Document and Entity Information
Document and Entity Information - shares | 9 Months Ended | |
Sep. 30, 2016 | Nov. 14, 2016 | |
Document And Entity Information [Abstract] | ||
Entity Registrant Name | Galaxy Gaming, Inc. | |
Entity Central Index Key | 13,156 | |
Document Type | 10-Q | |
Document Period End Date | Sep. 30, 2016 | |
Amendment Flag | false | |
Current Fiscal Year End Date | --12-31 | |
Entity Filer Category | Smaller Reporting Company | |
Entity Common Stock, Shares Outstanding | 39,315,591 | |
Document Fiscal Period Focus | Q3 | |
Document Fiscal Year Focus | 2,016 |
Condensed Balance Sheets (Unaud
Condensed Balance Sheets (Unaudited) - USD ($) | Sep. 30, 2016 | Dec. 31, 2015 |
Current assets: | ||
Cash and cash equivalents | $ 1,823,657 | $ 570,623 |
Restricted cash | 87,850 | 97,859 |
Accounts receivable, net of allowance for bad debts of $27,190 and $30,944 | 1,937,343 | 1,828,669 |
Inventory | 484,442 | 411,700 |
Deferred tax asset | 43,017 | |
Prepaid expense and other | 99,905 | 108,827 |
Total current assets | 4,433,197 | 3,060,695 |
Goodwill and other intangible assets, net | 13,235,698 | 14,352,636 |
Deferred tax assets, net | 82,562 | |
Other assets, net | 299,918 | 41,793 |
Total assets | 18,418,176 | 17,971,048 |
Current liabilities: | ||
Accounts payable | 563,445 | 1,421,848 |
Accrued expenses | 976,834 | 823,964 |
Income taxes payable | 1,106,600 | 170,331 |
Deferred revenue | 870,628 | 717,690 |
Jackpot liabilities | 91,602 | 106,671 |
Deferred tax liabilities | 75,358 | |
Deferred rent, current portion | 12,753 | 6,197 |
Current portion of long-term debt and capital lease obligations | 909,009 | 4,707,316 |
Total current liabilities | 4,606,229 | 7,954,017 |
Deferred rent, net | 42,532 | 52,643 |
Capital lease obligations, net | 54,898 | 78,008 |
Warrant liability | 806,698 | |
Long-term debt, net | 9,028,235 | 7,436,171 |
Total liabilities | 14,538,592 | 15,520,839 |
Commitments and Contingencies (See Note 10) | ||
Stockholders’ equity | ||
Preferred stock, 10,000,000 shares authorized; $.001 par value; 0 shares issued and outstanding, respectively | ||
Common stock, 65,000,000 shares authorized; $.001 par value; 39,315,591 and 39,215,591 shares issued and outstanding, respectively | 39,316 | 39,216 |
Additional paid-in capital | 3,054,847 | 2,963,841 |
Accumulated earnings (deficit) | 785,421 | (792,446) |
Accumulated other comprehensive income | 239,598 | |
Total stockholders’ equity | 3,879,584 | 2,450,209 |
Total liabilities and stockholders’ equity | 18,418,176 | 17,971,048 |
Property Plant and Equipment Excluding Assets Leased to Others | ||
Current assets: | ||
Property and equipment, net | 244,896 | 298,877 |
Products Leased and Held for Lease, Net | ||
Current assets: | ||
Property and equipment, net | $ 204,467 | $ 134,485 |
Condensed Balance Sheets (Unau3
Condensed Balance Sheets (Unaudited) (Parenthetical) - USD ($) | Sep. 30, 2016 | Dec. 31, 2015 |
Statement Of Financial Position [Abstract] | ||
Accounts receivables, net allowance for bad debts | $ 27,190 | $ 30,944 |
Preferred Stock, Shares authorized | 10,000,000 | 10,000,000 |
Preferred Stock, Par Value | $ 0.001 | $ 0.001 |
Preferred Stock, Issued | 0 | 0 |
Preferred Stock, Outstanding | 0 | 0 |
Common Stock, Shares authorized | 65,000,000 | 65,000,000 |
Common Stock, par value | $ 0.001 | $ 0.001 |
Common Stock, Issued | 39,315,591 | 39,215,591 |
Common Stock, Outstanding | 39,315,591 | 39,215,591 |
Condensed Statements of Operati
Condensed Statements of Operations (Unaudited) - USD ($) | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2016 | Sep. 30, 2015 | Sep. 30, 2016 | Sep. 30, 2015 | |
Revenue: | ||||
Product leases and royalties | $ 3,190,823 | $ 2,747,774 | $ 9,229,815 | $ 8,003,469 |
Product sales and service | 1,146 | 7,074 | 10,425 | 18,073 |
Total revenue | 3,191,969 | 2,754,848 | 9,240,240 | 8,021,542 |
Costs and expenses: | ||||
Cost of ancillary products and assembled components | 26,763 | 22,890 | 78,075 | 70,168 |
Selling, general and administrative | 1,576,480 | 1,736,024 | 4,850,785 | 4,995,984 |
Research and development | 89,513 | 101,822 | 270,734 | 371,251 |
Depreciation and amortization | 419,540 | 416,918 | 1,252,860 | 1,251,614 |
Share-based compensation | 41,075 | 17,909 | 91,006 | 72,850 |
Total costs and expenses | 2,153,371 | 2,295,563 | 6,543,460 | 6,761,867 |
Income from operations | 1,038,598 | 459,285 | 2,696,780 | 1,259,675 |
Other income (expense): | ||||
Settlement income | 697,214 | 697,214 | ||
Interest expense | (227,632) | (248,604) | (741,045) | (799,407) |
Loss on extinguishment of debt | (87,578) | (87,578) | ||
Change in estimated fair value of warrant liability | 2,933 | 2,933 | ||
Interest income | 56 | 2,084 | 202 | 13,288 |
Total other expense | 384,993 | (246,520) | (128,274) | (786,119) |
Income before provision for income taxes | 1,423,591 | 212,765 | 2,568,506 | 473,556 |
Provision for income taxes | (602,619) | (93,059) | (990,639) | (219,418) |
Net income | $ 820,972 | $ 119,706 | $ 1,577,867 | $ 254,138 |
Net income per share, basic and diluted | $ 0.02 | $ 0 | $ 0.04 | $ 0.01 |
Weighted-average shares outstanding: | ||||
Basic | 39,315,591 | 39,040,775 | 39,372,944 | 39,040,775 |
Diluted | 39,465,676 | 39,079,102 | 39,559,494 | 39,079,102 |
Condensed Statements of Compreh
Condensed Statements of Comprehensive Income (Unaudited) - USD ($) | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2016 | Sep. 30, 2015 | Sep. 30, 2016 | Sep. 30, 2015 | |
Statement Of Income And Comprehensive Income [Abstract] | ||||
Net income | $ 820,972 | $ 119,706 | $ 1,577,867 | $ 254,138 |
Other comprehensive income: | ||||
Foreign currency translation adjustments, net of tax | 120,193 | 89,401 | ||
Total comprehensive income | $ 820,972 | $ 239,899 | $ 1,577,867 | $ 343,539 |
Condensed Statements of Cash Fl
Condensed Statements of Cash Flows (Unaudited) - USD ($) | 9 Months Ended | |
Sep. 30, 2016 | Sep. 30, 2015 | |
Cash flows from operating activities: | ||
Net income | $ 1,577,867 | $ 254,138 |
Adjustments to reconcile net income to net cash provided by operating activities: | ||
Depreciation and amortization | 1,252,860 | 1,251,614 |
Amortization of debt issuance costs and debt discount | 136,710 | 156,474 |
Provision for bad debt expense | 40,000 | |
Inventory reserve | 47,069 | |
Loss on extinguishment of debt | 87,578 | |
Change in estimated fair value of warrant liability | (2,933) | |
Deferred income tax provision | 54,370 | 219,418 |
Share-based compensation | 91,006 | 72,850 |
Changes in operating assets and liabilities: | ||
Decrease in restricted cash | 10,009 | 9,392 |
Increase in accounts receivable | (107,969) | (197,139) |
Decrease in other current assets | 43,017 | 62,314 |
Increase in inventory | (181,319) | (125,820) |
Decrease (increase) in prepaid expenses and other current assets | 6,608 | (65,538) |
(Decrease) increase in accounts payable | (858,954) | 495,891 |
Increase in income tax payable | 936,269 | |
Increase in accrued expenses | 141,841 | 23,037 |
Increase in deferred revenue | 152,938 | 65,227 |
Decrease in jackpot liabilities | (15,069) | (6,296) |
Decrease in deferred rent | (3,555) | (957) |
Net cash provided by operating activities | 3,321,274 | 2,301,674 |
Cash flows from investing activities: | ||
Acquisition of property and equipment | (43,345) | (44,980) |
Cash flows from financing activities: | ||
Proceeds received from long-term debt | 932,126 | |
Principal payments on capital lease obligations | (51,698) | (49,186) |
Principal payments on long-term debt | (2,873,437) | (2,662,699) |
Net cash used in financing activities | (1,993,009) | (2,711,885) |
Effect of exchange rate changes on cash | (31,886) | (1,962) |
Net increase (decrease) in cash and cash equivalents | 1,253,034 | (457,153) |
Cash and cash equivalents – beginning of period | 570,623 | 560,184 |
Cash and cash equivalents – end of period | 1,823,657 | 103,031 |
Supplemental cash flow information: | ||
Cash paid for interest | 753,250 | 800,830 |
Inventory transferred to leased assets | 108,577 | 39,896 |
Cash paid for income taxes | 35,000 | |
Supplemental non-cash financing activities information: | ||
Effect of exchange rate on long-term debt payable in foreign currency | 336,485 | $ 119,414 |
Issuance of warrants in conjunction with term loan | 809,631 | |
Points paid on term loan | $ 262,500 |
DESCRIPTION OF BUSINESS
DESCRIPTION OF BUSINESS | 9 Months Ended |
Sep. 30, 2016 | |
Organization Consolidation And Presentation Of Financial Statements [Abstract] | |
DESCRIPTION OF BUSINESS | GALAXY GAMING, INC. NOTES TO FINANCIAL STATEMENTS (Unaudited) NOTE 1. DESCRIPTION OF BUSINESS Unless the context indicates otherwise, references to “Galaxy Gaming, Inc.,” “we,” “us,” “our,” or the “Company,” refer 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. We are an established global gaming company specializing in the design, development, manufacturing, marketing and acquisition of proprietary casino table games and associated technology, platforms and systems for the casino gaming industry. We are a leading supplier of gaming entertainment products worldwide and provide a diverse offering of quality products and services at competitive prices, designed to enhance the player experience. 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 and 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, and Africa and to cruise ships and internet gaming sites worldwide. |
SIGNIFICANT ACCOUNTING POLICIES
SIGNIFICANT ACCOUNTING POLICIES | 9 Months Ended |
Sep. 30, 2016 | |
Accounting Policies [Abstract] | |
SIGNIFICANT ACCOUNTING POLICIES | NOTE 2. 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. Basis of presentation. As permitted by the rules and regulations of the Securities and Exchange Commission (“SEC”), certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles in the United States of America (“U.S. GAAP”) have been condensed or omitted pursuant to those rules and regulations. The operating results for interim periods are not necessarily indicative of results that may be expected for any other interim period or for the full year. In the opinion of management, the accompanying unaudited interim financial statements contain all necessary adjustments, consisting only of those of a recurring nature, and disclosures to present fairly the Company’s financial position and the results of its operations and cash flows for the periods presented. These unaudited interim condensed financial statements should be read in conjunction with the financial statements and the related notes thereto included in the Company’s Form 10-K for the fiscal year ended December 31, 2015, filed with the SEC on March 30, 2016. Basis of accounting. The financial statements have been prepared on the accrual basis of accounting in conformity with U.S. GAAP. 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. Inventory value (Note 3) 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. Products leased and held for lease. We develop products intended primarily to be leased by casinos, which are stated at cost, net of depreciation (Note 5). Depreciation on leased products is calculated using the straight-line method over a three-year period Property and equipment. Property and equipment (Note 4) are being depreciated over their estimated useful lives of 3 to 5 years, using the straight-line method. Goodwill. Goodwill was created as a result of an acquisition in October 2011 (discussed in more detail in Note 9). Goodwill is 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. Other intangible assets. Our finite-lived intangible assets (Note 6) are being amortized using the straight-line method over the following estimated economic lives: Licensing agreements 60 months Patents 87 - 132 months Trademarks 144 - 360 months Client relationships 264 months Intangible assets are analyzed for potential impairment whenever events or changes in circumstances indicate the carrying value may not be recoverable. 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. Leases. We recognize rent expense for operating leases (Note 10) on a straight-line basis (including the effect of reduced or free rent and rent escalations) over the applicable lease term. The difference between the cash paid to the landlord and the amount recognized as rent expense on a straight-line basis is recorded as deferred rent. The landlord of our corporate headquarters financed leasehold improvements in the amount of $150,000. These improvements have been recorded as a capital lease and amortized over the life of the lease. 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. We also, occasionally, receive a one-time sale of certain products and/or reimbursement of our manufactured equipment. Substantially all of our revenue is recognized when it is earned. 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 until earned. 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. 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, nor do we 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 and SpectrumVision . Research and development. We incur research and development (“R&D”) costs to develop our new and next-generation products. Our products reach commercial 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. In the ordinary course of business, there are transactions and calculations where the ultimate tax outcome is uncertain. We recognize the tax benefit from an uncertain tax position if we believe 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. Judgment is required in determining the provision for incomes taxes and related accruals, deferred tax assets and liabilities. Additionally, our tax returns for tax years 2013 and thereafter remain open for examination by various tax authorities. Net income per share. Basic net income per share is calculated by dividing net income by the weighted-average number of common shares issued and outstanding during the year. Diluted net income 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. Share-based compensation. We recognize compensation expense for all share-based awards made to employees, directors and independent contractors. The fair value of share based awards (Note 11) is estimated at the grant date using the Black-Scholes option-pricing model and the portion that is ultimately expected to vest is recognized as compensation cost over the requisite service period. We have elected to recognize compensation expense for all options with graded vesting on a straight-line basis over the vesting period of the entire option. The determination of fair value using the Black-Scholes pricing model is affected by our stock price as well as assumptions regarding a number of complex and subjective variables, including expected stock price volatility, risk-free interest rate, expected dividends and projected employee stock option exercise behaviors. We estimate volatility based on historical volatility of our common stock, and estimate the expected term based on several criteria, including the vesting period of the grant and the term of the award. We estimate employee stock option exercise behavior based on actual historical exercise activity and assumptions regarding future exercise activity of unexercised, outstanding options. Share based compensation is recognized only for those awards that are ultimately expected to vest, and we have applied or estimated forfeiture rate to unvested awards for purposes of calculating compensation costs. These estimates will be revised in future periods if actual forfeitures differ from the estimates. Changes in forfeiture estimates impact compensation cost in the period in which the change in estimate occurs. Warrant accounting. We account for common stock warrants pursuant to the applicable guidance on accounting for derivative financial instruments indexed to, and potentially settled in, a company’s own stock, on the understanding that in compliance with applicable securities laws, registered warrants require the issuance of unregistered securities upon exercise. We classify warrants on the balance sheet as a long-term liability, which is revalued at each balance sheet date subsequent to the initial issuance. Determining the appropriate fair-value model and calculating the fair value of warrants requires considerable judgment, including estimating stock price volatility and expected warrant life. We develop our estimates based on historical data. A small change in the estimates used may have a relatively large change in the estimated valuation. We use the Black-Scholes pricing model to value the registered warrants. Changes in the fair market value of the warrants are reflected in the statement of operations as “Change in the fair value of warrant liability.” No warrants have been exercised as of September 30, 2016. 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 statement presentations. New accounting standards not yet adopted Revenue Recognition. In May 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2014-09 (Topic 606), , which is a comprehensive new revenue recognition standard that will supersede virtually all existing revenue guidance, including industry-specific guidance. Under the new standard, revenue will be recognized when control of the promised goods or services is transferred to customers in an amount that reflects the consideration to which the company expects to be entitled in exchange for those goods and services. The standard creates a five-step model that will generally require companies to use more judgment and make more estimates than under current guidance when considering the terms of contracts along with all relevant facts and circumstances. These include the identification of customer contracts and separating performance obligations, the determination of transaction price that potentially includes an estimate of variable consideration, allocating the transaction price to each separate performance obligation, and recognizing revenue in line with the pattern of transfer. In August 2015, the FASB issued ASU No. 2015-14, Revenue from Contracts with Customers (Topic 606): Deferral of the Effective Date Inventory. In July 2015, the FASB issued ASU No. 2015-11, ASU 2015-11 changes the criteria for measuring inventory within the scope of the ASU. Inventory will now be measured at the lower of cost and net realizable value, while the concept of market value will be eliminated. The ASU defines net realizable value as the estimated selling process in the ordinary course of business, less reasonably predictable costs of completion, disposal and transportation. ASU 2015-11 is effective for fiscal years beginning after December 15, 2016, and interim periods within those fiscal years, with earlier adoption permitted. The prospective adoption of the ASU is required and we are currently evaluating the impact of adopting this guidance. Deferred Taxes. In November 2015, the FASB issued ASU No. 2015-17, which eliminates the requirement to present deferred tax liabilities and assets as current and non-current in a classified balance sheet. Instead, all deferred tax assets and liabilities will be required to be presented as non-current. The ASU is effective for fiscal years beginning after December 15, 2016, and interim periods within those fiscal years. The amendments in this guidance may be applied prospectively to all deferred tax liabilities and assets or retrospectively to all periods presented with earlier application permitted for financial statements that have not been issued. This ASU is not expected to have a material impact on our financial statements. Leases. In February 2016, the FASB issued ASU No. 2016-02, The amended guidance is intended to increase transparency and comparability among organizations by recognizing lease assets and lease liabilities on the balance sheet and disclosing key information about leasing arrangements. The adoption of this guidance is expected to result in a significant portion of our operating leases being recognized on our Balance Sheets. The guidance requires lessees and lessors to recognize and measure leases at the beginning of the earliest period presented using a modified retrospective approach. ASU 2016-02 is effective for fiscal years beginning after December 15, 2018 and interim periods within those fiscal years with earlier adoption permitted. We are currently evaluating the impact of adopting this guidance. |
INVENTORY
INVENTORY | 9 Months Ended |
Sep. 30, 2016 | |
Inventory Disclosure [Abstract] | |
INVENTORY | NOTE 3. INVENTORY Inventory consisted of the following at: September 30, 2016 December 2015 Raw materials and component parts $ 320,868 $ 231,709 Finished goods 168,151 170,528 Work-in-process 25,423 39,463 514,442 441,700 Less: inventory reserve (30,000 ) (30,000 ) $ 484,442 $ 411,700 |
PROPERTY AND EQUIPMENT
PROPERTY AND EQUIPMENT | 9 Months Ended |
Sep. 30, 2016 | |
Property Plant And Equipment [Abstract] | |
PROPERTY AND EQUIPMENT | NOTE 4. PROPERTY AND EQUIPMENT Property and equipment, substantially all of which collateralizes long-term obligations (Notes 8 and 9), consisted of the following at: September 30, 2016 December 31, 2015 Furniture and fixtures $ 238,273 $ 211,411 Leasehold improvements 156,843 156,843 Automotive vehicles 94,087 94,087 Computer equipment 96,956 89,203 Office equipment 37,871 29,140 624,030 580,684 Less: accumulated depreciation (379,134 ) (281,807 ) $ 244,896 $ 298,877 As of September 30, 2016, property and equipment includes $243,970 of assets acquired under capital leases (Note 8). Accumulated depreciation of assets under capital leases totaled $148,500 as of September 30, 2016. |
PRODUCTS LEASED AND HELD FOR LE
PRODUCTS LEASED AND HELD FOR LEASE | 9 Months Ended |
Sep. 30, 2016 | |
Leases Operating [Abstract] | |
PRODUCTS LEASED AND HELD FOR LEASE | NOTE 5. PRODUCTS LEASED AND HELD FOR LEASE Products leased and held for lease consisted of the following at: September 30, 2016 December 2015 Enhanced table systems $ 397,261 $ 288,683 Less: accumulated depreciation (192,794 ) (154,198 ) $ 204,467 $ 134,485 |
GOODWILL AND OTHER INTANGIBLE A
GOODWILL AND OTHER INTANGIBLE ASSETS | 9 Months Ended |
Sep. 30, 2016 | |
Goodwill And Intangible Assets Disclosure [Abstract] | |
GOODWILL AND OTHER INTANGIBLE ASSETS | NOTE 6. GOODWILL AND OTHER INTANGIBLE ASSETS Goodwill and finite-lived intangible assets consisted of the following at: September 30, 2016 December 31, 2015 Goodwill $ 1,091,000 $ 1,091,000 Finite-lived intangible assets: 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 Licensing agreements 35,000 35,000 20,450,967 20,450,967 Less: accumulated amortization (8,306,269 ) (7,189,331 ) 12,144,698 13,261,636 $ 13,235,698 $ 14,352,636 |
ACCRUED EXPENSES
ACCRUED EXPENSES | 9 Months Ended |
Sep. 30, 2016 | |
Payables And Accruals [Abstract] | |
ACCRUED EXPENSES | NOTE 7. ACCRUED EXPENSES Accrued expenses, consisted of the following at: September 30, 2016 December 2015 Royalties $ 33,157 $ 259,193 TableMAX reimbursement 392,358 136,785 Salaries and payroll taxes 275,015 95,115 Trade show expenses 85,275 78,549 Vacation 85,834 62,546 Professional fees 69,286 154,888 Commissions 33,282 22,056 Accrued interest 2,627 14,832 $ 976,834 $ 823,964 |
CAPITAL LEASE OBLIGATIONS
CAPITAL LEASE OBLIGATIONS | 9 Months Ended |
Sep. 30, 2016 | |
Leases [Abstract] | |
CAPITAL LEASE OBLIGATIONS | NOTE 8. CAPITAL LEASE OBLIGATIONS Capital lease obligations consisted of the following at: September 30, 2016 December 2015 Capital lease obligation – leasehold improvements $ 85,506 $ 107,365 Capital lease obligation – office furniture — 29,839 85,506 137,204 Less: Current portion (30,608 ) (59,196 ) $ 54,898 $ 78,008 Future annual payments for capital leases obligations are as follows for the years ending September 30: Total 2017 $ 34,545 2018 34,545 2019 23,030 2020 — Total minimum lease payments $ 92,120 Less: amount representing interest (6,614 ) $ 85,506 |
LONG-TERM DEBT
LONG-TERM DEBT | 9 Months Ended |
Sep. 30, 2016 | |
Debt Disclosure [Abstract] | |
LONG-TERM DEBT | NOTE 9. LONG-TERM DEBT Long-term debt consisted of the following at: September 30, 2016 December 2015 Term loan $ 10,500,000 $ — Note payable, unrelated party — 11,577,858 Notes payable, related party 527,102 1,079,083 Equipment notes payable 58,402 70,664 11,085,504 12,727,605 Less: Unamortized debt issuance costs (369,236 ) — Warrants issued (809,632 ) — Debt discount — (643,314 ) 9,906,636 12,084,291 Less: Current portion (878,401 ) (4,648,120 ) $ 9,028,235 $ 7,436,171 Term loan credit facility. In August 2016, we entered into a term loan agreement for an aggregate principal amount of $10,500,000 (the "Term Loan"). Proceeds of the Term Loan were primarily used to prepay in full the outstanding notes payable to unrelated parties. The remainder of the proceeds from the Term Loan will be used for general corporate purposes and working capital needs. The Term Loan is secured by a senior lien on the Company's assets. In conjunction with the Term Loan, we issued the lenders a six-year warrant to purchase 1,965,780 shares of the Company’s common stock (the “Warrants”) (Note 13). Under the Term Loan, the Company is subject to quarterly financial covenants that, among other things, limit our annual capital expenditures (as defined in the Term Loan agreement), and require us to maintain a specified leverage ratio and minimum EBITDA amounts, each of which are defined in the Term Loan agreement. We are not aware of any noncompliance with the financial covenants of the Term Loan Agreement. During the initial twelve-month period of the Term Loan, the outstanding principal will accrue interest at the rate of 14.0% per annum. Thereafter, the outstanding principal will accrue interest at the lesser of 14.0% per annum or 12.5% per annum for any quarterly period in which the Company achieves a specified leverage ratio. The Term Loan requires quarterly interest-only payments through December 31, 2016 after which the Company is required to make quarterly principal payments of $262,500 plus accrued interest. The remaining principal and any unpaid interest will be payable in full on August 29, 2021. Voluntary prepayments of the Term Loan, in full or in part, are permitted after the first anniversary of the Term Loan, subject to certain premiums. The Term Loan also requires certain mandatory prepayments in the amount of 100% of the proceeds from certain asset dispositions (other than in the ordinary course of business) and certain other extraordinary events, and 25% of the proceeds from the sale and issuance of capital stock. Note payable, unrelated party. In connection with an asset acquisition in October 2011, we executed a promissory note payable for $12.2 million, and another promissory note payable for £6.4 million GBP ($10.0 million USD). The notes were recorded net of a debt discount of $1,530,000. The effective interest rate of the notes was 6% and 7% during 2015 and 2016, respectively. These notes were repaid in full in connection with the Term Loan agreement executed in August 2016. Concurrently with the repayment of the note obligation payable in GBP, $239,598 of previously unrecognized gains on foreign exchange translations related to the GBP note payable were reclassified out of accumulated other comprehensive income and factored into the calculation of loss on debt extinguishment. Notes payable, related party. In connection with an asset purchase agreement executed in December 2007, we executed a note payable due to an entity owned and controlled by our Chief Executive Officer (“CEO”). This note requires annual principal and interest payments of $109,908, at a fixed interest rate of 7.3% through December 2018, at which time there is a balloon payment due of $354,480. In October 2015, our CEO loaned the Company $500,000 for working capital purposes, in exchange for a promissory note. In April 2016, pursuant to the terms of the agreement, we paid the CEO $535,000 in full satisfaction of the balance due, relieving us of any further payments or obligations under this arrangement. As of September 30, 2016, maturities of our long-term debt obligations are as follows: Twelve months ending September 30, Total 2017 $ 878,401 2018 1,147,294 2019 1,442,486 2020 1,054,823 2021 6,562,500 Total notes payable 11,085,504 Less: Unamortized debt issuance costs (369,236 ) Warrants issued (809,632 ) Notes payable, net $ 9,906,636 |
COMMITMENTS AND CONTINGENCIES
COMMITMENTS AND CONTINGENCIES | 9 Months Ended |
Sep. 30, 2016 | |
Commitments And Contingencies Disclosure [Abstract] | |
COMMITMENTS AND CONTINGENCIES | NOTE 10. COMMITMENTS AND CONTINGENCIES Concentration of risk. We are exposed to risks associated with clients who represent a significant portion of total revenues. For the nine months ended September 30, 2016 and 2015, respectively, we had the following client revenue concentrations: Location 2016 Revenue 2015 Revenue Client A North America 13.6% 14.8% Client B North America 6.9% 5.5% Client C North America 6.2% 6.8% Client D North America 5.7% 3.5% Client E United Kingdom 5.3% 6.7% We are also exposed to risks associated with the expiration of our patents. Domestic and international patents for two of our products expired in June 2015. The patents accounted for approximately $4,299,637 or 47% of our revenue for the nine months ended September 30, 2016 and $4,283,055 or 53% of revenue for the nine months ended September 30, 2015. Operating lease. In February 2014, we entered into a lease (the “Spencer Lease”) for a new corporate office with an unrelated third party. The 5-year Spencer Lease is for a building approximately 24,000 square feet in size, located in Las Vegas, Nevada. The initial term of the Spencer Lease commenced on April 1, 2014. We paid approximately $153,000 in annual base rent in the first year, which increases by approximately 4% each year. We are also obligated to pay real estate taxes and other building operating costs. Subject to certain conditions, we have certain rights under the Spencer 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 Spencer 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 Spencer Lease. In connection with the commencement of the Spencer Lease, the landlord agreed to finance tenant improvements (“TI Allowance”) of $150,000. The base rent is increased by an amount sufficient to fully amortize the TI Allowance through the Spencer 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. The TI Allowance has been classified as a capital lease on the balance sheet. Total rent expense was $165,856 and $171,840 for the nine months ended September 30, 2016 and 2015, respectively. Future minimum lease payments are as follows: Twelve Months Ending September 30, Annual Obligation 2017 $ 229,236 2018 237,972 2019 184,794 2020 1,401 2021 — $ 653,403 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 U.S. GAAP, 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 12 in Item 8. “Financial Statements and Supplementary Data” included in our annual report on Form 10-K for the year ended December 31, 2015. Except as discussed in the following paragraph, there are no material updates to matters previously reported on Form 10-K for the year ended December 31, 2015. On July 11, 2016, we entered into a settlement agreement (the "Settlement Agreement") with Red Card Gaming, Inc. ("RCG"), and AGS, LLC ("AGS") for purposes of resolving all disputes between the parties. Pursuant to the Settlement Agreement, among other things, RCG, AGS and the Company agreed to a mutual release of all claims and counter-claims. RCG and AGS also agreed to terminate all of their rights and obligations related to the APA, and AGS agreed to pay us the sum of $350,000 and agreed to the injunctive terms of the Final Award. Furthermore, we agreed to dismiss the complaint they filed in November 2014 against In Bet Gaming, Inc. and In Bet, LLC (collectively "In Bet"), alleging that In Bet's In-Between side bet game infringed on one of our patents. AGS became involved in an Inter-Parties Review subsequent to November 2014, concerning the patent at issue because AGS had title and interest in the game In-Between. As a result of the Settlement Agreement, we recognized settlement income of $697,214, calculated as follows: Settlement Income Amount Release of accrued royalties owed to AGS $ 347,214 Payment from AGS 350,000 $ 697,214 |
STOCKHOLDERS' EQUITY
STOCKHOLDERS' EQUITY | 9 Months Ended |
Sep. 30, 2016 | |
Equity [Abstract] | |
STOCKHOLDERS' EQUITY | NOTE 11. STOCKHOLDERS’ EQUITY In April 2015, one of our Directors, was granted 75,000 shares of our restricted common stock as condition of his Board of Directors Director Service Agreement. The fair market value of the grant was $22,500, which was determined using our closing stock price as April 1, 2015, the date of the grant. The restricted stock grant vested immediately. In November 2015, our CFO, was granted 150,000 shares of our restricted common stock as condition of his Employment Agreement. The fair market value of the grant was $30,000, which was determined using our closing stock price at November 14, 2015, the date of the grant. Beginning June 30, 2016, the restricted stock will vest at six-month intervals through December 31, 2018. As a condition of his 2015 employment agreement, our CFO can elect to use up to 50% of his annual bonus to purchase shares of the Company’s common stock at a 50% discount. The purchase price is determined by using the average closing price of the prior 10 business days discounted by 50%. On February 28, 2016, our CFO made the election to utilize $9,000 of his annual 2015 bonus to purchase 100,000 shares of common stock at the market price of $0.18 (effective price of $0.09 after discount). The shares vested immediately. |
INCOME TAXES
INCOME TAXES | 9 Months Ended |
Sep. 30, 2016 | |
Income Tax Disclosure [Abstract] | |
INCOME TAXES | NOTE 12. INCOME TAXES Our forecasted effective tax rate at September 30, 2016 is 40.8%, a 6.8% decrease from the 47.6% effective tax rate recorded at September 30, 2015. After a discrete benefit of $65,078, the effective tax rate for the nine months ended September 30, 2016 was 38.2%. The discrete tax benefit was primarily due to changes in positions taken for uncertain tax positions. |
STOCK WARRANTS OPTIONS AND GRAN
STOCK WARRANTS OPTIONS AND GRANTS | 9 Months Ended |
Sep. 30, 2016 | |
Disclosure Of Compensation Related Costs Sharebased Payments [Abstract] | |
STOCK WARRANTS OPTIONS AND GRANTS | NOTE 13. STOCK WARRANTS, OPTIONS AND GRANTS Stock options. For the nine months ended September 30, 2016 and 2015, we issued 427,500 and 412,500 stock options, respectively. Stock options issued to members of our Board of Directors were 225,000 and 200,000 for the nine months ended September 30, 2016 and 2015, respectively. Stock options issued to independent contractors were 112,500 for each of the nine month periods ended September 30, 2016 and 2015, respectively. During the nine months ended September 30, 2016, we issued 90,000 stock options to two employees, with a vesting period of three years. The strike price was equal to the stock price at the date of the grant. During the nine months ended September 30, 2015, we issued 100,000 stock options to an employee, with a vesting period of three years. The strike price was equal to the stock price at the date of the grant. The value of all stock options granted for the nine months ended September 30, 2016 and 2015 was determined to be $85,606 and $52,600, respectively, using the Black-Scholes option pricing model with the following assumptions: Options Issued Nine Months Ended September 30, 2016 Options Issued Nine Months Ended September 30, 2015 Dividend yield 0% 0% Expected volatility 89% - 90% 84% - 85% Risk free interest rate 1.01% - 1.22% 1.37% - 1.63% Expected life (years) 5.00 5.00 A summary of stock option activity is as follows: Common Weighted-average exercise price Outstanding – January 1, 2015 381,250 $ 0.36 Issued 675,000 0.23 Exercised — — Expired — — Outstanding – December 31, 2015 1,056,250 $ 0.28 Issued 427,500 0.33 Exercised — — Expired — — Outstanding – September 30, 2016 1,483,750 $ 0.29 Exercisable – September 30, 2016 1,143,750 $ 0.30 Share based compensation. The cost of all stock options issued has been classified as share based compensation for the nine months ended September 30, 2016 and 2015, respectively. Total share based compensation was $91,006 and $72,850 for the nine months ended September 30, 2016 and 2015, respectively. Warrants. On August 29, 2016, in connection with the Term Loan agreement, the Company entered into a Warrant Agreement (the "Warrant Agreement") with the lenders pursuant to which the Company issued warrants to purchase 1,965,780 shares of common stock at an initial exercise price of $0.30 per share (the "Warrants"). The number of shares of common stock issuable upon exercise of the Warrants, and/or the exercise price of such shares, is subject to standard anti-dilution adjustments in the event of stock splits, reorganizations, stock dividends, and similar events. As of the date of the Warrant Agreement, the shares of common stock issuable upon a full exercise of the Warrants would represent 5.0% of the total issued and outstanding shares of the Company's common stock. The lenders were also granted the right, but not the obligation, to purchase up to 5.0% of the total number of new securities that the Company may, from time to time, sell and issue. The Warrants expire on August 29, 2022, and may not be exercised prior to the earliest of (a) the fifth anniversary of the Loan Agreement, (b) the date on which the obligations described in the Loan Agreement are repaid in full, or (c) the date on which the Lender declares all or any portion of the outstanding amount of the Term Loan to be due and payable under the terms of the Loan Agreement (collectively, the "Trigger Date"). Exercise of the Warrants requires a sixty (60) day prior written notice, during which time the Company may exercise its Call Right described below. The Warrant Agreement includes a call right (the "Call Right") whereby the Company can purchase the Warrants for a fixed sum of $1,333,333 upon providing the Warrant holders with a thirty (30) day prior written notice. Furthermore, the Warrant Agreement also includes a put right (the "Put Right") whereby the Lenders may require the Company to purchase from the Lenders all or any portion of the Warrants at a purchase price equal to the lesser of (a) the fair market value of the underlying shares of common stock as of the date of exercise of the Put Right, or (b) $1,333,333. The Put Right may not be exercised prior to the Trigger Date (as defined above), and the Put Right expires on August 29, 2022. A summary of warrant activity is as follows: Common Weighted-average exercise price Outstanding – December 31, 2015 — — Issued 1,965,780 0.30 Exercised — — Expired — — Outstanding – September 30, 2016 1,965,780 $ 0.30 Exercisable – September 30, 2016 — $ — |
SUBSEQUENT EVENTS
SUBSEQUENT EVENTS | 9 Months Ended |
Sep. 30, 2016 | |
Subsequent Events [Abstract] | |
SUBSEQUENT EVENTS | NOTE 14. SUBSEQUENT EVENTS In accordance with ASC 855-10, we have evaluated all events and transactions that occurred subsequent to September 30, 2016 through the date these financial statements were issued, and we did not identify any additional material subsequent events, the effects of which would require additional disclosure or adjustment to these financial statements. |
SIGNIFICANT ACCOUNTING POLICI21
SIGNIFICANT ACCOUNTING POLICIES (Policies) | 9 Months Ended |
Sep. 30, 2016 | |
Accounting Policies [Abstract] | |
Basis of presentation and Basis of accounting | Basis of presentation. As permitted by the rules and regulations of the Securities and Exchange Commission (“SEC”), certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles in the United States of America (“U.S. GAAP”) have been condensed or omitted pursuant to those rules and regulations. The operating results for interim periods are not necessarily indicative of results that may be expected for any other interim period or for the full year. In the opinion of management, the accompanying unaudited interim financial statements contain all necessary adjustments, consisting only of those of a recurring nature, and disclosures to present fairly the Company’s financial position and the results of its operations and cash flows for the periods presented. These unaudited interim condensed financial statements should be read in conjunction with the financial statements and the related notes thereto included in the Company’s Form 10-K for the fiscal year ended December 31, 2015, filed with the SEC on March 30, 2016. Basis of accounting. The financial statements have been prepared on the accrual basis of accounting in conformity with U.S. GAAP. 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 | 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 | 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. Inventory consists of ancillary products such as signs, layouts, and bases for the various games and electronic devices and components. Inventory value (Note 3) 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. |
Products leased and held for lease | Products leased and held for lease. We develop products intended primarily to be leased by casinos, which are stated at cost, net of depreciation (Note 5). Depreciation on leased products is calculated using the straight-line method over a three-year period |
Property and equipment | Property and equipment. Property and equipment (Note 4) are being depreciated over their estimated useful lives of 3 to 5 years, using the straight-line method |
Goodwill | Goodwill. Goodwill was created as a result of an acquisition in October 2011 (discussed in more detail in Note 9). Goodwill is 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. |
Other intangible assets | Other intangible assets. Our finite-lived intangible assets (Note 6) are being amortized using the straight-line method over the following estimated economic lives: Licensing agreements 60 months Patents 87 - 132 months Trademarks 144 - 360 months Client relationships 264 months Intangible assets are analyzed for potential impairment whenever events or changes in circumstances indicate the carrying value may not be recoverable. |
Impairment of long-lived assets | 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. |
Leases | Leases. We recognize rent expense for operating leases (Note 10) on a straight-line basis (including the effect of reduced or free rent and rent escalations) over the applicable lease term. The difference between the cash paid to the landlord and the amount recognized as rent expense on a straight-line basis is recorded as deferred rent. The landlord of our corporate headquarters financed leasehold improvements in the amount of $150,000. These improvements have been recorded as a capital lease and amortized over the life of the lease. |
Revenue Recognition | 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. We also, occasionally, receive a one-time sale of certain products and/or reimbursement of our manufactured equipment. Substantially all of our revenue is recognized when it is earned. 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 until earned. 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. 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, nor do we market the software separately from the equipment. |
Costs of ancillary products and assembled components | 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 and SpectrumVision . |
Research and development | Research and development. We incur research and development (“R&D”) costs to develop our new and next-generation products. Our products reach commercial 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 | 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 | Income taxes. In the ordinary course of business, there are transactions and calculations where the ultimate tax outcome is uncertain. We recognize the tax benefit from an uncertain tax position if we believe 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. Judgment is required in determining the provision for incomes taxes and related accruals, deferred tax assets and liabilities. Additionally, our tax returns for tax years 2013 and thereafter remain open for examination by various tax authorities. |
Net income per share | Net income per share. Basic net income per share is calculated by dividing net income by the weighted-average number of common shares issued and outstanding during the year. Diluted net income 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. |
Share-based compensation | Share-based compensation. We recognize compensation expense for all share-based awards made to employees, directors and independent contractors. The fair value of share based awards (Note 11) is estimated at the grant date using the Black-Scholes option-pricing model and the portion that is ultimately expected to vest is recognized as compensation cost over the requisite service period. We have elected to recognize compensation expense for all options with graded vesting on a straight-line basis over the vesting period of the entire option. The determination of fair value using the Black-Scholes pricing model is affected by our stock price as well as assumptions regarding a number of complex and subjective variables, including expected stock price volatility, risk-free interest rate, expected dividends and projected employee stock option exercise behaviors. We estimate volatility based on historical volatility of our common stock, and estimate the expected term based on several criteria, including the vesting period of the grant and the term of the award. We estimate employee stock option exercise behavior based on actual historical exercise activity and assumptions regarding future exercise activity of unexercised, outstanding options. Share based compensation is recognized only for those awards that are ultimately expected to vest, and we have applied or estimated forfeiture rate to unvested awards for purposes of calculating compensation costs. These estimates will be revised in future periods if actual forfeitures differ from the estimates. Changes in forfeiture estimates impact compensation cost in the period in which the change in estimate occurs. |
Warrant Accounting | Warrant accounting. We account for common stock warrants pursuant to the applicable guidance on accounting for derivative financial instruments indexed to, and potentially settled in, a company’s own stock, on the understanding that in compliance with applicable securities laws, registered warrants require the issuance of unregistered securities upon exercise. We classify warrants on the balance sheet as a long-term liability, which is revalued at each balance sheet date subsequent to the initial issuance. Determining the appropriate fair-value model and calculating the fair value of warrants requires considerable judgment, including estimating stock price volatility and expected warrant life. We develop our estimates based on historical data. A small change in the estimates used may have a relatively large change in the estimated valuation. We use the Black-Scholes pricing model to value the registered warrants. Changes in the fair market value of the warrants are reflected in the statement of operations as “Change in the fair value of warrant liability.” No warrants have been exercised as of September 30, 2016 |
Use of estimates and assumptions | 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 | Reclassifications. Certain accounts and financial statement captions in the prior periods have been reclassified to conform to the current period financial statement presentations. |
New accounting standards not yet adopted | New accounting standards not yet adopted Revenue Recognition. In May 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2014-09 (Topic 606), , which is a comprehensive new revenue recognition standard that will supersede virtually all existing revenue guidance, including industry-specific guidance. Under the new standard, revenue will be recognized when control of the promised goods or services is transferred to customers in an amount that reflects the consideration to which the company expects to be entitled in exchange for those goods and services. The standard creates a five-step model that will generally require companies to use more judgment and make more estimates than under current guidance when considering the terms of contracts along with all relevant facts and circumstances. These include the identification of customer contracts and separating performance obligations, the determination of transaction price that potentially includes an estimate of variable consideration, allocating the transaction price to each separate performance obligation, and recognizing revenue in line with the pattern of transfer. In August 2015, the FASB issued ASU No. 2015-14, Revenue from Contracts with Customers (Topic 606): Deferral of the Effective Date Inventory. In July 2015, the FASB issued ASU No. 2015-11, ASU 2015-11 changes the criteria for measuring inventory within the scope of the ASU. Inventory will now be measured at the lower of cost and net realizable value, while the concept of market value will be eliminated. The ASU defines net realizable value as the estimated selling process in the ordinary course of business, less reasonably predictable costs of completion, disposal and transportation. ASU 2015-11 is effective for fiscal years beginning after December 15, 2016, and interim periods within those fiscal years, with earlier adoption permitted. The prospective adoption of the ASU is required and we are currently evaluating the impact of adopting this guidance. Deferred Taxes. In November 2015, the FASB issued ASU No. 2015-17, which eliminates the requirement to present deferred tax liabilities and assets as current and non-current in a classified balance sheet. Instead, all deferred tax assets and liabilities will be required to be presented as non-current. The ASU is effective for fiscal years beginning after December 15, 2016, and interim periods within those fiscal years. The amendments in this guidance may be applied prospectively to all deferred tax liabilities and assets or retrospectively to all periods presented with earlier application permitted for financial statements that have not been issued. This ASU is not expected to have a material impact on our financial statements. Leases. In February 2016, the FASB issued ASU No. 2016-02, The amended guidance is intended to increase transparency and comparability among organizations by recognizing lease assets and lease liabilities on the balance sheet and disclosing key information about leasing arrangements. The adoption of this guidance is expected to result in a significant portion of our operating leases being recognized on our Balance Sheets. The guidance requires lessees and lessors to recognize and measure leases at the beginning of the earliest period presented using a modified retrospective approach. ASU 2016-02 is effective for fiscal years beginning after December 15, 2018 and interim periods within those fiscal years with earlier adoption permitted. We are currently evaluating the impact of adopting this guidance. |
SIGNIFICANT ACCOUNTING POLICI22
SIGNIFICANT ACCOUNTING POLICIES (Tables) | 9 Months Ended |
Sep. 30, 2016 | |
Accounting Policies [Abstract] | |
Finite-Lived Intangible Assets Estimated Economic Lives | Our finite-lived intangible assets (Note 6) are being amortized using the straight-line method over the following estimated economic lives: Licensing agreements 60 months Patents 87 - 132 months Trademarks 144 - 360 months Client relationships 264 months |
INVENTORY (Tables)
INVENTORY (Tables) | 9 Months Ended |
Sep. 30, 2016 | |
Inventory Disclosure [Abstract] | |
Schedule of Inventory | Inventory consisted of the following at: September 30, 2016 December 2015 Raw materials and component parts $ 320,868 $ 231,709 Finished goods 168,151 170,528 Work-in-process 25,423 39,463 514,442 441,700 Less: inventory reserve (30,000 ) (30,000 ) $ 484,442 $ 411,700 |
PROPERTY AND EQUIPMENT (Tables)
PROPERTY AND EQUIPMENT (Tables) | 9 Months Ended |
Sep. 30, 2016 | |
Property Plant And Equipment [Abstract] | |
Schedule of Property and Plant Equipment Collateralized with Long-term Obligations | Property and equipment, substantially all of which collateralizes long-term obligations (Notes 8 and 9), consisted of the following at: September 30, 2016 December 31, 2015 Furniture and fixtures $ 238,273 $ 211,411 Leasehold improvements 156,843 156,843 Automotive vehicles 94,087 94,087 Computer equipment 96,956 89,203 Office equipment 37,871 29,140 624,030 580,684 Less: accumulated depreciation (379,134 ) (281,807 ) $ 244,896 $ 298,877 |
PRODUCTS LEASED AND HELD FOR 25
PRODUCTS LEASED AND HELD FOR LEASE (Tables) | 9 Months Ended |
Sep. 30, 2016 | |
Leases Operating [Abstract] | |
Schedule of Products Leased and Held for Lease | Products leased and held for lease consisted of the following at: September 30, 2016 December 2015 Enhanced table systems $ 397,261 $ 288,683 Less: accumulated depreciation (192,794 ) (154,198 ) $ 204,467 $ 134,485 |
GOODWILL AND OTHER INTANGIBLE26
GOODWILL AND OTHER INTANGIBLE ASSETS (Tables) | 9 Months Ended |
Sep. 30, 2016 | |
Goodwill And Intangible Assets Disclosure [Abstract] | |
Schedule of Goodwill and Finite-lived Intangible Assets | Goodwill and finite-lived intangible assets consisted of the following at: September 30, 2016 December 31, 2015 Goodwill $ 1,091,000 $ 1,091,000 Finite-lived intangible assets: 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 Licensing agreements 35,000 35,000 20,450,967 20,450,967 Less: accumulated amortization (8,306,269 ) (7,189,331 ) 12,144,698 13,261,636 $ 13,235,698 $ 14,352,636 |
ACCRUED EXPENSES (Tables)
ACCRUED EXPENSES (Tables) | 9 Months Ended |
Sep. 30, 2016 | |
Payables And Accruals [Abstract] | |
Schedule of Accrued Expenses | Accrued expenses, consisted of the following at: September 30, 2016 December 2015 Royalties $ 33,157 $ 259,193 TableMAX reimbursement 392,358 136,785 Salaries and payroll taxes 275,015 95,115 Trade show expenses 85,275 78,549 Vacation 85,834 62,546 Professional fees 69,286 154,888 Commissions 33,282 22,056 Accrued interest 2,627 14,832 $ 976,834 $ 823,964 |
CAPITAL LEASE OBLIGATIONS (Tabl
CAPITAL LEASE OBLIGATIONS (Tables) | 9 Months Ended |
Sep. 30, 2016 | |
Leases [Abstract] | |
Schedule of Capital Lease Obligations | Capital lease obligations consisted of the following at: September 30, 2016 December 2015 Capital lease obligation – leasehold improvements $ 85,506 $ 107,365 Capital lease obligation – office furniture — 29,839 85,506 137,204 Less: Current portion (30,608 ) (59,196 ) $ 54,898 $ 78,008 |
Schedule of Future Annual Payments for Capital Leases Obligations | Future annual payments for capital leases obligations are as follows for the years ending September 30: Total 2017 $ 34,545 2018 34,545 2019 23,030 2020 — Total minimum lease payments $ 92,120 Less: amount representing interest (6,614 ) $ 85,506 |
LONG-TERM DEBT (Tables)
LONG-TERM DEBT (Tables) | 9 Months Ended |
Sep. 30, 2016 | |
Debt Disclosure [Abstract] | |
Schedule of Long-term Debt | Long-term debt consisted of the following at: September 30, 2016 December 2015 Term loan $ 10,500,000 $ — Note payable, unrelated party — 11,577,858 Notes payable, related party 527,102 1,079,083 Equipment notes payable 58,402 70,664 11,085,504 12,727,605 Less: Unamortized debt issuance costs (369,236 ) — Warrants issued (809,632 ) — Debt discount — (643,314 ) 9,906,636 12,084,291 Less: Current portion (878,401 ) (4,648,120 ) $ 9,028,235 $ 7,436,171 |
Schedule of Maturities | As of September 30, 2016, maturities of our long-term debt obligations are as follows: Twelve months ending September 30, Total 2017 $ 878,401 2018 1,147,294 2019 1,442,486 2020 1,054,823 2021 6,562,500 Total notes payable 11,085,504 Less: Unamortized debt issuance costs (369,236 ) Warrants issued (809,632 ) Notes payable, net $ 9,906,636 |
COMMITMENTS AND CONTINGENCIES (
COMMITMENTS AND CONTINGENCIES (Tables) | 9 Months Ended |
Sep. 30, 2016 | |
Commitments And Contingencies Disclosure [Abstract] | |
Schedule of Client Revenue Concentrations | For the nine months ended September 30, 2016 and 2015, respectively, we had the following client revenue concentrations: Location 2016 Revenue 2015 Revenue Client A North America 13.6% 14.8% Client B North America 6.9% 5.5% Client C North America 6.2% 6.8% Client D North America 5.7% 3.5% Client E United Kingdom 5.3% 6.7% |
Schedule of Future Minimum Lease Payments | Future minimum lease payments are as follows: Twelve Months Ending September 30, Annual Obligation 2017 $ 229,236 2018 237,972 2019 184,794 2020 1,401 2021 — $ 653,403 |
Schedule of Settlement Income | Settlement Income Amount Release of accrued royalties owed to AGS $ 347,214 Payment from AGS 350,000 $ 697,214 |
STOCK WARRANTS OPTIONS AND GR31
STOCK WARRANTS OPTIONS AND GRANTS (Tables) | 9 Months Ended |
Sep. 30, 2016 | |
Disclosure Of Compensation Related Costs Sharebased Payments [Abstract] | |
Summary of Stock Options Pricing | Options Issued Nine Months Ended September 30, 2016 Options Issued Nine Months Ended September 30, 2015 Dividend yield 0% 0% Expected volatility 89% - 90% 84% - 85% Risk free interest rate 1.01% - 1.22% 1.37% - 1.63% Expected life (years) 5.00 5.00 |
Summary of Stock Option Activity | A summary of stock option activity is as follows: Common Weighted-average exercise price Outstanding – January 1, 2015 381,250 $ 0.36 Issued 675,000 0.23 Exercised — — Expired — — Outstanding – December 31, 2015 1,056,250 $ 0.28 Issued 427,500 0.33 Exercised — — Expired — — Outstanding – September 30, 2016 1,483,750 $ 0.29 Exercisable – September 30, 2016 1,143,750 $ 0.30 |
Summary of Warrant Activity | A summary of warrant activity is as follows: Common Weighted-average exercise price Outstanding – December 31, 2015 — — Issued 1,965,780 0.30 Exercised — — Expired — — Outstanding – September 30, 2016 1,965,780 $ 0.30 Exercisable – September 30, 2016 — $ — |
SIGNIFICANT ACCOUNTING POLICI32
SIGNIFICANT ACCOUNTING POLICIES (Details Narrative) | 9 Months Ended |
Sep. 30, 2016USD ($)shares | |
Product Information [Line Items] | |
Leasehold Improvements | $ 150,000 |
Open tax year | 2,013 |
Warrants exercised | shares | 0 |
Maximum | |
Product Information [Line Items] | |
Cash, FDIC Insured Amount | $ 250,000 |
Property plant and equipment useful life | 5 years |
Minimum | |
Product Information [Line Items] | |
Property plant and equipment useful life | 3 years |
SIGNIFICANT ACCOUNTING POLICI33
SIGNIFICANT ACCOUNTING POLICIES - Finite-Lived Intangible Assets Estimated Economic Lives (Details) | 9 Months Ended |
Sep. 30, 2016 | |
Licensing agreements | |
Finite Lived Intangible Assets [Line Items] | |
Finite lived intangible assets useful life | 60 months |
Patents | Minimum | |
Finite Lived Intangible Assets [Line Items] | |
Finite lived intangible assets useful life | 87 months |
Patents | Maximum | |
Finite Lived Intangible Assets [Line Items] | |
Finite lived intangible assets useful life | 132 months |
Trademarks | Minimum | |
Finite Lived Intangible Assets [Line Items] | |
Finite lived intangible assets useful life | 144 months |
Trademarks | Maximum | |
Finite Lived Intangible Assets [Line Items] | |
Finite lived intangible assets useful life | 360 months |
Client relationships | |
Finite Lived Intangible Assets [Line Items] | |
Finite lived intangible assets useful life | 264 months |
INVENTORY - Schedule of Invento
INVENTORY - Schedule of Inventory (Details) - USD ($) | Sep. 30, 2016 | Dec. 31, 2015 |
Inventory Disclosure [Abstract] | ||
Raw materials and component parts | $ 320,868 | $ 231,709 |
Finished goods | 168,151 | 170,528 |
Work-in-process | 25,423 | 39,463 |
Subtotal | 514,442 | 441,700 |
Less: inventory reserve | (30,000) | (30,000) |
Inventory | $ 484,442 | $ 411,700 |
PROPERTY AND EQUIPMENT - Schedu
PROPERTY AND EQUIPMENT - Schedule of Property and Plant Equipment Collateralized with Long-term Obligations (Details) - USD ($) | Sep. 30, 2016 | Dec. 31, 2015 |
Furniture and Fixtures | ||
Property Plant And Equipment [Line Items] | ||
Property and equipment, gross | $ 238,273 | $ 211,411 |
Leasehold Improvements | ||
Property Plant And Equipment [Line Items] | ||
Property and equipment, gross | 156,843 | 156,843 |
Automotive Vehicles | ||
Property Plant And Equipment [Line Items] | ||
Property and equipment, gross | 94,087 | 94,087 |
Computer Equipment | ||
Property Plant And Equipment [Line Items] | ||
Property and equipment, gross | 96,956 | 89,203 |
Office Equipment | ||
Property Plant And Equipment [Line Items] | ||
Property and equipment, gross | 37,871 | 29,140 |
Property Plant and Equipment Excluding Assets Leased to Others | ||
Property Plant And Equipment [Line Items] | ||
Property and equipment, gross | 624,030 | 580,684 |
Less: accumulated depreciation | (379,134) | (281,807) |
Property and equipment, net | $ 244,896 | $ 298,877 |
PROPERTY AND EQUIPMENT (Details
PROPERTY AND EQUIPMENT (Details Narrative) | Sep. 30, 2016USD ($) |
Property Plant And Equipment [Abstract] | |
Capital Lease Assets | $ 243,970 |
Capital Lease Assets, Accumulated depreciation | $ 148,500 |
PRODUCTS LEASED AND HELD FOR 37
PRODUCTS LEASED AND HELD FOR LEASE - Schedule of Products Leased and Held for Lease (Details) - USD ($) | Sep. 30, 2016 | Dec. 31, 2015 |
Leases Operating [Abstract] | ||
Enhanced table systems | $ 397,261 | $ 288,683 |
Less: accumulated depreciation | (192,794) | (154,198) |
Products leased and held for lease, net | $ 204,467 | $ 134,485 |
GOODWILL AND OTHER INTANGIBLE38
GOODWILL AND OTHER INTANGIBLE ASSETS - Schedule of Goodwill and Finite-lived Intangible Assets (Details) - USD ($) | Sep. 30, 2016 | Dec. 31, 2015 |
Finite Lived Intangible Assets [Line Items] | ||
Goodwill | $ 1,091,000 | $ 1,091,000 |
Finite-lived intangible assets: | ||
Gross finite-lived intangible assets | 20,450,967 | 20,450,967 |
Less: accumulated amortization | (8,306,269) | (7,189,331) |
Finite-lived intangible assets, net | 12,144,698 | 13,261,636 |
Goodwill and finite-lived intangible assets | 13,235,698 | 14,352,636 |
Patents | ||
Finite-lived intangible assets: | ||
Gross finite-lived intangible assets | 13,615,967 | 13,615,967 |
Client relationships | ||
Finite-lived intangible assets: | ||
Gross finite-lived intangible assets | 3,400,000 | 3,400,000 |
Trademarks | ||
Finite-lived intangible assets: | ||
Gross finite-lived intangible assets | 2,740,000 | 2,740,000 |
Non-compete Agreements | ||
Finite-lived intangible assets: | ||
Gross finite-lived intangible assets | 660,000 | 660,000 |
Licensing agreements | ||
Finite-lived intangible assets: | ||
Gross finite-lived intangible assets | $ 35,000 | $ 35,000 |
ACCRUED EXPENSES - Schedule of
ACCRUED EXPENSES - Schedule of Accrued Expenses (Details) - USD ($) | Sep. 30, 2016 | Dec. 31, 2015 |
Payables And Accruals [Abstract] | ||
Royalties | $ 33,157 | $ 259,193 |
TableMAX reimbursement | 392,358 | 136,785 |
Salaries and payroll taxes | 275,015 | 95,115 |
Trade show expenses | 85,275 | 78,549 |
Vacation | 85,834 | 62,546 |
Professional fees | 69,286 | 154,888 |
Commissions | 33,282 | 22,056 |
Accrued interest | 2,627 | 14,832 |
Accrued expenses | $ 976,834 | $ 823,964 |
CAPITAL LEASE OBLIGATIONS - Sch
CAPITAL LEASE OBLIGATIONS - Schedule of Capital Lease Obligations (Details) - USD ($) | Sep. 30, 2016 | Dec. 31, 2015 |
Capital Lease Obligation [Line Items] | ||
Capital lease obligation | $ 85,506 | $ 137,204 |
Less: Current portion | (30,608) | (59,196) |
Capital lease obligations, net of current portion | 54,898 | 78,008 |
Leasehold Improvements | ||
Capital Lease Obligation [Line Items] | ||
Capital lease obligation | $ 85,506 | 107,365 |
Office Furniture | ||
Capital Lease Obligation [Line Items] | ||
Capital lease obligation | $ 29,839 |
CAPITAL LEASE OBLIGATIONS - S41
CAPITAL LEASE OBLIGATIONS - Schedule of Future Annual Payments for Capital Leases Obligations (Details) - USD ($) | Sep. 30, 2016 | Dec. 31, 2015 |
Leases [Abstract] | ||
2,017 | $ 34,545 | |
2,018 | 34,545 | |
2,019 | 23,030 | |
Total minimum lease payments | 92,120 | |
Less: amount representing interest | (6,614) | |
Capital lease obligation | $ 85,506 | $ 137,204 |
LONG-TERM DEBT - Schedule of Lo
LONG-TERM DEBT - Schedule of Long-term Debt (Details) - USD ($) | Sep. 30, 2016 | Aug. 31, 2016 | Dec. 31, 2015 |
Debt Instrument [Line Items] | |||
Long-term debt, gross | $ 11,085,504 | $ 12,727,605 | |
Unamortized debt issuance costs | (369,236) | ||
Warrants issued | (809,632) | ||
Debt discount | (643,314) | ||
Long-term Debt | 9,906,636 | 12,084,291 | |
Less: Current portion | (878,401) | (4,648,120) | |
Total long-term debt | 9,028,235 | 7,436,171 | |
Term Loan | |||
Debt Instrument [Line Items] | |||
Long-term debt, gross | 10,500,000 | $ 10,500,000 | |
Note Payable, Unrelated Party | |||
Debt Instrument [Line Items] | |||
Long-term debt, gross | 11,577,858 | ||
Notes Payable, Related Party | |||
Debt Instrument [Line Items] | |||
Long-term debt, gross | 527,102 | 1,079,083 | |
Equipment Notes Payable | |||
Debt Instrument [Line Items] | |||
Long-term debt, gross | $ 58,402 | $ 70,664 |
LONG-TERM DEBT (Details Narrati
LONG-TERM DEBT (Details Narrative) £ in Millions | Oct. 31, 2011USD ($) | Oct. 31, 2011GBP (£) | Aug. 31, 2016USD ($)shares | Oct. 31, 2015USD ($) | Sep. 30, 2016USD ($) | Sep. 30, 2016USD ($) | Jan. 01, 2017USD ($) | Aug. 29, 2016shares | Apr. 30, 2016USD ($) | Dec. 31, 2015USD ($) |
Debt Instrument [Line Items] | ||||||||||
Aggregate principal amount | $ 11,085,504 | $ 11,085,504 | $ 12,727,605 | |||||||
Loss on extinguishment of debt | $ (87,578) | $ (87,578) | ||||||||
Note Payable, Unrelated Party | ||||||||||
Debt Instrument [Line Items] | ||||||||||
Aggregate principal amount | $ 11,577,858 | |||||||||
Fair value of the notes payable | $ 1,530,000 | |||||||||
Effective interest rate | 7.00% | 7.00% | 6.00% | |||||||
Notes Payable, Related Party | ||||||||||
Debt Instrument [Line Items] | ||||||||||
Aggregate principal amount | $ 527,102 | $ 527,102 | $ 1,079,083 | |||||||
Annual principal and interest payments | $ 109,908 | |||||||||
Note payable, Frequency of periodic payment | annual | |||||||||
Fixed interest rate | 7.30% | 7.30% | ||||||||
Balloon payment | $ 354,480 | $ 354,480 | ||||||||
Promissory Note | ||||||||||
Debt Instrument [Line Items] | ||||||||||
Aggregate principal amount | 11,085,504 | 11,085,504 | ||||||||
Promissory Note | Chief Executive Officer | ||||||||||
Debt Instrument [Line Items] | ||||||||||
Repayment of loan | $ 500,000 | |||||||||
Due to related party | $ 535,000 | |||||||||
Warrant Agreement | ||||||||||
Debt Instrument [Line Items] | ||||||||||
Warrants issued, number of shares of common stock | shares | 1,965,780 | |||||||||
Unrecognized Gains on Foreign Exchange Translations to GBP Note Payable | Note Payable, Unrelated Party | Amounts Reclassified from Accumulated Other Comprehensive Income | ||||||||||
Debt Instrument [Line Items] | ||||||||||
Loss on extinguishment of debt | (239,598) | |||||||||
Term Loan Credit Facility | ||||||||||
Debt Instrument [Line Items] | ||||||||||
Aggregate principal amount | $ 10,500,000 | $ 10,500,000 | $ 10,500,000 | |||||||
Debt instrument, interest rate during period | 14.00% | |||||||||
Debt instrument, interest rate for quarterly period | 12.50% | |||||||||
Maturity date | Aug. 29, 2021 | |||||||||
Percentage of proceeds from disposition of asset | 100.00% | |||||||||
Percentage of proceeds from sale and issuance of capital stock | 25.00% | |||||||||
Term Loan Credit Facility | Scenario Forecast | ||||||||||
Debt Instrument [Line Items] | ||||||||||
Quarterly principal payments of borrowings plus accrued interest | $ 262,500 | |||||||||
Term Loan Credit Facility | Warrant Agreement | ||||||||||
Debt Instrument [Line Items] | ||||||||||
Warrants purchase period | 6 years | |||||||||
Warrants issued, number of shares of common stock | shares | 1,965,780 | |||||||||
Promissory Note Payable One | Note Payable, Unrelated Party | ||||||||||
Debt Instrument [Line Items] | ||||||||||
Promissory note payable | 12,200,000 | |||||||||
Promissory Note Payable Two | Note Payable, Unrelated Party | ||||||||||
Debt Instrument [Line Items] | ||||||||||
Promissory note payable | $ 10,000,000 | £ 6.4 |
LONG-TERM DEBT - Schedule of Ma
LONG-TERM DEBT - Schedule of Maturities (Details) - USD ($) | Sep. 30, 2016 | Dec. 31, 2015 |
Debt Instrument [Line Items] | ||
Total notes payable | $ 11,085,504 | $ 12,727,605 |
Unamortized debt issuance costs | (369,236) | |
Warrants issued | (809,632) | |
Long-term Debt | 9,906,636 | $ 12,084,291 |
Promissory Note | ||
Debt Instrument [Line Items] | ||
2,017 | 878,401 | |
2,018 | 1,147,294 | |
2,019 | 1,442,486 | |
2,020 | 1,054,823 | |
2,021 | 6,562,500 | |
Total notes payable | 11,085,504 | |
Unamortized debt issuance costs | (369,236) | |
Warrants issued | (809,632) | |
Long-term Debt | $ 9,906,636 |
COMMITMENTS AND CONTINGENCIES -
COMMITMENTS AND CONTINGENCIES - Schedule of Client Revenue Concentrations (Details) - Customer Concentration Risk - Revenue | 9 Months Ended | |
Sep. 30, 2016 | Sep. 30, 2015 | |
North America | Client A | ||
Product Information [Line Items] | ||
Concentration Risk | 13.60% | 14.80% |
North America | Client B | ||
Product Information [Line Items] | ||
Concentration Risk | 6.90% | 5.50% |
North America | Client C | ||
Product Information [Line Items] | ||
Concentration Risk | 6.20% | 6.80% |
North America | Client D | ||
Product Information [Line Items] | ||
Concentration Risk | 5.70% | 3.50% |
United Kingdom | Client E | ||
Product Information [Line Items] | ||
Concentration Risk | 5.30% | 6.70% |
COMMITMENTS AND CONTINGENCIES46
COMMITMENTS AND CONTINGENCIES (Details Narrative) | Jul. 11, 2016USD ($) | Feb. 28, 2014ft² | Sep. 30, 2016USD ($) | Sep. 30, 2016USD ($) | Sep. 30, 2015USD ($) |
Commitments And Contingencies [Line Items] | |||||
Rent expense | $ 165,856 | $ 171,840 | |||
Settlement income | $ 697,214 | 697,214 | |||
AGS, LLC | |||||
Commitments And Contingencies [Line Items] | |||||
Litigation settlement amount | $ 350,000 | ||||
Settlement income | $ 697,214 | ||||
Spencer Lease | |||||
Commitments And Contingencies [Line Items] | |||||
Rental term | 5 years | ||||
Rent expense | $ 153,000 | ||||
Annual rental increase | 4.00% | ||||
Tenant Improvement Allowance Option | $ 150,000 | ||||
Interest rate | 5.50% | 5.50% | |||
Spencer Lease | Building | |||||
Commitments And Contingencies [Line Items] | |||||
Area of building | ft² | 24,000 | ||||
Patents | Credit Concentration Risk | |||||
Commitments And Contingencies [Line Items] | |||||
Accounts receivable from client account | $ 4,299,637 | $ 4,299,637 | $ 4,283,055 | ||
Patents | Credit Concentration Risk | Revenue | |||||
Commitments And Contingencies [Line Items] | |||||
Concentration risk percentage | 47.00% | 53.00% |
COMMITMENTS AND CONTINGENCIES47
COMMITMENTS AND CONTINGENCIES - Schedule of Future Minimum Lease Payments (Details) | Sep. 30, 2016USD ($) |
Operating Leases, Future Minimum Payments Due, Fiscal Year Maturity [Abstract] | |
2,017 | $ 229,236 |
2,018 | 237,972 |
2,019 | 184,794 |
2,020 | 1,401 |
Total future minimum lease payments | $ 653,403 |
COMMITMENTS AND CONTINGENCIES48
COMMITMENTS AND CONTINGENCIES - Summary of Settlement Income (Details) - USD ($) | Jul. 11, 2016 | Sep. 30, 2016 | Sep. 30, 2016 |
Commitments And Contingencies [Line Items] | |||
Total settlement income | $ 697,214 | $ 697,214 | |
AGS | |||
Commitments And Contingencies [Line Items] | |||
Release of accrued royalties owed to AGS | $ 347,214 | ||
Payment from AGS | 350,000 | ||
Total settlement income | $ 697,214 |
STOCKHOLDERS' EQUITY (Details N
STOCKHOLDERS' EQUITY (Details Narrative) - USD ($) | Feb. 28, 2016 | Nov. 30, 2015 | Apr. 30, 2015 | Sep. 30, 2016 | Sep. 30, 2015 | Dec. 31, 2015 |
Temporary Equity [Line Items] | ||||||
Fair market value of shares granted | $ 85,606 | $ 52,600 | ||||
CFO | ||||||
Temporary Equity [Line Items] | ||||||
Annual bonus | $ 9,000 | |||||
Market price per share | $ 0.18 | |||||
Market price after discount | $ 0.09 | |||||
CFO | Maximum | ||||||
Temporary Equity [Line Items] | ||||||
Percentage of bonus compensation to purchase shares of common stock | 50.00% | |||||
Percentage of discount on common stock | 50.00% | |||||
CFO | Restricted Stock | ||||||
Temporary Equity [Line Items] | ||||||
Vesting period description | Beginning June 30, 2016, the restricted stock will vest at six-month intervals through December 31, 2018. | |||||
CFO | Common Stock | ||||||
Temporary Equity [Line Items] | ||||||
Common stock granted | 100,000 | |||||
Related Party | ||||||
Temporary Equity [Line Items] | ||||||
Issuance of restricted stock, shares | 150,000 | 75,000 | ||||
Common stock, shares vested | 150,000 | 75,000 | ||||
Fair market value of shares granted | $ 30,000 | $ 22,500 |
INCOME TAXES (Details Narrative
INCOME TAXES (Details Narrative) - USD ($) | 9 Months Ended | |
Sep. 30, 2016 | Sep. 30, 2015 | |
Income Tax Contingency [Line Items] | ||
Effective tax rate | 38.20% | 47.60% |
Decrease effective income tax rate | (6.80%) | |
Discrete tax benefit | $ 65,078 | |
Plan | ||
Income Tax Contingency [Line Items] | ||
Effective tax rate | 40.80% |
STOCK WARRANTS OPTIONS AND GR51
STOCK WARRANTS OPTIONS AND GRANTS (Details Narrative) - USD ($) | 3 Months Ended | 9 Months Ended | |||
Sep. 30, 2016 | Sep. 30, 2015 | Sep. 30, 2016 | Sep. 30, 2015 | Aug. 29, 2016 | |
Share Based Compensation Arrangement By Share Based Payment Award [Line Items] | |||||
Stock Options Issued | 427,500 | 412,500 | |||
Fair market value of shares granted | $ 85,606 | $ 52,600 | |||
Share-based compensation | $ 41,075 | $ 17,909 | $ 91,006 | $ 72,850 | |
Percentage of outstanding common stock issuance upon exercise of warrants | 5.00% | ||||
Warrants exercise description | The Warrants expire on August 29, 2022, and may not be exercised prior to the earliest of (a) the fifth anniversary of the Loan Agreement, (b) the date on which the obligations described in the Loan Agreement are repaid in full, or (c) the date on which the Lender declares all or any portion of the outstanding amount of the Term Loan to be due and payable under the terms of the Loan Agreement (collectively, the "Trigger Date"). | ||||
Warrants expiration date | Aug. 29, 2022 | ||||
Period for warrant exercise prior written notice | 60 days | ||||
Call Right | |||||
Share Based Compensation Arrangement By Share Based Payment Award [Line Items] | |||||
Value of warrants to be purchased prior written notice | $ 1,333,333 | ||||
Warrants purchase prior written notice period | 30 days | ||||
Put Right | |||||
Share Based Compensation Arrangement By Share Based Payment Award [Line Items] | |||||
Value of warrants to be purchased prior to trigger date | $ 1,333,333 | ||||
Warrants expiration date | Aug. 29, 2022 | ||||
Warrant Agreement | |||||
Share Based Compensation Arrangement By Share Based Payment Award [Line Items] | |||||
Warrants issued, number of shares of common stock | 1,965,780 | ||||
Warrants to purchase common stock, exercise price per share | $ 0.30 | ||||
Maximum percentage of shares granted for lender to purchase common stock | 5.00% | ||||
Director | |||||
Share Based Compensation Arrangement By Share Based Payment Award [Line Items] | |||||
Stock Options Issued | 225,000 | 200,000 | |||
Contractor | |||||
Share Based Compensation Arrangement By Share Based Payment Award [Line Items] | |||||
Stock Options Issued | 112,500 | 112,500 | |||
Employee | |||||
Share Based Compensation Arrangement By Share Based Payment Award [Line Items] | |||||
Stock Options Issued | 90,000 | 100,000 | |||
Stock options vesting period | 3 years | 3 years |
STOCK WARRANTS OPTIONS AND GR52
STOCK WARRANTS OPTIONS AND GRANTS - Summary of Stock Options Pricing (Details) - Stock Option | 9 Months Ended | |
Sep. 30, 2016 | Sep. 30, 2015 | |
Share Based Compensation Arrangement By Share Based Payment Award [Line Items] | ||
Dividend yield | 0.00% | 0.00% |
Expected volatility, minimum | 89.00% | 84.00% |
Expected volatility, maximum | 90.00% | 85.00% |
Risk free interest rate, minimum | 1.01% | 1.37% |
Risk free interest rate, maximum | 1.22% | 1.63% |
Expected life (years) | 5 years | 5 years |
STOCK WARRANTS OPTIONS AND GR53
STOCK WARRANTS OPTIONS AND GRANTS - Summary of Stock Option Activity (Details) - $ / shares | 9 Months Ended | 12 Months Ended | |
Sep. 30, 2016 | Sep. 30, 2015 | Dec. 31, 2015 | |
Share Based Compensation Arrangement By Share Based Payment Award [Line Items] | |||
Options Issued, number of shares | 427,500 | 412,500 | |
Common Stock | |||
Share Based Compensation Arrangement By Share Based Payment Award [Line Items] | |||
Beginning Balance, number of shares | 1,056,250 | 381,250 | 381,250 |
Options Issued, number of shares | 427,500 | 675,000 | |
Ending Balance, number of shares | 1,483,750 | 1,056,250 | |
Ending Balance, Options Exercisable | 1,143,750 | ||
Beginning Balance, weighted-average exercise price | $ 0.28 | $ 0.36 | $ 0.36 |
Options Issued, weighted-average exercise price | 0.33 | 0.23 | |
Ending Balance, weighted-average exercise price | 0.29 | $ 0.28 | |
Ending Balance, Options Exercisable, weighted-average exercise price | $ 0.30 |
STOCK WARRANTS OPTIONS AND GR54
STOCK WARRANTS OPTIONS AND GRANTS - Summary of Warrant Activity (Details) | 9 Months Ended |
Sep. 30, 2016$ / sharesshares | |
Share Based Compensation Arrangement By Share Based Payment Award [Line Items] | |
Warrants exercised | 0 |
Common Stock | |
Share Based Compensation Arrangement By Share Based Payment Award [Line Items] | |
Warrants Issued, number of shares | 1,965,780 |
Ending Balance, number of shares | 1,965,780 |
Warrants Issued, weighted-average exercise price | $ / shares | $ 0.30 |
Ending Balance, weighted-average exercise price | $ / shares | $ 0.30 |