, 2014 and 2013, respectively. |
INTANGIBLE_ASSETS
INTANGIBLE ASSETS | 3 Months Ended | |||||||
Mar. 31, 2014 | ||||||||
Notes to Financial Statements | ' | |||||||
INTANGIBLE ASSETS | ' | |||||||
Intellectual property and intangible assets consisted of the following at: | ||||||||
31-Mar-14 | 31-Dec-13 | |||||||
Patents | $ | 13,615,967 | $ | 13,615,967 | ||||
Customer relationships | 3,400,000 | 3,400,000 | ||||||
Trademarks | 2,740,000 | 2,740,000 | ||||||
Non-compete agreements | 660,000 | 660,000 | ||||||
20,415,967 | 20,415,967 | |||||||
Less: accumulated amortization | (3,993,955 | ) | (3,604,456 | ) | ||||
Intangible assets, net | $ | 16,422,012 | $ | 16,811,511 | ||||
Amortization expense was $389,499 and $397,226 for the three months ended March 31, 2014 and 2013, respectively. | ||||||||
In October 2011, we acquired the following intangible assets related to the asset purchase with Prime Table Games LLC and Prime Table Games UK (collectively “Prime Table Games”): | ||||||||
Fair Value | ||||||||
Patents | $ | 13,259,000 | ||||||
Customer relationships | 3,400,000 | |||||||
Trademarks | 2,740,000 | |||||||
Goodwill | 1,091,000 | |||||||
Non-compete agreement | 660,000 | |||||||
Total acquired intangible assets | $ | 21,150,000 |
ACCRUED_EXPENSES
ACCRUED EXPENSES | 3 Months Ended | |||||||
Mar. 31, 2014 | ||||||||
Notes to Financial Statements | ' | |||||||
ACCRUED EXPENSES | ' | |||||||
Accrued expenses, consisted of the following at: | ||||||||
31-Mar-14 | 31-Dec-13 | |||||||
Commissions | $ | 90,572 | $ | 92,744 | ||||
Trade show expenses | 64,825 | 48,718 | ||||||
Salaries & payroll taxes | 61,233 | 59,266 | ||||||
Vacation | 52,387 | 41,216 | ||||||
Professional fees | 50,000 | 75,000 | ||||||
Other accrued expenses | 8,223 | 3,015 | ||||||
Accrued interest | 2,279 | 2,443 | ||||||
Accrued expenses | $ | 329,519 | $ | 322,402 |
NOTES_PAYABLE
NOTES PAYABLE | 3 Months Ended | |||||||
Mar. 31, 2014 | ||||||||
Notes to Financial Statements | ' | |||||||
NOTES PAYABLE | ' | |||||||
Notes payable consisted of the following at: | ||||||||
31-Mar-14 | 31-Dec-13 | |||||||
Note payable – related party | $ | 1,087,650 | $ | 1,095,181 | ||||
Notes payable, net of debt discount - PTG | 16,892,728 | 17,480,676 | ||||||
17,980,378 | 18,575,857 | |||||||
Less: Current portion | (3,095,759 | ) | (2,929,918 | ) | ||||
Notes payable | $ | 14,884,619 | $ | 15,645,939 | ||||
The note payable – related party requires monthly principal and interest payments of $9,159, at a fixed interest rate of 7.3% through February 2017, at which time there is a balloon payment due of $1,003,000. This note payable is a result of the asset purchase agreement with GGLLC. The note payable between GGLLC and Bank of America was the subject of litigation and was settled in February 2014. See Note 11 for further details. | ||||||||
In October 2011, we closed an asset acquisition with Prime Table Games. Included within the structure of the $23 million acquisition was a $22.2 million component consisting of two promissory notes: 1) a note payable for $12.2 million, and 2) a note payable for £6.4 million GBP ($10.0 million USD) note. The notes were recorded at fair value, net of a debt discount of $1,530,000. See Note 16 for further details. | ||||||||
Maturities of our notes payable are as follows: | ||||||||
Maturities as of March 31, | Total | |||||||
2015 | $ | 3,095,759 | ||||||
2016 | 3,758,658 | |||||||
2017 | 5,362,488 | |||||||
2018 | 4,591,329 | |||||||
2019 | 2,180,564 | |||||||
Total notes payable | $ | 18,988,798 | ||||||
Less: debt discount | (1,008,420 | ) | ||||||
Notes payable, net of debt discount | $ | 17,980,378 |
COMMITMENTS_AND_CONTINGENCIES
COMMITMENTS AND CONTINGENCIES | 3 Months Ended | ||||||
Mar. 31, 2014 | |||||||
Commitments and Contingencies (See Note 11) | ' | ||||||
COMMITMENTS AND CONTINGENCIES | ' | ||||||
Operating lease obligations. We lease our offices from a related party that is connected with our CEO. We entered into a lease effective September 1, 2010 for a period of two years with a monthly rental payment of $10,359. Our lease expired at the end of August 2012 and is currently on a term of month-to-month. In addition to our offices, we rent various temporary storage facilities in the range of $150 to $460 a month. All temporary facilities have rental agreements with a monthly term. Total rent expense was $45,185 and $40,456 for the three months ended March 31, 2014 and 2013, respectively. | |||||||
In February 2014, we entered into a lease (the “Lease”) for a new corporate office with an unrelated third party. The 5-year Lease is for a building approximately 24,000 square feet, which is comprised of approximately 16,000 square feet office space and 8,000 square feet warehouse. The property is located in Las Vegas, Nevada. | |||||||
The initial term of the Lease will commence on April 1, 2014. We will be obligated to pay approximately $153,000 in annual base rent in the first year, which shall increase by approximately 4% each year. We will also be obligated to pay real estate taxes and other building operating costs. Subject to certain conditions, we have certain rights under the Lease, including rights of first offer to purchase the premises if the landlord elects to sell. We also have an option to extend the term of the Lease for two consecutive terms of three years each, at the then current fair market value rental rate determined in accordance with the terms of the Lease. | |||||||
In connection with the Lease, the landlord has agreed to provide a tenant improvement allowance (“TI Allowance”) option of $150,000. If we exercise such option, the base rent will be increased by an amount sufficient to fully amortize the TI Allowance through the Lease term upon equal monthly payments of principal and interest, with interest imputed on the outstanding principal balance at the rate of 5.5% per annum. | |||||||
Pursuant to the lease, we have the option to terminate the Lease effective at the end of the 36th month (“Termination Date”). We must deliver written notice of our intention to terminate the Lease to the landlord at least six months before the Termination Date. In the event we exercise our option to terminate, we shall pay the landlord a termination fee (the “Termination Fee”) equal to the sum of (i) all unamortized TI Allowance amounts, plus (ii) all unamortized leasing commissions paid by the landlord with respect to the lease, plus (iii) all unamortized rental abatement amounts. | |||||||
Future minimum lease payments are as follows: | |||||||
Twelve Months Ended March 31, | Annual Obligation | ||||||
2015 | $ | 158,577 | |||||
2016 | 216,120 | ||||||
2017 | 224,865 | ||||||
2018 | 233,604 | ||||||
2019 | 242,340 | ||||||
Thereafter | 63,933 | ||||||
Total Estimated Lease Obligations | $ | 1,139,439 | |||||
Legal proceedings. In the ordinary course of conducting our business, we are, from time to time, involved in various legal proceedings, administrative proceedings, regulatory government investigations and other matters, including those in which we are a plaintiff, that are complex in nature and have outcomes that are difficult to predict. In accordance with topic ASC Topic 450, we record accruals for such contingencies to the extent that we conclude that it is probable that a liability will be incurred and the amount of the related loss can be reasonably estimated. Our assessment of each matter may change based on future unexpected events. An unexpected adverse judgment in any pending litigation could cause a material impact on our business operations, intellectual property, results of operations or financial position. Unless otherwise expressly stated, we believe costs associated with litigation will not have a material impact on our financial position or liquidity, but may be material to the results of operations in any given period. We assume no obligation to update the status of pending litigation, except as may be required by applicable law, statute or regulation. For a complete description of the facts and circumstances surrounding material litigation to which we are a party, see Note 11 in Item 8. “Financial Statements and Supplementary Data” included in our annual report on Form 10-K for the year ended December 31, 2013. There are no material updates to matters previously reported on Form 10-K for the year ended December 31, 2013, except: | |||||||
Bank of America action. In October 2012, we were served with a complaint by Bank of America (“BofA”) regarding a promissory note payable between GGLLC and BofA. The complaint, filed in the Eighth Judicial District Court in the State of Nevada, alleged that we received valuable assets from GGLLC in 2007 for little or no consideration. In the complaint, BofA sought to collect in full the outstanding principal and any accrued interest owed under the promissory note. On February 21, 2014, we reached a full settlement of all claims alleged by BofA. Pursuant to the settlement, BofA and Galaxy agreed to dismiss its legal actions against each other and enter into a mutual release of claims. Furthermore, we agreed to vacate the building located at 6980 O’Bannon Drive no later than April 30, 2014. The complaint was officially dismissed by the court on April 10, 2014 and we vacated the building as of April 18, 2014. |
STOCKHOLDERS_EQUITY
STOCKHOLDERS EQUITY | 3 Months Ended |
Mar. 31, 2014 | |
Equity [Abstract] | ' |
STOCKHOLDERS EQUITY | ' |
We had 65,000,000 shares of $.001 par value common stock and 10,000,000 shares of $.001 par value preferred stock authorized as of March 31, 2014. | |
In February 2014, an independent contractor (the “Contractor”) was granted 150,000 shares of the Company’s restricted common stock. Of this amount, 75,000 vested and transferred immediately, with the remaining 75,000 vesting in equal installments through (and transferring on) January 1, 2015. | |
In March 2014, Norm DesRosiers, Director, was granted a restricted stock unit award veering 100,000 shares of the Company’s common stock as condition of his Board of Directors Director Service Agreement. The restricted stock unit award will vest immediately. | |
In April 2014, William A. Zender was appointed to serve as a member of our Board of Directors effective May 1, 2014. As a condition of his Board of Directors Director Service Agreement, Mr. Zender will be granted a restricted stock unit award of 75,000 shares of our common stock on May 1, 2014, which will vest immediately. | |
There were 38,485,591 common shares and no preferred shares issued and outstanding at March 31, 2014. |
RELATED_PARTY_TRANSACTIONS
RELATED PARTY TRANSACTIONS | 3 Months Ended |
Mar. 31, 2014 | |
Related Party Transactions [Abstract] | ' |
RELATED PARTY TRANSACTIONS | ' |
We leased our offices from the Saucier Business Trust, an entity that is related to our CEO through April 18, 2014. The lease was entered into effective September 1, 2010 for a period of two years requiring a monthly rental payment of $10,359. Our lease expired at the end of August 2012 and was on a term of month-to-month. Total payments made to this related party was $31,077 for each three month period ended March 31, 2014 and 2013. | |
We have a note receivable from Abyss Group, LLC, an entity that is related to our CEO. This note receivable was acquired as part of the 2007 asset purchase agreement with GGLLC. The note receivable is a ten year unsecured note with a 6% fixed interest rate, monthly principal and interest payments of $6,598 with the unpaid principal and interest due in February 2017. The terms of the note were amended whereby the monthly principal and interest payment was reduced to $3,332 and the unpaid principal and interest is due August 2015. The balance as of March 31, 2014 and December 31, 2013 was $383,298 and $383,298, respectively. Interest income associated with this note receivable was $5,545 and $5,820 for the three month periods ended March 31, 2014 and 2013, respectively. | |
We have a note payable to a related party, GGLLC, an entity that is controlled by our CEO. The note payable required monthly principal and interest payments of $9,159, at a fixed interest rate of 7.3% through February 2017, at which time there is a balloon payment due of $1,003,000. The balance as of the three month period ended March 31, 2014 and 2013 was $1,087,650 and $1,095,181, respectively. This note payable is a result of the asset purchase agreement with GGLLC. The note payable between GGLLC and Bank of America was the subject of litigation and was settled in March 2014. See Note 11 for further details. | |
Certain administrative, accounting and legal support services are performed by Carpathia Associates, LLC, an entity related to our CEO. We accrued or paid fees to the related party in the amount of $0 and $2,610 for the three months ended March 31, 2014 and 2013, respectively. |
INCOME_TAXES
INCOME TAXES | 3 Months Ended |
Mar. 31, 2014 | |
Income Tax Disclosure [Abstract] | ' |
INCOME TAXES | ' |
Our forecasted effective tax rate at March 31, 2014 is 38.2%, a 1.1% increase from the 37.1% effective tax rate recorded at March 31, 2013. No discrete items were recorded for the three months ending March 31, 2014. |
STOCK_WARRANTS_AND_OPTIONS
STOCK WARRANTS AND OPTIONS | 3 Months Ended | ||||||||||
Mar. 31, 2014 | |||||||||||
Notes to Financial Statements | ' | ||||||||||
STOCK WARRANTS AND OPTIONS | ' | ||||||||||
Warrant activity. We have accounted for warrants as equity instruments in accordance with EITF 00-19 (ASC 815-40) Accounting for Derivative Financial Instruments Indexed to, and Potentially Settled in, a Company’s Own Stock, and as such, will be classified in stockholders’ equity as they meet the definition of “…indexed to the issuer’s stock” in EITF 01-06 (ASC 815-40) The Meaning of Indexed to a Company’s Own Stock. In prior years, we estimated the fair value of the warrants using the Black-Scholes option pricing model based on assumptions at the time of issuance. | |||||||||||
A summary of current warrant activity is as follows: | |||||||||||
Common Stock Warrants | Weighted Average Exercise Price | ||||||||||
Outstanding – January 1, 2013 | 1,330,953 | $ | 0.45 | ||||||||
Issued | — | — | |||||||||
Exercised | — | — | |||||||||
Expired | (714,286 | ) | 0.4 | ||||||||
Outstanding – December 31, 2013 | 616,667 | 0.51 | |||||||||
Issued | — | — | |||||||||
Exercised | — | — | |||||||||
Expired | 266,667 | 0.4 | |||||||||
Outstanding – March 31, 2014 | 350,000 | $ | 0.6 | ||||||||
Exercisable – March 31, 2014 | — | — | |||||||||
Stock options. For the three months ended March 31, 2014, we issued 27,083 stock options at an exercise price equal to the closing price of our common stock on the last trading day prior of the quarter ($0.34). The stock options granted were calculated to have a fair value of $6,237 using the Black-Scholes option pricing model with the following assumptions: | |||||||||||
Options issued | |||||||||||
three months ended | |||||||||||
31-Mar-14 | |||||||||||
Dividend yield | 0 | % | |||||||||
Expected volatility | 86 | % | |||||||||
Risk free interest rate | 1.73 | % | |||||||||
Expected life (years) | 5 | ||||||||||
The cost of all options issued have been classified as share based compensation for the three months ended March 31, 2014 and 2013, respectively. | |||||||||||
A summary of stock option activity is as follows: | |||||||||||
Common Stock Options | Weighted Average Exercise Price | ||||||||||
Outstanding – January 1, 2013 | 100,000 | $ | 0.25 | ||||||||
Issued | — | — | |||||||||
Exercised | — | — | |||||||||
Expired | — | — | |||||||||
Outstanding – December 31, 2013 | 100,000 | 0.25 | |||||||||
Issued | 27,083 | 0.34 | |||||||||
Exercised | — | — | |||||||||
Expired | — | — | |||||||||
Outstanding – March 31, 2014 | 127,083 | $ | 0.27 | ||||||||
Exercisable – March 31, 2014 | 82,638 | $ | 0.28 |
ASSET_ACQUISITIONS_AND_SIGNIFI
ASSET ACQUISITIONS AND SIGNIFICANT TRANSACTIONS | 3 Months Ended | ||||
Mar. 31, 2014 | |||||
Notes to Financial Statements | ' | ||||
ASSET ACQUISITIONS AND SIGNIFICANT TRANSACTIONS | ' | ||||
Acquisition of Prime Table Games’ assets. In October 2011, we executed an asset purchase agreement (the “PTG Agreement”) with Prime Table Games. Under the terms of the PTG Agreement we acquired over 20 different table games, including 21+3, Two-way Hold'em and Three Card Poker, which are currently played on approximately 500 tables in 200 casinos in the United States, the United Kingdom and in the Caribbean (Three Card Poker rights are limited to the British Isles). The intellectual property portfolio includes 36 patents, 11 patents pending, 96 worldwide trademark and design registrations and 47 domain name registrations. The two principals of Prime Table Games also executed with us a non-compete agreement. | |||||
We accounted for the asset purchase as a business combination using the acquisition method of accounting which requires, among other things, that assets acquired and liabilities assumed be recognized at their fair values as of the purchase date and be recorded on the balance sheet regardless of the likelihood of success of the related product or technology. The process for estimating the fair values of identifiable intangible assets involves the use of significant estimates and assumptions, including estimating future cash flows and developing appropriate discount rates. Transaction costs are not included as a component of consideration transferred and were expensed as incurred. | |||||
Consideration transferred. The acquisition-date fair value of the consideration transferred consisted of the following items: | |||||
Common stock – 2,000,000 shares | $ | 480,000 | |||
Note payable – Prime Table Games LLC | 12,200,000 | ||||
Note payable – Prime Table Games UK | 10,000,000 | ||||
Total | $ | 22,680,000 | |||
The note payable to Prime Table Games UK is in the amount of £6,400,000 (GBP). Interest on the promissory notes was 0% in 2011. The fair value of the notes, net of the debt discount was $20,670,000. The rate increased to 3% in 2012 and increases at 1% per year thereafter to maximum of 9%. Payments on each of the notes are as follows: | |||||
Prime Table Games LLC. Monthly payments are due under this note, commencing with $100,000 due on or before January 28, 2012. Subsequent payments are due on the 28th day of each month and the payment amount shall increase to $130,000 per month beginning 16 months after the closing, $160,000 per month beginning in 28 months, $190,000 per month beginning in 40 months and $220,000 beginning in 52 months until fully paid. | |||||
Prime Table Games UK. Monthly payments are due under this note, commencing with £64,000 due on or before January 28, 2012. Subsequent payments are due on the 28th day of each month and the payment amount shall increase to £76,800 per month beginning 16 months after the closing, £89,600 per month beginning in 28 months, £102,400 per month beginning in 40 months, £115,200 per month in 52 months until fully paid. | |||||
In the event future monthly revenue received by us from the “Assets,” as defined in the Prime Agreement is less than 90% of the notes monthly payment due to Prime Table Games, then the note payments may, at our option, be adjusted to the higher of $100,000 per month (for the Prime Table Games LLC note) and £64,000 per month (for the Prime Table Games UK note) or 90% of the monthly revenue amount. If we engage in this payment adjustment election, the note shall not be deemed in default and the interest rate of the note will increase 2% per annum for the duration of the note or until the standard payment schedule resumes. | |||||
The notes are collateralized by the all of the assets acquired from Prime Table Games LLC and Prime Table Games UK. | |||||
Fair value estimate of assets acquired and liabilities assumed. The total purchase consideration is allocated to Prime Table Games intangible assets based on their estimated fair values as of the closing date. The allocation of the total purchase price to the net assets acquired is as follows: | |||||
Patents | $ | 13,259,000 | |||
Customer relationships | 3,400,000 | ||||
Trademarks | 2,740,000 | ||||
Debt discount | 1,530,000 | ||||
Goodwill | 1,091,000 | ||||
Non-compete agreement | 660,000 | ||||
Total purchase price allocation | $ | 22,680,000 | |||
TableMAX agreement. In February 2011, we entered into a definitive agreement (“TMAX Agreement”) with TableMAX Corporation (“TMAX”), a provider of electronic table games and platforms headquartered in Las Vegas, Nevada and a principal investor in TMAX. Under the terms of the TMAX Agreement, we have exclusive worldwide rights (excluding one international territory and two U.S. states) to the TMAX electronic gaming platform and certain game titles. We created an operating division (the “TableMAX Division”) for the purpose of conducting sales, distribution, marketing, engineering, sub-licensing and manufacturing related to the TMAX products and related intellectual property. The TableMAX Division is wholly owned by us and is not considered owned by, related to, a joint venture partner of, or an agent of TMAX. The term of the TMAX Agreement is five years. At any time during the term of the TMAX Agreement, either TMAX or we may make a written offer to purchase the sole ownership of the TableMAX Division. Such offer shall be subject to the parties’ mutual agreement and neither party shall be under any obligation to accept such an offer. If such an agreement has not been consummated within six months of the expiration of the TMAX Agreement, then each party must indicate to the other party no later than six months from the scheduled expiration of the TMAX Agreement, their intent to renew the TMAX Agreement for a term of at least one year, or terminate. | |||||
TMAX assigned, for the term of the TMAX Agreement, all of its existing gaming installations to the TableMAX Division. We agreed to furnish our intellectual property relating to our table game content for use by the TableMAX Division, royalty-free for the term of the TMAX Agreement. The TMAX Agreement specifies annual performance targets whereby we are required, on a cumulative basis, to have minimum table placements. If we fail to meet the performance criteria as defined in the TMAX Agreement, we will be required to pay TMAX the difference between TMAX’s share of the actual profit obtained by the TableMAX Division and the estimated profit that would have been obtained if the minimum performance criteria had been obtained. | |||||
We are responsible for the losses of the TableMAX Division however, TMAX agreed to reimburse us during the first 12 months from the date of the TMAX Agreement for operating expenses of the TableMAX Division up to a maximum of $600,000. Subsequent to the 12 months anniversary of the TMAX Agreement, TMAX notified us that they would continue to reimburse us for the losses attributed with the TableMAX Division through December 31, 2012. Net profits from the TableMAX Division will be split between TMAX and us on a sliding scale basis dependent upon the number of TableMAX Division table installations and profit results as defined in the TMAX Agreement. While TMAX has not agreed to reimbursement of losses subsequent to December 31, 2012, we have not experienced significant losses attributable to the TableMAX Division. | |||||
Included in other current assets at March 31, 2014 is $9,293, representing reimbursement due from TMAX. |
SUBSEQUENT_EVENTS
SUBSEQUENT EVENTS | 3 Months Ended |
Mar. 31, 2014 | |
Subsequent Events [Abstract] | ' |
SUBSEQUENT EVENTS | ' |
Appointment of New Director. On April 1, 2014, William A. Zender agreed to serve as a member of our Board of Directors. In connection with his appointment, Mr. Zender was granted a restricted stock unit award, covering 75,000 shares of our common stock. The restricted stock unit award vests immediately. We will also provide annual cash compensation of $30,000 to be paid in quarterly installments on the last day of each quarter. Mr. Zender will receive options to purchase 25,000 shares of common stock, granted quarterly and vested immediately, with a strike price equal to the closing price on the last day of the quarter. Exercise term of options shall be five years from the date of grant or ninety days from date of separation, whichever is less. | |
Bank of America Update. On April 10, 2014, the complaint filed by BofA was officially dismissed by the Eighth Judicial District Court in the State of Nevada. See Note 11 for further details. | |
In accordance with ASC 855-10, we have analyzed our operations subsequent to March 31, 2014 to the date of these financial statements were issued, and have determined that we do not have any material subsequent events to disclose in these financial statements other than the events discussed above. |
SIGNIFICANT_ACCOUNTING_POLICIE1
SIGNIFICANT ACCOUNTING POLICIES (Policies) | 3 Months Ended | ||||||
Mar. 31, 2014 | |||||||
Accounting Policies [Abstract] | ' | ||||||
Basis of presentation | ' | ||||||
The accompanying unaudited interim financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America and the rules of the Securities and Exchange Commission (“SEC”), and should be read in conjunction with the audited financial statements and notes thereto contained herein and in our Form 10-K filed with the SEC as of and for the year ended December 31, 2013. In the opinion of management, all adjustments necessary in order for the financial statements to be not misleading have been reflected herein. The results of operations for interim periods are not necessarily indicative of the results to be expected for the full year. | |||||||
Basis of accounting | ' | ||||||
The financial statements have been prepared on the accrual basis of accounting in conformity with accounting principles generally accepted in the United States of America. Revenues are recognized as income when earned and expenses are recognized when they are incurred. We do not have significant categories of cost as our income is recurring with high margins. Expenses such as wages, consulting expenses, legal, regulatory and professional fees and rent are recorded when the expense is incurred. | |||||||
Cash and cash equivalents | ' | ||||||
We consider cash on hand, cash in banks, certificates of deposit, and other short-term securities with maturities of three months or less when purchased, as cash and cash equivalents. Our bank accounts are deposited in insured institutions. The funds are insured up to $250,000 per account. To date, we have not experienced uninsured losses. | |||||||
Restricted cash | ' | ||||||
We are required by gaming regulation to maintain sufficient reserves in restricted accounts to be used for the purpose of funding payments to winners of our jackpots offered. Compliance with restricted cash requirements for jackpot funding is reported to gaming authorities in various jurisdictions. | |||||||
Inventory | ' | ||||||
Inventory consists of ancillary products such as signs, layouts, and bases for the various games and electronic devices and components to support our Enhanced Table Systems. Inventory value is determined by the average cost method and management maintains inventory levels based on historical and industry trends. We regularly assess inventory quantities for excess and obsolescence primarily based on forecasted product demand. See Note 5. | |||||||
Products leased and held for lease | ' | ||||||
We provide products whereby we maintain ownership and charge a fee for the use of the product. Since we retain title to the equipment, we classify these assets as “products leased and held for lease” and they are shown on the accompanying balance sheets. These assets are stated at cost, net of depreciation. Depreciation on leased products is calculated using the straight-line method over a three year period. | |||||||
Property and equipment | ' | ||||||
Property and equipment are being depreciated over their estimated useful lives, 3 to 5 years, using the straight-line method of depreciation for book purposes. | |||||||
Intellectual property and intangible assets | ' | ||||||
These intellectual property and intangible assets have finite lives and are being amortized using the straight-line method over their economic useful lives, five to thirty years. Material assets added over the past several years are as follows: | |||||||
Client installation base | 60 months | ||||||
Patents | 87 - 132 months | ||||||
Trademarks | 144 – 360 months | ||||||
Client relationships | 264 months | ||||||
The intangible assets are analyzed for potential impairment whenever events or changes in circumstances indicate the carrying value may not be recoverable. | |||||||
Goodwill | ' | ||||||
A goodwill balance of $1,091,000 was created as a result of the PTG asset acquisition. This asset will be assessed for impairment at least annually and if found to be impaired, its carrying amount will be reduced and an impairment loss will be recognized. | |||||||
Impairment of long-lived assets | ' | ||||||
We continually monitor events and changes in circumstances that could indicate carrying amounts of long-lived assets may not be recoverable. When such events or changes in circumstances are present, we assess the recoverability of long-lived assets by determining whether the carrying value of such assets will be recovered through undiscounted expected future cash flows. If the total of the future cash flows is less than the carrying amount of those assets, we recognize an impairment loss based on the excess of the carrying amount over the fair value of the assets. Assets to be disposed of are reported at the lower of the carrying amount or the fair value less costs to sell. | |||||||
Fair value of financial instruments | ' | ||||||
The fair value of cash and cash equivalents, restricted cash, accounts receivable, prepaid expenses, other current assets, inventory, notes receivable-related party, deferred tax assets, accounts payable, accrued expenses, deferred revenue, jackpot liabilities and notes payable approximates the carrying amount of these financial instruments due to their short-term nature. The fair value of long-term debt, which approximates its carrying value, is based on current rates at which we could borrow funds with similar remaining maturities. | |||||||
Concentration of risk | ' | ||||||
We are exposed to risks associated with clients who represent a significant portion of total revenues. As of March 31, 2014 and 2013, we had the following client revenue concentrations: | |||||||
Location | 2014 Revenue | 2013 Revenue | |||||
Client A | United Kingdom | 17.00% | 6.60% | ||||
Client B | North America | 15.30% | 12.50% | ||||
Client C | United Kingdom | 11.30% | 8.40% | ||||
Client D | North America | 5.00% | 4.70% | ||||
We are also exposed to risks associated with the expiration of our patents. In 2015, domestic and international patents will expire on two of our products, which account for approximately $1,298,735 or 57.4% of our revenue for the three months ended March 31, 2014. | |||||||
Revenue Recognition | ' | ||||||
Revenue is primarily derived from the licensing of our products and intellectual property. Consistent with our strategy, revenue is generated from negotiated month-to-month recurring licensing fees or the performance of our products, or both. Revenue from the sale of lifetime licenses, under which we have no continuing obligation, is recorded on the effective date of the license agreement. Revenue from the sale of equipment or ancillary products is recorded in accordance with the contractual shipping terms. | |||||||
Depending upon the product and negotiated terms, our clients may be invoiced monthly in advance, monthly in arrears or quarterly in arrears for the licensing of our products. If billed in advance, the advance billings are recorded as deferred revenue on our balance sheet. If billed in arrears, we recognize the corresponding preceding period’s revenue upon invoicing at the subsequent date. Generally, we begin earning revenue with the installation or “go live” date of the associated product in our clients’ establishment. The monthly recurring invoices are based on executed agreements with each client. | |||||||
Additionally, clients may be invoiced for product sales at the time of shipment or delivery of the product. Revenue from the sale of our associated products is recognized when the following criteria are met: | |||||||
-1 | Persuasive evidence of an arrangement between us and our client exists; | ||||||
-2 | Shipment has occurred; | ||||||
-3 | The price is fixed and or determinable; and | ||||||
-4 | Collectability is reasonably assured or probable. | ||||||
The combination of hardware and software included in our Enhanced Table Systems and e-Tables are essential to the operation of the respective systems. As such, we do not segregate the portion of revenue between manufactured equipment and any software or electronic devices needed to use the equipment when the system is provided. We do not market the software separately from the equipment. | |||||||
Costs of ancillary products and assembled components | ' | ||||||
Ancillary products include paytables (display of payouts), bases, layouts, signage and other items as they relate to support specific proprietary games in connection with the licensing of our games. Assembled components represent the cost of the equipment, devices and incorporated software used to support the Bonus Jackpot System. | |||||||
Research and development | ' | ||||||
We incur research and development costs to develop our new and next-generation products. Our products reach technological feasibility shortly before the products are released and therefore R&D costs are expensed as incurred. Employee related costs associated with product development are included in R&D costs. | |||||||
Foreign currency translation | ' | ||||||
For non-US functional accounts, assets and liabilities are translated at exchange rates in effect at the balance sheet date, and income and expense accounts at the average exchange rates for the year. Resulting currency translation adjustments are recorded as a separate component of shareholders’ equity. We record foreign currency transactions at the exchange rate prevailing at the date of the transaction with resultant gains and losses being included in results of operations. Realized foreign currency transaction gains and losses have not been significant for any period presented. | |||||||
Income taxes | ' | ||||||
We record deferred tax assets and liabilities based on temporary differences between the financial reporting and tax bases of assets and liabilities, applying enacted tax rates expected to be in effect for the year in which the differences are expected to reverse. We reduce deferred tax assets by a valuation allowance when it is more likely than not that some or all of the deferred tax assets will not be realized. | |||||||
Our provision for income taxes includes interest and penalties related to uncertain tax positions. We only recognize the tax benefit from an uncertain tax position if it is more likely than not that the tax position will be sustained on examination by the taxing authorities, based on the technical merits of the position. The tax benefits recognized in the financial statements from such positions are then measured based on the largest benefit that has a greater than 50% likelihood of being realized upon ultimate settlement. | |||||||
Basic income (loss) per share | ' | ||||||
Basic earnings per share is calculated by dividing net income by the weighted average number of common shares issued and outstanding during the year. Diluted earnings per share is similar to basic, except that the weighted average number of shares outstanding is increased by the potentially dilutive effect of outstanding stock options and warrants, if applicable, during the year, using the treasury stock method. | |||||||
Stock-based compensation | ' | ||||||
We measure and recognize all stock-based compensation, including restricted stock and stock-based awards to employees, under the fair value method. We measure the fair value of stock-based awards using the Black-Scholes model and restricted shares using the grant date fair value of the stock. Compensation is attributed to the periods of associated service and such expense is recognized on a straight-line basis over the vesting period of the awards. Forfeitures are estimated at the time of grant, with such estimate updated when the expected forfeiture rate changes. | |||||||
Use of estimates and assumptions | ' | ||||||
We are required to make estimates, judgments and assumptions that we believe are reasonable based on our historical experience, contract terms, observance of known trends in our company and the industry as a whole, and information available from other outside sources. Our estimates affect reported amounts for assets, liabilities, revenues, expenses and related disclosures. Actual results may differ from initial estimates. | |||||||
Reclassifications | ' | ||||||
Certain accounts and financial statement captions in the prior periods have been reclassified to conform to the current period financial statements. | |||||||
Recently adopted accounting standards | ' | ||||||
In March 2013, the Financial Accounting Standards Board (“FASB”) issued an Accounting Standards Update (“ASU”) requiring the release of cumulative translation adjustment into net income when an entity either sells a part or all of its investment in a foreign entity or no longer holds a controlling financial interest in a foreign subsidiary. We adopted this ASU in 2014 first quarter and it has not had a material impact on our financial statements. | |||||||
In February 2013, the FASB issued new accounting guidance for the recognition, measurement, and disclosure of obligations resulting from joint and several liability arrangements for which the total amount of the obligation is fixed at the reporting date, including debt arrangements, other contractual obligations, and settled litigation and judicial rulings. The new guidance is effective for fiscal years, and interim periods within those fiscal years, beginning on or after December 15, 2013. We adopted this guidance in 2014 and does not believe it has a significant impact on its consolidated results of operations, financial condition and cash flows. | |||||||
New accounting standards not yet adopted | ' | ||||||
The Company believes there is no additional new accounting guidance adopted but not yet effective that is relevant to the readers of our financial statements. However, there are numerous new proposals under development which, if and when enacted, may have a significant impact on its financial reporting. |
SIGNIFICANT_ACCOUNTING_POLICIE2
SIGNIFICANT ACCOUNTING POLICIES (Tables) | 3 Months Ended | ||||||
Mar. 31, 2014 | |||||||
Notes to Financial Statements | ' | ||||||
Schedule of Client Revenue Concentrations | ' | ||||||
Location | 2014 Revenue | 2013 Revenue | |||||
Client A | United Kingdom | 17.00% | 6.60% | ||||
Client B | North America | 15.30% | 12.50% | ||||
Client C | United Kingdom | 11.30% | 8.40% | ||||
Client D | North America | 5.00% | 4.70% |
NOTE_RECEIVABLE_RELATED_PARTY_
NOTE RECEIVABLE - RELATED PARTY (Tables) | 3 Months Ended | |||||||
Mar. 31, 2014 | ||||||||
Notes to Financial Statements | ' | |||||||
Schedule of Related Party Note Receivable | ' | |||||||
31-Mar-14 | 31-Dec-13 | |||||||
Note receivable | $ | 383,298 | $ | 383,298 | ||||
Less: current portion | (18,487 | ) | (18,212 | ) | ||||
Long-term note receivable | $ | 364,811 | $ | 365,086 |
PREPAID_EXPENSES_Tables
PREPAID EXPENSES (Tables) | 3 Months Ended | |||||||
Mar. 31, 2014 | ||||||||
Notes to Financial Statements | ' | |||||||
Schedule of Prepaid Expenses | ' | |||||||
31-Mar-14 | 31-Dec-13 | |||||||
Professional services | $ | 47,554 | $ | 5,436 | ||||
Rent | 28,985 | 175 | ||||||
Insurance | 12,247 | 12,579 | ||||||
Trade show expense | 8,195 | — | ||||||
IT System | 4,772 | 8,923 | ||||||
Inventory costs | 2,520 | 2,520 | ||||||
Property taxes | 1,460 | 3,325 | ||||||
Other prepaid expenses | 438 | 147 | ||||||
Regulatory compliance expenses | — | 1,868 | ||||||
Prepaid expenses | $ | 106,171 | $ | 34,973 |
INVENTORY_Tables
INVENTORY (Tables) | 3 Months Ended | |||||||
Mar. 31, 2014 | ||||||||
Inventory Disclosure [Abstract] | ' | |||||||
Schedule of Inventory | ' | |||||||
31-Mar-14 | 31-Dec-13 | |||||||
Raw materials and component parts | $ | 191,372 | $ | 182,351 | ||||
Finished goods | 92,178 | 95,579 | ||||||
Work-in-process | 47,204 | 52,445 | ||||||
330,754 | 330,375 | |||||||
Less: inventory reserve | (32,895 | ) | (32,895 | ) | ||||
Inventory | $ | 297,859 | $ | 297,480 |
PROPERTY_AND_EQUIPMENT_Tables
PROPERTY AND EQUIPMENT (Tables) | 3 Months Ended | |||||||
Mar. 31, 2014 | ||||||||
Property, Plant and Equipment [Abstract] | ' | |||||||
Schedule of Property and Plant Equipment | ' | |||||||
31-Mar-14 | 31-Dec-13 | |||||||
Computer equipment | $ | 80,581 | $ | 69,960 | ||||
Furniture and fixtures | 76,031 | 76,031 | ||||||
Office equipment | 12,270 | 12,270 | ||||||
Leasehold improvements | 6,367 | 6,367 | ||||||
175,249 | 164,628 | |||||||
Less: accumulated depreciation | (125,383 | ) | (119,676 | ) | ||||
Property and equipment, net | $ | 49,866 | $ | 44,952 |
PRODUCTS_LEASED_AND_HELD_FOR_L1
PRODUCTS LEASED AND HELD FOR LEASE (Tables) | 3 Months Ended | |||||||
Mar. 31, 2014 | ||||||||
Notes to Financial Statements | ' | |||||||
Schedule of Products Leased and Held for Lease | ' | |||||||
31-Mar-14 | 31-Dec-13 | |||||||
Enhanced table systems | $ | 194,411 | $ | 157,861 | ||||
Less: accumulated depreciation | (79,660 | ) | (71,978 | ) | ||||
Products leased and held for lease, net | $ | 114,751 | $ | 85,883 |
INTANGIBLE_ASSETS_Tables
INTANGIBLE ASSETS (Tables) | 3 Months Ended | |||||||
Mar. 31, 2014 | ||||||||
Notes to Financial Statements | ' | |||||||
Schedule of Intellectual Property and Intangible Assets | ' | |||||||
31-Mar-14 | 31-Dec-13 | |||||||
Patents | $ | 13,615,967 | $ | 13,615,967 | ||||
Customer relationships | 3,400,000 | 3,400,000 | ||||||
Trademarks | 2,740,000 | 2,740,000 | ||||||
Non-compete agreements | 660,000 | 660,000 | ||||||
20,415,967 | 20,415,967 | |||||||
Less: accumulated amortization | (3,993,955 | ) | (3,604,456 | ) | ||||
Intangible assets, net | $ | 16,422,012 | $ | 16,811,511 | ||||
Schedule of Intangible Assets of Prime Table Games | ' | |||||||
Fair Value | ||||||||
Patents | $ | 13,259,000 | ||||||
Customer relationships | 3,400,000 | |||||||
Trademarks | 2,740,000 | |||||||
Goodwill | 1,091,000 | |||||||
Non-compete agreement | 660,000 | |||||||
Total acquired intangible assets | $ | 21,150,000 |
ACCRUED_EXPENSES_Tables
ACCRUED EXPENSES (Tables) | 3 Months Ended | |||||||
Mar. 31, 2014 | ||||||||
Notes to Financial Statements | ' | |||||||
Schedule of Accrued Expenses | ' | |||||||
31-Mar-14 | 31-Dec-13 | |||||||
Commissions | $ | 90,572 | $ | 92,744 | ||||
Trade show expenses | 64,825 | 48,718 | ||||||
Salaries & payroll taxes | 61,233 | 59,266 | ||||||
Vacation | 52,387 | 41,216 | ||||||
Professional fees | 50,000 | 75,000 | ||||||
Other accrued expenses | 8,223 | 3,015 | ||||||
Accrued interest | 2,279 | 2,443 | ||||||
Accrued expenses | $ | 329,519 | $ | 322,402 |
NOTES_PAYABLE_Tables
NOTES PAYABLE (Tables) | 3 Months Ended | |||||||
Mar. 31, 2014 | ||||||||
Notes to Financial Statements | ' | |||||||
Schedule of Notes Payable | ' | |||||||
31-Mar-14 | 31-Dec-13 | |||||||
Note payable – related party | $ | 1,087,650 | $ | 1,095,181 | ||||
Notes payable, net of debt discount - PTG | 16,892,728 | 17,480,676 | ||||||
17,980,378 | 18,575,857 | |||||||
Less: Current portion | (3,095,759 | ) | (2,929,918 | ) | ||||
Notes payable | $ | 14,884,619 | $ | 15,645,939 | ||||
Schedule of Maturities | ' | |||||||
Maturities as of March 31, | Total | |||||||
2015 | $ | 3,095,759 | ||||||
2016 | 3,758,658 | |||||||
2017 | 5,362,488 | |||||||
2018 | 4,591,329 | |||||||
2019 | 2,180,564 | |||||||
Total notes payable | $ | 18,988,798 | ||||||
Less: debt discount | (1,008,420 | ) | ||||||
Notes payable, net of debt discount | $ | 17,980,378 |
COMMITMENTS_AND_CONTINGENCIES_
COMMITMENTS AND CONTINGENCIES (Tables) | 3 Months Ended | ||||||
Mar. 31, 2014 | |||||||
Commitments and Contingencies (See Note 11) | ' | ||||||
Schedule of Estimates of Lease Obligations | ' | ||||||
Twelve Months Ended March 31, | Annual Obligation | ||||||
2015 | $ | 158,577 | |||||
2016 | 216,120 | ||||||
2017 | 224,865 | ||||||
2018 | 233,604 | ||||||
2019 | 242,340 | ||||||
Thereafter | 63,933 | ||||||
Total Estimated Lease Obligations | $ | 1,139,439 |
STOCK_WARRANTS_AND_OPTIONS_Tab
STOCK WARRANTS AND OPTIONS (Tables) | 3 Months Ended | ||||||||||
Mar. 31, 2014 | |||||||||||
Notes to Financial Statements | ' | ||||||||||
Summary of Current Warrant Activity | ' | ||||||||||
Common Stock Warrants | Weighted Average Exercise Price | ||||||||||
Outstanding – January 1, 2013 | 1,330,953 | $ | 0.45 | ||||||||
Issued | — | — | |||||||||
Exercised | — | — | |||||||||
Expired | (714,286 | ) | 0.4 | ||||||||
Outstanding – December 31, 2013 | 616,667 | 0.51 | |||||||||
Issued | — | — | |||||||||
Exercised | — | — | |||||||||
Expired | 266,667 | 0.4 | |||||||||
Outstanding – March 31, 2014 | 350,000 | $ | 0.6 | ||||||||
Exercisable – March 31, 2014 | — | — | |||||||||
Summary of Stock Options Pricing | ' | ||||||||||
Options issued | |||||||||||
three months ended | |||||||||||
31-Mar-14 | |||||||||||
Dividend yield | 0 | % | |||||||||
Expected volatility | 86 | % | |||||||||
Risk free interest rate | 1.73 | % | |||||||||
Expected life (years) | 5 | ||||||||||
Summary of Stock Option Activity | ' | ||||||||||
Common Stock Options | Weighted Average | ||||||||||
Exercise Price | |||||||||||
Outstanding – January 1, 2013 | 100,000 | $ | 0.25 | ||||||||
Issued | — | — | |||||||||
Exercised | — | — | |||||||||
Expired | — | — | |||||||||
Outstanding – December 31, 2013 | 100,000 | 0.25 | |||||||||
Issued | 27,083 | 0.34 | |||||||||
Exercised | — | — | |||||||||
Expired | — | — | |||||||||
Outstanding – March 31, 2014 | 127,083 | $ | 0.27 | ||||||||
Exercisable – March 31, 2014 | 82,638 | $ | 0.28 |
ASSET_ACQUISITIONS_AND_SIGNIFI1
ASSET ACQUISITIONS AND SIGNIFICANT TRANSACTIONS (Tables) | 3 Months Ended | ||||
Mar. 31, 2014 | |||||
Notes to Financial Statements | ' | ||||
Schedule of Asset Acquisition | ' | ||||
Common stock – 2,000,000 shares | $ | 480,000 | |||
Note payable – Prime Table Games LLC | 12,200,000 | ||||
Note payable – Prime Table Games UK | 10,000,000 | ||||
Total | $ | 22,680,000 | |||
Schedule of Asset Acquisition Allocation | ' | ||||
Patents | $ | 13,259,000 | |||
Customer relationships | 3,400,000 | ||||
Trademarks | 2,740,000 | ||||
Debt discount | 1,530,000 | ||||
Goodwill | 1,091,000 | ||||
Non-compete agreement | 660,000 | ||||
Total purchase price allocation | $ | 22,680,000 |
SIGNIFICANT_ACCOUNTING_POLICIE3
SIGNIFICANT ACCOUNTING POLICIES - Schedule of Client Revenue Concentrations (Details) | 3 Months Ended | |
Mar. 31, 2014 | Mar. 31, 2013 | |
Customer A - United Kingdom | ' | ' |
Concentration Risk | 17.00% | 6.60% |
Customer B - North America | ' | ' |
Concentration Risk | 15.30% | 12.50% |
Customer C - United Kingdom | ' | ' |
Concentration Risk | 11.30% | 8.40% |
Customer D - North America | ' | ' |
Concentration Risk | 5.00% | 4.70% |
SIGNIFICANT_ACCOUNTING_POLICIE4
SIGNIFICANT ACCOUNTING POLICIES (Details Narrative) (USD $) | 3 Months Ended | |
Mar. 31, 2014 | Dec. 31, 2013 | |
Accounting Policies [Abstract] | ' | ' |
Fiscal Year End | '--12-31 | ' |
Property Plant And Equipment Useful Life Minimum | '3 years | ' |
Property Plant And Equipment Useful Life Maximum | '5 years | ' |
Finite Lived Intangible Assets Useful Life Minimum | '5 years | ' |
Finite Lived Intangible Assets Useful Life Maximum | '30 years | ' |
Client Installation Base Useful Life | '60 months | ' |
Patents Useful Life Minimum | '87 months | ' |
Patents Useful Life Maximum | '132 months | ' |
Trademarks Useful Life Minimum | '144 months | ' |
Trademarks Useful Life Maximum | '360 months | ' |
Client Relationships Base Useful Life | '264 months | ' |
Goodwill | $1,091,000 | $1,091,000 |
Accounts receivable from client account | $1,298,735 | ' |
NOTE_RECEIVABLE_Schedule_of_Re
NOTE RECEIVABLE - Schedule of Related Party Note Receivable (Details) (USD $) | Mar. 31, 2014 | Dec. 31, 2013 |
Notes to Financial Statements | ' | ' |
Note receivable | $383,298 | $383,298 |
Less: current portion | -18,487 | -18,212 |
Total long-term note receivable | $364,811 | $365,086 |
NOTE_RECEIVABLE_RELATED_PARTY_1
NOTE RECEIVABLE - RELATED PARTY (Details Narrative) (USD $) | 3 Months Ended | |
Mar. 31, 2014 | Mar. 31, 2013 | |
Notes to Financial Statements | ' | ' |
Fixed interest rate | 6.00% | ' |
Monthly principal and interest payments | $6,598 | ' |
Unpaid principal and interest due | '2017-02-01 | ' |
Monthly principal and interest payment, reduction | 3,332 | ' |
Interest income | 5,545 | 5,820 |
Interest receivable | $23,119 | ' |
PREPAID_EXPENSES_Schedule_of_P
PREPAID EXPENSES - Schedule of Prepaid Expenses (Details) (USD $) | Mar. 31, 2014 | Dec. 31, 2013 |
Notes to Financial Statements | ' | ' |
Insurance | $12,247 | $12,579 |
IT system | 4,772 | 8,923 |
Professional services | 47,554 | 5,436 |
Property taxes | 1,460 | 3,325 |
Inventory costs | 2,520 | 2,520 |
Regulatory compliance expense | ' | 1,868 |
Rent | 28,985 | 175 |
Other prepaid expenses | 438 | 147 |
Trade show expense | 8,195 | ' |
Total prepaid expenses | $106,171 | $34,973 |
INVENTORY_Schedule_of_Inventor
INVENTORY - Schedule of Inventory (Details) (USD $) | Mar. 31, 2014 | Dec. 31, 2013 |
Inventory Disclosure [Abstract] | ' | ' |
Raw materials and component parts | $191,372 | $182,351 |
Finished goods | 92,178 | 95,579 |
Work-in-process | 47,204 | 52,445 |
Subtotal | 330,754 | 330,375 |
Less: inventory reserve | -32,895 | -32,895 |
Total inventory | $297,859 | $297,480 |
PROPERTY_AND_EQUIPMENT_Schedul
PROPERTY AND EQUIPMENT - Schedule of Property and Plant Equipment (Details) (USD $) | Mar. 31, 2014 | Dec. 31, 2013 |
Property, Plant and Equipment [Abstract] | ' | ' |
Furniture and fixtures | $76,031 | $76,031 |
Computer equipment | 80,581 | 69,960 |
Office equipment | 12,270 | 12,270 |
Leasehold improvements | 6,367 | 6,367 |
Property and Equipment Gross | 175,249 | 164,628 |
Less: accumulated depreciation | -125,383 | -119,676 |
Property And Equipment Net | $49,866 | $44,952 |
PROPERTY_AND_EQUIPMENT_Details
PROPERTY AND EQUIPMENT (Details Narrative) (USD $) | 3 Months Ended | |
Mar. 31, 2014 | Mar. 31, 2013 | |
Property, Plant and Equipment [Abstract] | ' | ' |
Depreciation Expense | $5,707 | $4,516 |
PRODUCTS_LEASED_AND_HELD_FOR_L2
PRODUCTS LEASED AND HELD FOR LEASE - Schedule of Products Leased and Held for Lease (Details) (USD $) | Mar. 31, 2014 | Dec. 31, 2013 |
Notes to Financial Statements | ' | ' |
Enhanced table systems | $194,411 | $157,861 |
Less: accumulated depreciation | -79,660 | -71,978 |
Products leased and held for lease, net | $114,751 | $85,883 |
PRODUCTS_LEASED_AND_HELD_FOR_L3
PRODUCTS LEASED AND HELD FOR LEASE (Details Narrative) (USD $) | 3 Months Ended | |
Mar. 31, 2014 | Mar. 31, 2013 | |
Notes to Financial Statements | ' | ' |
Products leased and held for lease, Depreciation | $7,682 | $4,737 |
INTANGIBLE_ASSETS_Schedule_of_
INTANGIBLE ASSETS - Schedule of Intellectual Property and Intangible Assets (Details) (USD $) | Mar. 31, 2014 | Dec. 31, 2013 | Oct. 31, 2011 |
Prime Table Games Acquisition | |||
Patents | $13,615,967 | $13,615,967 | $13,259,000 |
Customer relationships | 3,400,000 | 3,400,000 | 3,400,000 |
Trademarks | 2,740,000 | 2,740,000 | 2,740,000 |
Goodwill | ' | ' | 1,091,000 |
Non-compete | 660,000 | 660,000 | 660,000 |
Other intangible assets | 20,415,967 | 20,415,967 | 21,150,000 |
Less: Accumulated amortization | -3,993,955 | -3,604,456 | ' |
Total Intangible Assets (Net) | $16,422,012 | $16,811,511 | $21,150,000 |
INTANGIBLE_ASSETS_Details_Narr
INTANGIBLE ASSETS (Details Narrative) (USD $) | 3 Months Ended | |
Mar. 31, 2014 | Mar. 31, 2013 | |
Notes to Financial Statements | ' | ' |
Amortization Of Intangible Assets | $389,499 | $397,226 |
ACCRUED_EXPENSES_Schedule_of_A
ACCRUED EXPENSES - Schedule of Accrued Expenses (Details) (USD $) | Mar. 31, 2014 | Dec. 31, 2013 |
Notes to Financial Statements | ' | ' |
Professional fees | $50,000 | $75,000 |
Commissions | 90,572 | 92,744 |
Salaries & payroll taxes | 61,233 | 59,266 |
Vacation | 52,387 | 41,216 |
Accrued interest | 2,279 | 2,443 |
Other accrued expenses | 8,223 | 3,015 |
Trade show expenses | 64,825 | 48,718 |
Total accrued expenses | $329,519 | $322,402 |
NOTES_PAYABLE_Schedule_of_Note
NOTES PAYABLE - Schedule of Notes Payable (Details) (USD $) | Mar. 31, 2014 | Dec. 31, 2013 |
Notes to Financial Statements | ' | ' |
Note payable related party | $1,087,650 | $1,095,181 |
Notes payable, net of debt discount - PTG | 16,892,728 | 17,480,676 |
Total Note Payable | 17,980,378 | 18,575,857 |
Less: Current portion | -3,095,759 | -2,929,918 |
Total long-term debt | $14,884,619 | $15,645,939 |
LONGTERM_DEBT_Schedule_of_Matu
LONG-TERM DEBT - Schedule of Maturities (Details) (USD $) | Mar. 31, 2019 | Mar. 31, 2018 | Mar. 31, 2017 | Mar. 31, 2016 | Mar. 31, 2015 |
Notes to Financial Statements | ' | ' | ' | ' | ' |
Maturities of Long Term Debt | $2,180,564 | $4,591,329 | $5,362,488 | $3,758,658 | $3,095,759 |
Total notes payable | 18,988,798 | ' | ' | ' | ' |
Less: debt discount | -1,008,420 | ' | ' | ' | ' |
Notes payable, net of debt discount | $17,980,378 | ' | ' | ' | ' |
NOTES_PAYABLE_Details_Narrativ
NOTES PAYABLE (Details Narrative) (USD $) | 3 Months Ended | |
Mar. 31, 2014 | Dec. 31, 2013 | |
Monthly principal and interest payments | $6,598 | ' |
Fixed interest rate | 6.00% | ' |
Promissory Note payable | 17,980,378 | 18,575,857 |
Debt discount | 1,530,000 | ' |
Note Receivable GGLLC 2 | ' | ' |
Monthly principal and interest payments | 9,159 | ' |
Fixed interest rate | 7.30% | ' |
Balloon payment | 1,003,000 | ' |
Prime Table Games UK | ' | ' |
Promissory Note payable | 12,200,000 | ' |
Prime Table Games LLC | ' | ' |
Promissory Note payable | 10,000,000 | ' |
Prime Table Games UK and LLC | ' | ' |
Promissory Note payable | 22,680,000 | ' |
Debt discount | $1,530,000 | ' |
COMMITMENTS_AND_CONTINGENCIES_1
COMMITMENTS AND CONTINGENCIES - Schedule of Estimates of Lease Obligations (Details) (USD $) | Mar. 31, 2020 | Mar. 31, 2019 | Mar. 31, 2018 | Mar. 31, 2017 | Mar. 31, 2016 | Mar. 31, 2015 |
Commitments and Contingencies (See Note 11) | ' | ' | ' | ' | ' | ' |
Estimates of lease obligations | $63,933 | $242,340 | $233,604 | $224,865 | $216,120 | $158,577 |
Total lease obligation | ' | ' | $1,139,439 | ' | ' | ' |
COMMITMENTS_AND_CONTINGENCIES_2
COMMITMENTS AND CONTINGENCIES (Details Narrative) (USD $) | 3 Months Ended | 24 Months Ended | 12 Months Ended | |
Mar. 31, 2014 | Mar. 31, 2013 | Sep. 01, 2012 | Mar. 31, 2015 | |
Spencer Lease | ||||
Monthly rental payment | ' | ' | $10,359 | ' |
Rent expense | 45,185 | 40,456 | ' | 153,000 |
Montly rent payment, minimum | 150 | ' | ' | ' |
Montly rent payment, maximum | 460 | ' | ' | ' |
Total revenue | 2,264,811 | 1,896,378 | ' | ' |
Selling, general and administrative | 1,206,345 | 957,583 | ' | ' |
Rental term | ' | ' | ' | '5 years |
Annual rental increase | ' | ' | ' | 4.00% |
Tenant Improvement Allowance Option | ' | ' | ' | $150,000 |
STOCKHOLDERS_EQUITY_Details_Na
STOCKHOLDERS EQUITY (Details Narrative) (USD $) | Mar. 31, 2014 | Dec. 31, 2013 | Feb. 28, 2014 | Apr. 30, 2014 | Mar. 31, 2014 |
Contractor | Related Party | Related Party | |||
Common Stock, shares authorized | 65,000,000 | 65,000,000 | ' | ' | ' |
Common Stock, par value | $0.00 | $0.00 | ' | ' | ' |
Preferred Stock, shares authorized | 10,000,000 | 10,000,000 | ' | ' | ' |
Preferred Stock, par value | $0.00 | $0.00 | ' | ' | ' |
Common Stock, shares granted | ' | ' | 150,000 | 75,000 | 100,000 |
Common Stock, shares issued | 38,485,591 | 38,310,591 | ' | ' | ' |
Common Stock, shares vested | ' | ' | 75,000 | 75,000 | 100,000 |
RELATED_PARTY_TRANSACTIONS_Det
RELATED PARTY TRANSACTIONS (Details Narrative) (USD $) | 3 Months Ended | 24 Months Ended | 3 Months Ended | 12 Months Ended | 3 Months Ended | ||||||
Mar. 31, 2014 | Mar. 31, 2013 | Sep. 01, 2012 | Mar. 31, 2014 | Mar. 31, 2013 | Mar. 31, 2014 | Dec. 31, 2012 | Mar. 31, 2014 | Mar. 31, 2013 | Mar. 31, 2014 | Mar. 31, 2013 | |
Saucier Business Trust | Saucier Business Trust | Note Receivable GGLLC | Note Receivable GGLLC | Note Receivable GGLLC 2 | Note Receivable GGLLC 2 | Carpathia Associates LLC | Carpathia Associates LLC | ||||
Monthly rental payment | ' | ' | $10,359 | ' | ' | ' | ' | ' | ' | ' | ' |
Rent expense | 45,185 | 40,456 | ' | 31,077 | 31,077 | ' | ' | ' | ' | ' | ' |
Fixed interest rate | 6.00% | ' | ' | ' | ' | 6.00% | ' | 7.30% | ' | ' | ' |
Monthly principal and interest payments | 6,598 | ' | ' | ' | ' | 6,598 | ' | 9,159 | ' | ' | ' |
Unpaid principal and interest due | '2017-02-01 | ' | ' | ' | ' | '2017-02-01 | ' | '2017-02-01 | ' | ' | ' |
Monthly principal and interest payment, reduction | 3,332 | ' | ' | ' | ' | 3,332 | ' | ' | ' | ' | ' |
Interest income | 5,545 | 5,820 | ' | ' | ' | 5,545 | 5,820 | ' | ' | ' | ' |
Interest receivable balance | 23,119 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Note payable, balance | ' | ' | ' | ' | ' | 383,298 | 383,298 | 1,087,650 | 1,095,181 | ' | ' |
Note payable, balloon payment | ' | ' | ' | ' | ' | ' | ' | 1,003,000 | ' | ' | ' |
Fees paid to related party for services | ' | ' | ' | ' | ' | ' | ' | ' | ' | $0 | $2,610 |
INCOME_TAXES_Details_Narrative
INCOME TAXES (Details Narrative) | 3 Months Ended | |
Mar. 31, 2014 | Mar. 31, 2013 | |
Income Tax Disclosure [Abstract] | ' | ' |
Effective tax rate | 38.20% | 37.10% |
Stock_Warrants_and_Options_Sum
Stock Warrants and Options - Summary of Current Warrant Activity (Details) (USD $) | 3 Months Ended | 12 Months Ended |
Mar. 31, 2014 | Dec. 31, 2013 | |
Notes to Financial Statements | ' | ' |
Beginning Balance, number of shares | 616,667 | 1,330,953 |
Beginning Balance, weighted average exercise price | $0.51 | $0.45 |
Warrants expired, number of shares | 266,667 | -714,286 |
Warrants expired, weighted average exercise price | $0.40 | $0.40 |
Ending Balance, number of shares | ' | 616,667 |
Ending Balance, weighted average exercise price | ' | $0.51 |
Ending Balance, Warrants exercisable | 350,000 | ' |
Ending Balance, Warrants exercisable, weighted average exercise price | $0.60 | ' |
Stock_Warrants_and_Options_Sum1
Stock Warrants and Options - Summary of Stock Options Pricing (Details) | 3 Months Ended |
Mar. 31, 2014 | |
Notes to Financial Statements | ' |
Dividend yield | 0.00% |
Expected volatility | 86.00% |
Risk free interest rate | 1.73% |
Expected life (years) | '5 years |
Stock_Warrants_and_Options_Sum2
Stock Warrants and Options - Summary of Stock Option Activity (Details) (USD $) | 3 Months Ended | |
Mar. 31, 2014 | Dec. 31, 2012 | |
Notes to Financial Statements | ' | ' |
Beginning Balance, number of shares | 100,000 | 100,000 |
Beginning Balance, weighted average exercise price | $0.25 | $0.25 |
Options Issued, number of shares | 27,083 | ' |
Options Issued, weighted average exercise price | $0.34 | ' |
Ending Balance, number of shares | 127,083 | 100,000 |
Ending Balance, weighted average exercise price | $0.27 | $0.25 |
Ending Balance, Options Exercisable | 82,638 | ' |
Ending Balance, Options Exercisable, weighted average exercise price | $0.28 | ' |
STOCK_WARRANTS_AND_OPTIONS_Det
STOCK WARRANTS AND OPTIONS (Details Narrative) (USD $) | 3 Months Ended |
Mar. 31, 2014 | |
Notes to Financial Statements | ' |
Stock Options Issued | 27,083 |
Stock Options Issued, value | $6,237 |
Stock Options, exercise price | $0.34 |
ASSET_ACQUISITIONS_AND_SIGNIFI2
ASSET ACQUISITIONS AND SIGNIFICANT TRANSACTIONS - Schedule of Asset Acquisition (Details) (USD $) | Mar. 31, 2014 |
Notes to Financial Statements | ' |
Common stock - 2,000,000 shares | $480,000 |
Note payable - Prime Table Games LLC | 12,200,000 |
Note payable - Prime Table Games UK | 10,000,000 |
Total | $22,680,000 |
ASSET_ACQUISITIONS_AND_SIGNIFI3
ASSET ACQUISITIONS AND SIGNIFICANT TRANSACTIONS - Schedule of Asset Acquisition Allocation (Details) (USD $) | Mar. 31, 2014 |
Asset Allocation Based on Fair Value Price | ' |
Patents | $13,259,000 |
Customer relationships | 3,400,000 |
Trademarks | 2,740,000 |
Debt discount | 1,530,000 |
Goodwill | 1,091,000 |
Non-compete agreement | 660,000 |
Total Asset Allocation | $22,680,000 |
ASSET_ACQUISITIONS_AND_SIGNIFI4
ASSET ACQUISITIONS AND SIGNIFICANT TRANSACTIONS (Details Narrative) | Mar. 31, 2014 | Dec. 31, 2013 | Mar. 31, 2014 | 28-May-16 | 28-May-15 | 28-May-14 | Mar. 31, 2014 | 28-May-13 | Jan. 28, 2012 | 28-May-16 | 28-May-15 | 28-May-14 | Mar. 31, 2014 | 28-May-13 | Jan. 28, 2012 | Mar. 31, 2014 | Feb. 21, 2011 |
USD ($) | USD ($) | Prime Table Games UK and LLC | Prime Table Games LLC | Prime Table Games LLC | Prime Table Games LLC | Prime Table Games LLC | Prime Table Games LLC | Prime Table Games LLC | Prime Table Games UK | Prime Table Games UK | Prime Table Games UK | Prime Table Games UK | Prime Table Games UK | Prime Table Games UK | TMAX | TMAX | |
USD ($) | USD ($) | USD ($) | USD ($) | USD ($) | USD ($) | USD ($) | GBP (£) | GBP (£) | GBP (£) | USD ($) | GBP (£) | GBP (£) | USD ($) | USD ($) | |||
Date entered into promissory note | ' | ' | 4-Oct-11 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Promissory Note payable | $17,980,378 | $18,575,857 | $22,680,000 | ' | ' | ' | $10,000,000 | ' | ' | ' | ' | ' | $12,200,000 | ' | ' | ' | ' |
Promissory Notes were recorded at fair value, net of debt discount | ' | ' | 20,670,000 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Promissory Note, interest rate minimum | ' | ' | 3.00% | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Promissory Note, interest rate maximum | ' | ' | 9.00% | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Promissory Notes, No. 1 Monthly Payment | ' | ' | ' | 220,000 | 190,000 | 160,000 | ' | 130,000 | 100,000 | 115,200 | 102,400 | 89,600 | ' | 76,800 | 64,000 | ' | ' |
Promissory Notes, Term | ' | ' | ' | '12 months | '12 months | '12 months | ' | '12 months | '16 months | '12 months | '12 months | '12 months | ' | '12 months | '16 months | ' | ' |
TableMAX Operating Expense Reimbursable | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | $9,293 | $600,000 |
TableMAX Operating Expense Reimbursable Term | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | '12 months |
SUBSEQUENT_EVENTS_Details_Narr
SUBSEQUENT EVENTS (Details Narrative) (USD $) | Mar. 31, 2014 | Dec. 31, 2013 | Apr. 02, 2014 |
Director Appt | |||
Shares, issued | 38,485,591 | 38,310,591 | 75,000 |
Options to purchase | ' | ' | 25,000 |
Option to purchase, exercise period | ' | ' | 'P5Y |
Annual Cash Compensation | $61,233 | $59,266 | $30,000 |