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Document and Entity Information - shares
9 Months Ended
Sep. 30, 2017
Nov. 07, 2017
Document And Entity Information    
Entity Registrant Name NEWGIOCO GROUP, INC.  
Entity Central Index Key 0001080319  
Document Type 10-Q  
Document Period End Date Sep. 30, 2017  
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   37,009,295
Document Fiscal Period Focus Q3  
Document Fiscal Year Focus 2017  
Consolidated Balance Sheets - USD ($)
Sep. 30, 2017
Dec. 31, 2016
Current Assets    
Cash and cash equivalents $ 3,183,550 $ 2,230,422
Accounts receivable 89,120 16,919
Gaming account receivable 987,196 535,408
Prepaid expenses 113,049 91,577
Other current assets 5,731 8,705
Total Current Assets 4,378,646 2,883,031
Noncurrent Assets    
Restricted cash 578,840 475,916
Property, plant and equipment 277,624 203,660
Intangible assets 3,358,242 3,690,978
Goodwill 260,318 260,318
Investment in non-consolidated entities 1 6,508
Total Noncurrent Assets 4,475,025 4,637,380
Total Assets 8,853,671 7,520,411
Current Liabilities    
Line of credit - bank 337,287 726
Accounts payable and accrued liabilities 1,259,279 1,006,739
Gaming account balances 870,545 710,562
Taxes payable 803,621 525,361
Advances from stockholders 647,184 557,549
Liability in connection with acquisition 140,052 125,375
Debenture, net of discount 977,185 616,517
Derivative liability 183,987 211,262
Promissory notes payable - other 120,195 111,285
Promissory notes payable- related party 318,078 318,078
Bank loan payable - current portion 118,006 102,140
Total Current Liabilities 5,775,419 4,285,594
Bank loan payable 387,553 426,610
Other long term liabilities 492,399 315,579
Total Liabilities 6,655,371 5,027,783
Stockholders' Deficiency    
Common Stock, $0.0001 par value, 80,000,000 shares authorized; 37,009,295 shares issued and outstanding at September 30, 2017 and December 31, 2016 respectively 3,701 3,701
Additional - paid in capital 14,225,116 14,169,062
Accumulated other comprehensive income (409,965) (416,631)
Accumulated deficit (11,620,552) (11,263,504)
Total Stockholders' Equity 2,198,300 2,492,628
Total Liabilities and Stockholders' Equity $ 8,853,671 $ 7,520,411
Consolidated Balance Sheets (Parenthetical) - $ / shares
Sep. 30, 2017
Dec. 31, 2016
STOCKHOLDERS' EQUITY    
Capital stock - par value $ 0.0001 $ 0.0001
Capital stock - authorized 80,000,000 80,000,000
Capital stock - issued 37,009,295 37,009,295
Capital stock - outstanding 37,009,295 37,009,295
Consolidated Statements of Comprehensive Income (Loss) - USD ($)
3 Months Ended 9 Months Ended
Sep. 30, 2017
Sep. 30, 2016
Sep. 30, 2017
Sep. 30, 2016
Income Statement [Abstract]        
Revenue $ 5,121,019 $ 2,606,670 $ 13,090,643 $ 5,879,514
Costs and expenses        
Selling expenses 3,126,025 1,087,112 9,037,176 3,401,572
General and administrative expenses 1,441,290 973,025 3,932,468 2,620,973
Total Costs and Expenses 4,567,315 2,060,137 12,969,644 6,022,545
Income (Loss) from Operations 553,704 546,533 120,999 (143,031)
Other Expenses (Income)        
Interest expense, net of interest income 110,391 209,556 360,778 515,051
Changes in fair value of derivative liabilities (108,750) 77,095 (245,445) (291,121)
Imputed interest on related party advances 8,248 3,492 22,535 6,060
Impairment on investment 186 6,758
Total Other Expenses (Income) 10,075 290,143 144,626 229,990
Income (Loss) before income taxes 543,629 256,390 (23,627) (373,021)
Income taxes provision 271,964 220,275 333,419 248,138
Net Income (Loss) 271,665 36,115 (357,046) (621,159)
Other Comprehensive Income (Loss)        
Foreign currency translation adjustment 43,259 4,814 6,666 (5,463)
Comprehensive Income (Loss) $ 314,924 $ 40,929 $ (350,380) $ (626,622)
Net Income (Loss) per common share - basic $ 0.01 $ 0.00 $ (0.01) $ (0.02)
Net Income (Loss) per common share - diluted $ 0.01 $ 0.00 $ (0.01) $ (0.02)
Weighted average number of common shares outstanding basic 37,009,295 30,362,394 37,009,295 26,298,527
Weighted average number of common shares outstanding diluted 37,552,008 31,488,116 37,009,295 26,298,527
Consolidated Statements of Cash Flows - USD ($)
9 Months Ended
Sep. 30, 2017
Sep. 30, 2016
Cash Flows from Operating Activities    
Net loss $ (357,046) $ (621,159)
Adjustments to reconcile net loss to net cash used in operating activities    
Depreciation and amortization 426,258 375,207
Amortization of deferred costs 72,460 163,350
Non-cash interest 170,236 400,668
Imputed interest on advances from stockholders 22,535 6,060
Changes in fair value of derivative liabilities (245,445) (291,121)
Impairment of assets 6,758
Stock issued for services 268,669
Bad debt 98,068 53,015
Changes in operating assets and liabilities    
Prepaid expenses (92,052) (138,198)
Accounts payable and accrued liabilities 163,655 (336,777)
Accounts receivable (66,191) 112,071
Gaming accounts receivable (459,436) (151,372)
Gaming account liabilities 66,983 24,052
Taxes payable 204,316 237,273
Other current assets 3,967 (199,909)
Other current liabilities (1,481)
Customer Deposits 118,037
Long term liability 13,811 20,907
Net cash provided by (used in) operating activities 146,914 (78,745)
Cash Flows from Investing Activities    
Acquisition of property, plant and equipment (140,551) (56,092)
Cash acquired on acquisition 803,482
Cash paid for acquisition (202,015)
Increase in restricted cash (44,499) (98,105)
Net cash provided by (used in) investing activities (185,050) 447,270
Cash Flows from Financing Activities    
Proceeds of bank credit line, net of repayment 317,165 (307,902)
Repayment of bank loan (80,208) 558,050
Proceeds from promissory notes, net of repayment 115,103
Proceeds from debenture and convertible notes, net of repayment 401,653 614,900
Advances from stockholders, net of repayment 24,695 141,721
Net cash provided by financing activities 663,305 1,121,872
Effect of change in exchange rate 327,959 30,911
Net increase (decrease) in cash 953,128 1,521,308
Cash - beginning of year 2,230,422 157,363
Cash - end of year 3,183,550 1,678,671
Supplemental disclosure of cash flow information:    
Cash paid during the year for: Interest 190,803 114,339
Cash paid during the year for: Income taxes 180,004 22,495
Supplemental cash flow disclosure for non-cash activities:    
Common shares issued for the acquisition of subsidiaries 2,360,163
Common shares issued to related parties for repayment of debt 138,225
Common shares issued for cashless exercise of warrants $ 14,438
Basis of Presentation and Nature of Business
9 Months Ended
Sep. 30, 2017
Organization, Consolidation and Presentation of Financial Statements [Abstract]  
Basis of Presentation and Nature of Business

1. Basis of Presentation and Nature of Business

 

Basis of Presentation

 

The unaudited consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States for interim financial information and the rules and regulations of the Securities and Exchange Commission. In the opinion of management, the unaudited consolidated financial statements have been prepared on the same basis as the annual financial statements and reflect all adjustments, which include only normal recurring adjustments, necessary to present fairly the financial position as of September 30, 2017 and the results of operations and cash flows for the period ended September 30, 2017 and 2016. The financial data and other information disclosed in these notes to the interim financial statements related to these periods are unaudited. The results for the three and nine months ended September 30, 2017 are not necessarily indicative of the results to be expected for any subsequent periods or for the entire year ending December 31, 2017. The balance sheet at December 31, 2016 has been derived from the audited financial statements at that date.

 

Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States have been condensed or omitted pursuant to the Securities and Exchange Commission's rules and regulations. These unaudited consolidated financial statements should be read in conjunction with our audited financial statements and notes thereto for the year ended December 31, 2016 as included in our Annual Report on form 10-K.

 

Nature of Business

 

Newgioco Group, Inc. ("Newgioco Group" or "the Company") was incorporated in the state of Delaware on August 26, 1998 as Pender International Inc. On September 30, 2005, the Company changed its name to Empire Global Corp., and on July 20, 2016 changed its name to Newgioco Group, Inc. The Company maintains its principal executive offices headquartered in Toronto, Canada with wholly owned subsidiaries in Italy and Austria.

 

Our subsidiaries include: Multigioco Srl (“Multigioco”) which was acquired on August 15, 2014, Rifa Srl (“Rifa”) which was acquired on January 1, 2015, as well as Ulisse Gmbh (“Ulisse”) and Odissea Betriebsinformatik Beratung Gmbh (“Odissea”) which were both acquired on July 1, 2016.

 

Newgioco Group is now a vertically integrated company which owns and operates an innovative, certified Betting Platform Software (“BPS”) and offering a complete suite of online and offline leisure gaming services including a variety of lottery and casino gaming, as well as sports betting through a distribution network of retail betting locations situated throughout Italy.

Going Concern
9 Months Ended
Sep. 30, 2017
Organization, Consolidation and Presentation of Financial Statements [Abstract]  
Going Concern

2. Going concern

 

The accompanying consolidated financial statements have been prepared assuming the Company will continue as a going concern, which contemplates realization of assets and the satisfaction of liabilities in the normal course of business.

 

The Company had a working capital deficit of $1,396,773 as of September 30, 2017, and reported operating losses for the past two years. There are no assurances that management will be successful in achieving sufficient cash flows to fund the Company's working capital needs, or whether the Company will be able to refinance or renegotiate its obligations when they become due or raise additional capital through future debt or equity. These factors, among others, raise substantial doubt about the Company's ability to continue as a going concern. No adjustments have been made to the carrying value of assets or liabilities as a result of this uncertainty.

 

Management plans to mitigate its losses in future years by significantly reducing its operating expenses, seeking out new business opportunities and attempting to raise debt or equity financing. However, there is no assurance that the Company will be able to obtain additional financing, reduce its operating expenses or be successful in maintaining a viable business.

Summary of Significant Accounting Policies
9 Months Ended
Sep. 30, 2017
Accounting Policies [Abstract]  
Summary of Significant Accounting Policies

3. Summary of Significant Accounting Policies

 

a) Basis of consolidation

 

The consolidated financial statements include the financial statements of the Company and its subsidiaries, all of which are wholly owned. All significant inter-company transactions are eliminated upon consolidation.

 

Certain amounts of prior periods were reclassified to conform with current period presentation.

 

b) Use of estimates

 

The preparation of the financial statements in conformity with Generally Accepted Accounting Principles ("GAAP") requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the dates of the financial statements and the reported amounts of revenue and expenses during the reporting periods. Actual results could differ from those estimates. These estimates and assumptions include valuing equity securities issued in share based payment arrangements, determining the fair value of assets acquired, allocation of purchase price, impairment of long-lived assets, the collectability of receivables and the value of deferred taxes and related valuation allowances. Certain estimates, including evaluating the collectability of receivables and advances, could be affected by external conditions, including those unique to our industry, and general economic conditions. It is possible that these external factors could have an effect on our estimates that could cause actual results to differ from our estimates. We re-evaluate all of our accounting estimates at least quarterly based on these conditions and record adjustments when necessary.

 

c) Goodwill

 

Goodwill is recognized for the excess of the purchase price over the fair value of tangible and identifiable intangible net assets of businesses acquired. Goodwill is not being amortized, but is reviewed at least annually for impairment. In our evaluation of goodwill impairment, we perform a qualitative assessment to determine if it is more likely than not that the fair value of a reporting unit is less than its carrying amount. If the qualitative assessment is not conclusive, we proceed to a two-step process to test goodwill for impairment including comparing the fair value of the reporting unit to its carrying value (including attributable goodwill). Fair value for our reporting units is determined using an income or market approach incorporating market participant considerations and management's assumptions on revenue growth rates, operating margins, discount rates and expected capital expenditures. Fair value determinations may include both internal and third-party valuations. Unless circumstances otherwise dictate, we perform our annual impairment testing in the fourth quarter.

 

We perform the allocation based on our knowledge of the market in which we operate, and our overall knowledge of the leisure betting and gaming industry.

 

d) Business Combinations

 

We allocate the fair value of purchase consideration to the tangible and intangible assets acquired and liabilities assumed based on their estimated fair values. The excess of the fair value of purchase consideration over the fair values of these identifiable assets and liabilities is recorded as goodwill.

 

Such valuations require management to make significant estimates and assumptions, especially with respect to intangible assets. Significant estimates in valuing certain intangible assets include, but are not limited to, future expected cash flows from acquired users, acquired technology, and trade names from a market participant perspective, useful lives and discount rates. Management's estimates of fair value are based upon assumptions believed to be reasonable, but which are inherently uncertain and unpredictable and, as a result, actual results may differ from estimates.

 

e) Long-Lived Assets

 

We evaluate the carrying value of our long-lived assets for impairment by comparing the expected undiscounted future cash flows of the assets to the net book value of the assets when events or circumstances indicate that the carrying amount of a long-lived asset may not be recoverable. If the expected undiscounted future cash flows are less than the net book value of the assets, the excess of the net book value over the estimated fair value will be charged to earnings.

 

Fair value is based upon discounted cash flows of the assets at a rate deemed reasonable for the type of asset and prevailing market conditions, appraisals, and, if appropriate, current estimated net sales proceeds from pending offers.

 

f) Derivative Financial Instruments

 

The Company does not use derivative instruments to hedge exposures to cash flow, market, or foreign currency risks. The Company evaluates all of its financial instruments, including convertible notes and stock purchase warrants, to determine if such instruments are derivatives or contain features that qualify as embedded derivatives. For derivative financial instruments that are accounted for as liabilities, the derivative instrument is initially recorded at its fair value and is then re-valued at each reporting date, with changes in the fair value reported as charges or credits to income.

 

For option-based simple derivative financial instruments, the Company uses the Black-Scholes option-pricing model to value the derivative instruments at inception and subsequent valuation dates. The classification of derivative instruments, including whether such instruments should be recorded as liabilities or as equity, is re-assessed at the end of each reporting period.

 

g) Earnings Per Share

 

FASB ASC 260, "Earnings Per Share" provides for calculation of "basic" and "diluted" earnings per share. Basic earnings per share includes no dilution and is computed by dividing net income (loss) available to common shareholders by the weighted average common shares outstanding for the period. Diluted earnings per share reflect the potential dilution of securities that could share in the earnings of an entity similar to fully diluted earnings per share. These potentially dilutive securities were not included in the calculation of loss per share for the nine months ended September 30, 2017 and nine months ended September 30, 2016, because the effect would have been anti-dilutive. while the Company had income per share for the three months ended September 30, 2017 and three months ended September 30, 2016. Accordingly, basic and diluted loss per common share is the same for these periods.

 

h) Currency translation

 

Since the Company's subsidiaries operate in Europe, the subsidiaries functional currency is the Euro. In the consolidated financial statements, revenue and expense accounts are translated at the average rates during the period, and assets and liabilities are translated at period-end rates and equity accounts are translated at historical rate. Translation adjustments arising from the use of different exchange rates from period to period are included as a component of stockholders' equity. Gains and losses from foreign currency transactions are recognized in current operations.

 

i) Revenue Recognition

 

Revenues from sports-betting, casino, cash and skill games; slots, bingo and horse race wagers represent the gross pay-ins (also referred to as Turnover) from customers less gaming taxes and payouts to customers. Revenues are recorded when the game is closed. In addition, the Company receives commissions from the sale of scratch tickets and other lottery games. Commissions are recorded when the ticket for scratch off tickets and lottery tickets are sold.

 

Revenues from Betting Platform Software (“BPS”) include license fees, training, installation, and product support services. Revenue is recognized when the significant risks and rewards of ownership are transferred or when the obligation is fulfilled. License fees are calculated as a percentage of each licensee’s level of activity and are contingent upon the licensee’s usage. The license fees were recognized on an accrual basis as earned.

 

j) Cash and equivalents

 

The Company considers all highly liquid debt instruments with maturities of three months or less at the time acquired to be cash equivalents. Cash equivalents represent short-term investments consisting of investment-grade corporate and government obligations, carried at cost, which approximates market value. The Company had no cash equivalents as of September 30, 2017 and December 31, 2016.

 

The Company primarily places its cash with high-credit quality financial institutions, one of which is located in the United States and is insured by the Federal Deposit Insurance Corporation for up to $250,000 and another which is located in Italy and is insured by the Italian government.

 

k) Gaming accounts receivable

 

Gaming accounts receivable represents gaming deposits made by customers to their online gaming accounts either directly by credit card, bank wire, e-wallet or other accepted method through one of our websites or indirectly by cash collected at the cashier of a betting shop but not yet credited to our bank accounts and subject to normal trade collection terms without discounts. The Company periodically evaluates the collectability of its gaming accounts receivable and considers the need to record or adjust an allowance for doubtful accounts based upon historical collection experience and specific customer information. Actual amounts could vary from the recorded estimates. The Company does not require collateral to support customer receivables.The Company does not require collateral to support customer receivables. The company recorded bad debt expense of $33,118 and $98,068 for the three and nine months ended September 30, 2017, respectively. All balances previously recorded as allowance for doubtful accounts were written off as uncollectible.

 

l) Gaming account balances

 

Gaming account balances represent customer balances, including winnings and deposits, that are held as credits in online gaming accounts and have not as of yet been used or withdrawn by the customers. Customers can request payment from the Company at any time and the payment to customers can be made through bank wire, credit card, or cash disbursement from one of our locations. Online gaming account credit balances are non-interest bearing.

 

m) Fair Value Measurements

 

ASC Topic 820, Fair Value Measurement and Disclosures, defines fair value as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. This topic also establishes a fair value hierarchy which requires classification based on observable and unobservable inputs when measuring fair value. There are three levels of inputs that may be used to measure fair value:

 

Level 1: Observable inputs such as quoted prices (unadjusted) in active market for identical assets or liabilities.

 

Level 2: Inputs other than quoted prices that are observable, either directly or indirectly. These include quoted prices for similar assets or liabilities in active markets and quoted prices for identical or similar assets or liabilities in markets that are not active.

 

Level 3: Unobservable inputs in which little or no market data exists, therefore developed using estimates and assumptions developed by us, which reflect those that a market participant would use.

 

The carrying value of the Company's short term investments, prepaid expenses, accounts receivables, other current assets, accounts payable and accrued liabilities, gaming account balance, and advances from shareholder approximate fair value because of the short-term maturity of these financial instruments.

 

The derivative liability in connection with the conversion feature of the convertible debt and warrants is classified as a level 3 liability, and is the only financial liability measured at fair value on a recurring basis.

 

The change in the Level 3 financial instrument is as follows:

 

 

Balance at December 31, 2015  $28,375 
Issued during the year ended December 31, 2016   609,256 
Exercised during the year ended December 31, 2016   —   
Change in fair value recognized in operations   (426,369)
Balance at December 31, 2016   211,262 
Issued during the nine months ended September 30, 2017   218,170 
Change in fair value recognized in operations   (245,445)
Balance at September 30, 2017  $183,987 

 

n) Property, plant and equipment

 

Property, plant and equipment are stated at acquisition cost less accumulated depreciation and adjustments for impairment losses. Expenditures are capitalized only when they increase the future economic benefits embodied in an item of property, plant and equipment. All other expenditures are recognized as expenses in the statement of income as incurred.

 

Depreciation is charged on a straight-line basis over the estimated remaining useful lives of the individual assets. Amortization commences from the time an asset is put into operation. The range of the estimated useful lives is as follows:

 

Trademarks / names  14 years
Office equipment  5 years
Office furniture  8 1/3 years
Signs and displays  5 years

 

o) Leases

 

Leases are reviewed and classified as capital or operating at their inception in accordance with ASC Topic 840, Accounting for Leases. For leases that contain rent escalations, the Company records rent expense on the straight line method. The difference between rent expense recorded and the amount paid is credited or charged to deferred rent account and is included in accrued expenses and other current liabilities.

 

All lease agreements of the Company as lessees are accounted for as operating leases as of September 30, 2017 and 2016.

 

p) Income Taxes

 

We use the asset and liability method of accounting for income taxes in accordance with ASC Topic 740, "Income Taxes." Under this method, income tax expense is recognized for the amount of: (i) taxes payable or refundable for the current year and (ii) deferred tax consequences of temporary differences resulting from matters that have been recognized in an entity's financial statements or tax returns. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in the results of operations in the period that includes the enactment date. A valuation allowance is provided to reduce the deferred tax assets reported if based on the weight of the available positive and negative evidence, it is more likely than not some portion or all of the deferred tax assets will not be realized.

 

ASC Topic 740.10.30 clarifies the accounting for uncertainty in income taxes recognized in an enterprise's financial statements and prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. ASC Topic 740.10.40 provides guidance on derecognition, classification, interest and penalties, accounting in interim periods, disclosure, and transition. We have no material uncertain tax positions for any of the reporting periods presented.

 

The Company has elected to include interest and penalties related to uncertain tax positions, if determined, as a component of income tax expense.

 

In Italy, tax years beginning 2011 forward, are open and subject to examination, while in Austria companies are open and subject to inspection for 5 years and 10 years for inspection of serious infractions. The Company is not currently under examination and it has not been notified of a pending examination.

 

q) Comprehensive Income (Loss)

 

Comprehensive income (loss) is defined as the change in equity of a business enterprise during a period from transactions and other events and circumstances from non-owner sources, including foreign currency translation adjustments and unrealized gains and losses on marketable securities.

 

The Company adopted FASB ASC 220-10-45, "Reporting Comprehensive Income". ASC 220-10-45 establishes standards for reporting and presentation of comprehensive income and its components in a full set of financial statements. Comprehensive income consists of net income and unrealized gains (losses) on available for sale marketable securities; foreign currency translation adjustments and changes in market value of future contracts that qualify as a hedge; and negative equity adjustments.

 

r) Recent Accounting Pronouncements

 

In January 2016, the FASB issued ASU 2016-01, Financial Instruments - Overall (Subtopic 740): Recognition and Measurement of Financial Assets and Financial Liabilities. The provisions of this update are effective for annual and interim reporting periods beginning after December 15, 2017. ASU 2016-01 enhances the reporting model for financial instruments to provide users of financial statements with more decision-useful information. The Company is currently assessing the impact of ASU 2016.

 

In February 2016, the FASB issued ASU 2016-02, Leases. This update requires organizations that lease assets to recognize on the balance sheet the assets and liabilities for the rights and obligations created by those leases. The new guidance will also require additional disclosure about the amount, timing and uncertainty of cash flows arising from leases. The provisions of this update are effective for annual and interim periods beginning after December 15, 2018. The Company is currently assessing the impact that the adoption of ASU 2016-02 will have on the consolidated balance sheet and the consolidated results of operations.

 

In May 2017, the FASB issued ASU 2017-09, Compensation-Stock Compensation (Topic 718), Scope of Modification Accounting. The amendments in this Update provide guidance about which changes to the terms or conditions of a share-based payment award require an entity to apply modification accounting in Topic 718. The amendments in this Update are effective for all entities for annual periods, and interim periods within those annual periods, beginning after December 15, 2017.

 

In July 2017, the FASB issued ASU 2017-11, Earnings Per Share (Topic 260), Distinguishing Liabilities from Equity (Topic 480), Derivatives and Hedging (Topic 815). The amendments in Part I of this Update change the classification analysis of certain equity-linked financial instruments (or embedded features) with down round features. When determining whether certain financial instruments should be classified as liabilities or equity instruments, a down round feature no longer precludes equity classification when assessing whether the instrument is indexed to an entity’s own stock. The amendments also clarify existing disclosure requirements for equity-classified instruments. The amendments in Part I of this Update are effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2018. The Company is currently assessing the impact of ASU 2016.

 

There are no other recently issued accounting standards that are expected to have a material effect on our financial condition, results of operations or cash flows.

Acquisitions
9 Months Ended
Sep. 30, 2017
Business Combinations [Abstract]  
Acquisitions

4. Acquisition of Ulisse Gmbh and Odissea Betriebsinformatik Beratung Gmbh

 

Odissea Betriebsinformatik Beratung Gmbh (“Odissea”) Acquisition

 

On June 30, 2016, the Company entered into a Share Exchange Agreement, which closed on July 1, 2016, with the shareholders of Odissea organized under the laws of Austria. Odissea operates a proprietary Betting Operating System. Pursuant to the agreement, the Company issued 4,386,100 shares of common stock in consideration for 100% of the issued and outstanding shares of Odissea. As a result of this acquisition, the sellers now hold approximately 11.85% of the issued and outstanding shares of common stock of the Company.

 

Pursuant to the Odissea SPA, upon completion of certification of the Betting Operating System by the ADM, which was obtained on June 30, 2017, the sellers may exercise the option to resell to the Company 50% of the shares of common stock issued in consideration for the purchase price (or 2,193,050 shares) at a fixed price of U.S. $1.00 per share (the “Odissea Put Option”). As of the date of this report, the Odissea Put Option has been extended indefinitely by mutual consent.

 

The purchase price was allocated to the fair market value of tangible and intangible assets acquired and liabilities assumed. Intangible assets will be amortized over their remaining useful life as follows:

 

        Remaining Useful Life
Current assets   $ 210,505      
Property, Plant and Equipment     30,638      
Identifiable intangible assets:            
Betting Operating System     1,685,371     15 years
Less: liabilities assumed     (215,935 )    
Total identifiable assets less liabilities assumed     1,710,579      
Total purchase price     1,710,579      
Excess purchase price   $      

 

Ulisse Gmbh (“Ulisse”) Acquisition

 

On June 30, 2016, the Company entered into a Share Exchange Agreement, which closed on July 1, 2016, with the shareholders of Ulisse organized under the laws of Austria. Ulisse operates an existing network of approximately 140 land-based Agency locations. Pursuant to the agreement, the Company issued 1,665,600 shares of common stock in consideration for 100% of the issued and outstanding shares of Ulisse. As a result of this acquisition, the sellers now hold approximately 4.50% of the issued and outstanding shares of common stock of the Company.

 

Pursuant to the Ulisse SPA, upon completion of the ADM license tender auction and the Rights obtained by the Company are assigned to the Ulisse locations the sellers may exercise the option to resell to the Company 50% of the shares of common stock issued in consideration for the purchase price (or 832,800 shares) at a fixed price of U.S. $1.00 per share (the “Ulisse Put Option”). As of the date of this report, the Ulisse Put Option has been extended indefinitely by mutual consent.

 

The purchase price was allocated to the fair market value of tangible and intangible assets acquired and liabilities assumed. Intangible assets will be amortized over their remaining useful life as follows:

 

        Remaining Useful Life
Current assets   $ 984,647      
Property, Plant and Equipment     2,917      
Identifiable intangible assets:            
Customer relationships     83,996     10 years
Less: liabilities assumed     (421,976 )    
Total identifiable assets less liabilities assumed     649,584      
Total purchase price     649,584      
Excess purchase price   $      

 

The Company has estimated the fair value of assets acquired and liabilities assumed in connection with acquisitions and is currently undergoing a formal valuation and will adjust these estimates accordingly upon completion of the third-party valuation.

Intangible Assets
9 Months Ended
Sep. 30, 2017
Goodwill and Intangible Assets Disclosure [Abstract]  
Intangible Assets

5. Intangible Assets

 

Intangible assets consist of the following:

 

 

    September 30, 2017   December 31, 2016   Life (years)
Betting Platform Software   $ 1,685,371     $ 1,685,371       15  
Licenses     965,467       953,024       1.5 - 7  
Location contracts     1,000,000       1,000,000       5 - 7  
Customer relationships     870,927       870,927       10 - 15  
Trademarks/names     110,000       110,000       14  
Websites     40,000       40,000       5  
      4,671,765       4,659,322          
Accumulated amortization     (1,313,523)       (968,344 )        
Balance   $ 3,358,242     $ 3,690,978          

 

The Company evaluates intangible assets for impairment on an annual basis during the last month of each year and at an interim date if indications of impairment exist. Intangible asset impairment is determined by comparing the fair value of the asset to its carrying amount with an impairment being recognized only when the fair value is less than carrying value. The amortization expense was $112,233 and $332,739 for the three and nine months ended September 30, 2017, respectively.

 

Licenses include the GAD online license as well as the Bersani and Monti land-based licenses issued by the Italian gaming regulator to Multigioco and Rifa, respectively. These licenses were obtained by the Company in the acquisitions of Multigioco and Rifa.

Restricted Cash
9 Months Ended
Sep. 30, 2017
Accounting Policies [Abstract]  
Restricted Cash

6. Restricted Cash

 

Restricted Cash is cash held in a segregated bank account at Veneto Banca Societa Cooperativa Per Azioni (“SCpA”) (“Veneto Banca”) as collateral against our operating line of credit with Veneto Banca as well as Wirecard Bank as a security deposit for Ulisse betting operations.

Long Term Debt
9 Months Ended
Sep. 30, 2017
Debt Disclosure [Abstract]  
Long Term Debt

7. Long Term Debt

 

Long term debt represents the Italian "Trattamento di Fine Rapporto" (TFR) which is a severance amount set up by Italian companies to be paid to employees on termination or retirement as well as shop deposits that are held by Ulisse.

 

Severance liability related to employees in Italy was $117,271 and $91,865 at September 30, 2017 and 2016, respectively.

 

Customer deposit balances related to Ulisse operations was $375,128 and $223,714 at September 30, 2017 and 2016, respectively.

Line of Credit-Bank
9 Months Ended
Sep. 30, 2017
Debt Disclosure [Abstract]  
Line of Credit-Bank

8. Line of Credit – Bank

 

The Company currently maintains an operating line of credit for a maximum amount of EUR 300,000 (approximately U.S. $354,390) for Multigioco and EUR 50,000 (approximately U.S. $59,065) for Rifa from Banca Veneto in Italy. The line of credit is secured by restricted cash on deposit at Banca Veneto and guaranteed by certain shareholders of the Company and bears a fixed rate of interest at 5% per annum on the outstanding balance with no minimum payment, maturity or due date.

Liability in connection with acquisition
9 Months Ended
Sep. 30, 2017
Payables and Accruals [Abstract]  
Liability in connection with acquisition

9. Liability in connection with acquisition

 

Liability in connection with acquisition represent non-interest bearing amount due by the Company’s subsidiaries toward the purchase price as per a purchase agreement between Newgioco Srl and the Company’s subsidiaries. The Company’s shareholder and VP of Regulatory Affairs, Beniamino Gianfelici, owns 50% shares of Newgioco Srl.

Related party transactions and balances
9 Months Ended
Sep. 30, 2017
Related Party Transactions [Abstract]  
Related party transactions and balances

10. Related party transactions and balances

 

Advances from stockholders represent non-interest bearing loans that are due on demand. Interest was imputed at 5% per annum. Balances of Advances from stockholders are as follows:

 

   September 30, 2017  December 31, 2016
Gold Street Capital Corp.  $30,163   $1 
Doriana Gianfelici   57,886    51,819 
Luca Pasquini   76    5,260 
Other stockholders   559,059    500,469 
Total advances from stockholders  $647,184   $557,549 

 

During the nine months ended September 30, 2017, Gold Street, the major stockholder of Newgioco Group, advanced $193,046 to the Company and was repaid $162,884 by the Company. Also, the Company paid management fees to Gold Street Capital Corp. of $108,000 and $90,000 for the nine months ended September 30, 2017 and September 30, 2016, respectively.

 

Changes in advances from Doriana Gianfelici and other shareholders were due to the fluctuation in foreign exchange rates.

 

During the nine months ended September 30, 2017, Luca Pasquini was repaid approximately U.S. $5,184 by the Company. Also, the Company paid management fees of $15,032 to Luca Pasquini for the nine months ended September 30, 2017.

 

Advances from other stockholders comprise of the dividend accrued due to former stockholders of Ulisse for the six month period prior to the acquisition of Ulisse on July 1, 2016.

 

The amounts due to the stockholders at September 30, 2017 are non-interest bearing and due on demand.

 

Related-Party Debt

 

Promissory notes payable to related parties of $318,078 represents amounts due to Braydon Capital Corp., a company owned by Claudio Ciavarella, the brother of our CEO. The amount due to Braydon Capital Corp. is comprised of the following:

 

-a Promissory Note for $186,233 issued on December 15, 2015 that bears interest at a rate of 1% per month due in full on the Maturity Date of December 15, 2016. The Company and Braydon Capital have agreed to extend the Maturity Date indefinitely by mutual consent.

 

-a Promissory Note for $90,750 issued on January 13, 2016 that bears interest at a rate of 1% per month due in full on the maturity date of January 13, 2017 that was subsequently amended to add $41,095 in additional funds received from Braydon Capital Corp. for a total of $131,845. The Company and Braydon Capital have agreed to extend the Maturity Date indefinitely by mutual consent.
Stockholders Equity
9 Months Ended
Sep. 30, 2017
Equity [Abstract]  
Stockholders Equity

11. Stockholders’ Equity

 

On June 15, 2017, the Company issued a total of 80,000 Restricted Stock Units to the independent Directors of the company, 20,000 units each. These Restricted stock units are vested at 25% per year after each completed year served on the Board of Directors.

Debentures and Convertible Notes
9 Months Ended
Sep. 30, 2017
Notes to Financial Statements  
Debentures and Convertible Notes

12. Debentures and Convertible Notes

 

Debentures and convertible notes outstanding include the following:

 

   September 30,
2017
  December 31,
2016
February 29, 2016 Convertible Note, net of discount of $0 and $85,000  $600,000   $514,102 
April 4, 2016 Convertible Note, net of discount of $0 and $10,968   150,000    115,812 
January 24, 2017 Debenture, net of discount of $9,207   135,027    —   
March 27, 2017 Convertible Debenture, net of discount of $61,396   58,799    —   
June 5, 2017 Convertible Debenture, net of discount of $85,351   34,844    —   
June 9, 2017 Convertible Debenture, net of discount of $43,412   16,685    —   
    995,355    629,914 
Less: unamortized debt issuance costs   (18,170)   (13,397)
   $977,185   $616,517 

 

 

February 29, 2016 and April 4, 2016 Convertible Notes

 

On February 29, 2016, the Company closed a Securities Purchase Agreement with an unaffiliated private investor, to raise up to $750,000. The Company received gross proceeds from the initial private placement of $600,000. On April 4, 2016, the Company received the balance of gross proceeds of $150,000, less legal expenses of $15,000. Also, the company paid $75,000 in commissions for these notes. As part of the purchase agreement, the Company also issued a warrant to purchase 163,044 shares of Company’s common stock at $1.15 per share. These notes bear an interest rate of 12% per annum and were due in one year. The company continued to accrue interest at 22% past the due date. The notes were guaranteed by Confidi Union Impresa, an unrelated party.

 

The Company repaid a total of $125,000 in the nine months ended September 30, 2017. These payments were applied to the interest accrued at the date of the payments with the remainder applied towards the accrued penalty.

 

Accounts payable and accrued liabilities included a penalty and accrued interest on this Note of $193,244 and $33,756 at September 30, 2017 and September 30, 2016, respectively. See also Note 19.

 

January 24, 2017 Debenture

 

On January 24, 2017, the Company received gross proceeds from the initial private placement of CDN $180,000 (approximately U.S. $136,788) with a group of accredited investors. The Company incurred a total of CDN $14,400 (approximately U.S. $10,943) in finder’s fees to facilitate this transaction for net proceeds of CDN $165,600 (approximately U.S. $125,845). The debenture bears an interest rate of 10% per annum and is due in two years. As part of the purchase agreement, the Company also issued a warrant to purchase 18,000 of the Company’s common stock at $1.00 per share up to January 24, 2019.

 

March 27, 2017 Convertible Debenture

 

On March 27, 2017, the Company received gross proceeds from the initial private placement of CDN $150,000 (approximately U.S. $113,000) with a group of accredited investors. The Company incurred a total of CDN $5,000 (approximately U.S. $3,765) in finder’s fees to facilitate this transaction for net proceeds of CDN $145,000 (approximately U.S. $109,235). The convertible debenture bears an interest rate of 10% per annum and is due in two years. The debenture is convertible to shares of common stock of the Company at a price of $1.50 per share at any time up to March 27, 2019. As part of the purchase agreement, the Company also issued a warrant to purchase 15,000 of the Company’s common stock at $1.00 per share up to March 27, 2019.

 

June 5, 2017, and June 9, 2017 Convertible Debentures

 

On June 5, 2017, the Company received gross proceeds from the initial private placement of CDN $150,000 (approximately U.S. $115,470) with a group of accredited investors. The Company incurred a total of CDN $7,500 (approximately U.S. $5,774) in finder’s fees to facilitate this transaction for net proceeds of CDN $142,500 (approximately U.S. $109,696). The Debenture is convertible to shares of common stock of the Company at a price of $1.50 per share at any time up to June 5, 2019. As part of the purchase agreement, the Company also issued a warrant to purchase 15,000 of the Company’s common stock at $1.00 from November 5, 2017 to June 5, 2019.

 

On June 9, 2017, The Company received additional gross proceeds of CDN $75,000 (approximately U.S. $57,735) in connection with the June 5, 2017 Securities Purchase Agreement. The Company incurred a total of CDN $3,750 (approximately U.S. $2,887) in finder’s fees to facilitate this transaction for net proceeds of CDN $71,250 (approximately U.S. $54,848). The debenture is convertible to shares of common stock of the Company at a price of $1.50 per share at any time up to June 5, 2019. As part of the purchase agreement, the Company also issued a warrant to purchase 7,500 of the Company’s common stock at $1.00 from November 9, 2017 to June 9, 2019.

 

The Company has determined that the conversion feature embedded in the convertible notes and debentures constitutes a derivative and has been bifurcated from the note and recorded as a derivative liability, with a corresponding discount recorded to the associated debt, on the accompanying balance sheet, and revalued to fair market value at each reporting period. See Note 16.

 

The commissions and finders' fees related to the notes and debentures were amortized over the life of the notes.

 

Warrants issued in relation to the debentures and promissory notes are discussed in Note 15.

Promissory Notes Payable
9 Months Ended
Sep. 30, 2017
Debt Disclosure [Abstract]  
Promissory Notes Payable

13. Promissory Notes Payable - Other

 

On December 9, 2014, the Company obtained a promissory note for CDN $500,000 (approximately U.S. $436,796) from Paymobile Inc., a subsidiary of 2336414 Ontario Inc. (“2336414”) of which the Company owns 666,664 common shares, that bears interest at a rate of 1% per month on the outstanding balance.

 

As of the date of this report, the final payment of CDN $150,000 (approximately U.S. $112,515) was due on February 28, 2015. The Company and 2336414 have agreed to extend the due date indefinitely by mutual consent. Interest expense of $10,284 and $10,202 was recorded for the nine months ended September 30, 2017, and September 30, 2016, respectively.

Bank Loan Payable
9 Months Ended
Sep. 30, 2017
Debt Disclosure [Abstract]  
Bank Loan Payable

14. Bank Loan Payable

 

On September 30, 2016, the Company obtained a loan of EUR 500,000 (approximately U.S. $590,650) from Banca Veneto in Italy, which is secured by the Company's assets. The loan is amortized over 57 months ending September 30, 2021 with repayment started on January 31, 2017 in monthly installments of EUR 9,760 (approximately U.S. $11,529) with an underlying interest rate of 4.5 points above Euro Inter Bank Offered Rate ("EURIBOR"), subject to quarterly review.

 

The company repaid EUR 72,031 (approximately U.S. $85,090) during the nine months ended September 30, 2017.

Warrants
9 Months Ended
Sep. 30, 2017
Notes to Financial Statements  
Warrants

15. Warrants

 

On February 29, 2016, as per a Securities Purchase Agreement, the Company issued a warrant to purchase 130,435 shares of the Company’s common stock at $1.15 per share which may be exercised by the warrant holder between August 28, 2016 and February 28, 2019 (See Note 12). The warrant was issued in connection with the February 29, 2016 convertible Promissory Note. The fair value of the warrants of $106,583 was calculated using the Black-Scholes model on the date of issuance and was recorded as a debt discount, which has been amortized as interest expense over the life of the debt.

 

On April 4, 2016, the Company issued a warrant to purchase 32,609 shares of the Company’s common stock at $1.15 per share which may be exercised by the warrant holder until April 4, 2019 (See Note 12). The warrant was issued in connection with the April 4, 2016 Convertible Promissory Note. The fair value of the warrants of $27,901 was calculated using the Black-Scholes model on the date of issuance and was recorded as a debt discount, which has been amortized as interest expense over the life of the debt.

 

On April 4, 2016, the Company issued a warrant to purchase 62,220 shares of the Company’s common stock at $1.15 per share which may be exercised by the warrant holder until April 4, 2019. The warrant was issued to the placement agent in relation to securing the February 29, 2016 and April 4, 2016 convertible Promissory Notes (See Note 12). The fair value of the warrants of $53,236 was calculated using the Black-Scholes model on the date of issuance, and was recorded as a debt issuance cost, which has been amortized over the life of the debt.

 

On January 24, 2017, the Company issued a warrant to purchase 18,000 of the Company’s common stock at $1.00 per share which may be exercised by the warrant holder from June 24, 2017 until January 24, 2019. The warrant was issued in connection with the January 24, 2017 Debenture (See Note 12). The fair value of the warrants of $13,973 was calculated using the Black-Scholes model on the date of issuance and was recorded as a debt issuance cost, which has been amortized as interest expense over the life of the debt.

 

On March 27, 2017, the Company issued a warrant to purchase 15,000 of the Company’s common stock at $1.00 per share which may be exercised by the warrant holder from August 27, 2017 until March 27, 2019. The warrant was issued in connection with the March 27, 2017 Convertible Debenture (See Note 12). The fair value of the warrant of $11,923 was calculated using the Black-Scholes model on the date of issuance and was recorded as debt discount, which has been amortized as interest expense over the life of the debt.

 

On June 5, 2017, the Company issued a warrant to purchase 15,000 of the Company’s common stock at $1.00 per share which may be exercised by the holder from November 5, 2017 to June 5, 2019. The warrant was issued in connection with the June 5, 2017 Convertible Debenture (see Note 12). The fair value of the warrant of $14,826 was calculated using the Black-Scholes model on the date of issuance and was recorded as debt discount, which has been amortized as interest expense over the life of the debt.

 

On June 9, 2017, the Company issued a warrant to purchase 7,500 of the Company’s common stock at $1.00 per share which may be exercised from November 9, 2017 to June 9, 2019. The warrant was issued in connection with the June 9, 2017 Convertible Debenture (see Note 12). The fair value of the warrant of $7,489 was calculated using the Black-Scholes model on the date of issuance and was recorded as debt discount, which has been amortized as interest expense over the life of the debt.

 

The fair value of the warrants on the date of issuance as calculated using the Black-Scholes model was:

 

Warrant  Fair Value
At issuance
February 29, 2016  $106,583 
April 4, 2016  $53,236 
April 4, 2016  $27,901 
January 24, 2017  $13,973 
March 27, 2017  $11,923 
June 5, 2017  $14,826 
June 9, 2017  $7,489 

 

 

The following assumptions were used to calculate the fair value at issuance:

 

Warrant Date  Exercise Price/sh  Common Stock Price/sh  Volatility  Term  Dividend Yield  Interest Rate  Forfeiture Risk
February 29, 2016  $1.15   $0.90    200%  3 yrs   0%   0.91%   0%
April 4, 2016  $1.15   $0.95    195%  3 yrs   0%   0.91%   0%
April 4, 2016  $1.15   $0.95    195%  3 yrs   0%   0.91%   0%
January 24, 2017  $1.00   $0.78    404%  2 yrs   0%   0.91%   0%
March 27, 2017  $1.00   $0.80    390%  2 yrs   0%   0.91%   0%
June 5, 2017  $1.00   $0.99    445%  2 yrs   0%   0.91%   0%
June 9, 2017  $1.00   $0.99    445%  2 yrs   0%   0.91%   0%

 

A summary of warrant transactions during the nine months ended September 30, 2017 is as follows:

 

   Warrant Shares  Weighted Average Exercise Price Per Common Share  Weighted Average Life
Outstanding at December 31, 2016   233,964   $1.15    2.13 
Issued   55,500   $1.00    2.00 
Exercised   —      —      —   
Expired   (8,700)   —      —   
Outstanding at September 30, 2017   280,764   $1.09    1.51 
Exercisable at September 30, 2017   258,264   $1.12    1.46 

 

The following assumptions were used to calculate the fair value of warrants at September 30, 2017:

 

Exercises price $1.00 - $1.15
Common stock price per share $1.09
Volatility 392%
Weighted average life 1.51 years
Dividend yield 0%
Interest rate 0.91%
Forfeiture risk 0%
Derivative Liability and Fair Value
9 Months Ended
Sep. 30, 2017
Notes to Financial Statements  
Derivative Liability and Fair Value

16. Derivative Liability and Fair Value

 

The Company has evaluated the application of ASC 815 Derivatives and Hedging and ASC 815-40-25 to the warrants to purchase common stock issued with the convertible notes and debentures. Based on the guidance in ASC 815 and ASC 815-40-25, the Company concluded these instruments were required to be accounted for as derivatives due to the down round protection feature on the conversion price and the exercise price. The Company records the fair value of these derivatives on its balance sheet at fair value with changes in the values of these derivatives reflected in the statements of operations as “Gain (loss) on derivative liabilities.” These derivative instruments are not designated as hedging instruments under ASC 815 and are disclosed on the balance sheet under Derivative Liabilities.

 

The Convertible Debenture issued March 27, 2017 and accrued interest are convertible into common shares at a fixed price of $1.50 prior to March 27, 2019. The gross proceeds from the sale of the debenture were recorded net of $70,617 related to the conversion feature and $11,923 was allocated to the warrants issued.

 

The Convertible Debenture issued June 5, 2017, and accrued interest are convertible into common shares at a fixed price of $1.50 prior to June 5, 2019. The gross proceeds from the sale of the debenture were recorded net of $86,815 related to the conversion feature and $14,826 was allocated to the warrants issued.

 

The Convertible Debenture issued June 9, 2017, and accrued interest are convertible into common shares at a fixed price of $1.50 prior to June 9, 2019. The gross proceeds from the sale of the debenture were recorded net of $43,874 related to the conversion feature and $7,489 was allocated to the warrants issued.

 

The Company accounted for the convertible debentures issued on March 27, 2017, June 5, 2017, and June 9, 2017 in accordance with ASC 815 “Derivatives and Hedging.” Accordingly, the embedded conversion option is a derivative liability and is marked to market through earnings at the end of each reporting period.

Revenues
9 Months Ended
Sep. 30, 2017
Accounting Policies [Abstract]  
Revenues

17. Revenues

 

The following table sets forth the breakdown of net gaming revenues:

 

 

   Three Months Ended  Nine Months Ended
   September 30,
2017
  September 30,
2016
  September 30,
2017
  September 30,
2016
Turnover            
Turnover web-based  $22,033,214   $22,220,704   $78,282,283   $73,886,726 
Turnover land-based   26,093,287    2,712,309    72,135,336    6,043,047 
Total Turnover  $48,126,501   $24,933,013   $150,417,619   $79,929,773 
                     
Winnings/Payouts                    
Winnings web-based   20,947,833    20,904,633    74,233,981    69,170,147 
Winnings land-based   21,914,946    2,019,550    62,860,944    4,729,448 
Total Winnings/payouts   42,862,779    22,924,183    137,094,925    73,899,595 
                     
Gross Gaming Revenues   5,263,722   $2,008,830   $13,322,694   $6,030,178 
                     
Less: ADM Gaming Taxes   334,647    407,190    1,159,858    1,235,285 
Net Gaming Revenues  $4,929,075   $1,601,640    12,162,836   $4,794,893 
Add: Commission Revenues   55,086    772,833    218,585    852,424 
Add: Service Revenues   136,858    232,197    709,222    232,197 
Total Revenues  $5,121,019   $2,606,670   $13,090,643   $5,879,514 

 

Turnover represents the total bets processed for the period.

Income Taxes
9 Months Ended
Sep. 30, 2017
Income Tax Disclosure [Abstract]  
Income Taxes

18. Income Taxes

 

The Company is incorporated in the United States of America and is subject to United States federal taxation. No provisions for income taxes have been made as the Company had no U.S. taxable income for the nine months ended September 30, 2017 and 2016.

 

The Company's Italian subsidiaries are governed by the income tax laws of Italy. The corporate tax rate in Italy is 28.82% (IRES at 24% plus IRAP ordinary at 4.82%) on income reported in the statutory financial statements after appropriate tax adjustments.

 

The Company's Austrian subsidiaries are governed by the income tax laws of Austria. The corporate tax rate in Austria is 25% on income reported in the statutory financial statements after appropriate tax adjustments.

 

The reconciliation of income tax expense at the U.S. statutory rate of 35% to the Company’s effective tax rate is as follows:

 

   September 30,
2017
  September 30,
2016
U.S. Statutory rate  $(8,269)  $(130,557)
Tax rate difference between Italy, Austria and U.S.   45,860    (112,465)
Change in Valuation Allowance   330,199    483,044 
Permanent difference   (34,371)   8,116 
Effective tax rate  $333,419   $248,138 

 

The Company has accumulated a net operating loss carry forward ("NOL") of approximately $12.6 million as of September 30, 2017 in the U.S. This NOL may be offset against future taxable income through the year 2036. The use of these losses to reduce future income taxes will depend on the generation of sufficient taxable income prior to the expiration of the NOL. The Company periodically evaluates whether it is more likely than not that it will generate sufficient taxable income to realize the deferred income tax asset. At the present time, management cannot presently determine when the Company will be able to generate sufficient taxable income to realize the deferred tax asset; accordingly, a 100% valuation allowance has been established to offset the asset.

 

Utilization of NOLs are subject to limitation due to any ownership change (as defined under Section 382 of the Internal Revenue Code of 1986) which resulted in a change in business direction. Unused limitations may be carried over to future years until the NOLs expire. Utilization of NOLs may also be limited in any one year by alternative minimum tax rules.

 

Under Italian tax law, the operating loss carryforwards available for offset against future profits can be used indefinitely. Operating loss carryforwards are only available for offset against national income tax, up to the limit of 80% of taxable annual income. This restriction does not apply to the operating loss incurred in the first three years of the Company's activity, which are therefore available for 100% offsetting.

 

Under Austrian tax law, the operating loss carryforwards available for offset against future profits can be used indefinitely. Operating loss carryforwards are only available for offset against national income tax, up to the limit of 75% of taxable annual income.

 

The provisions for income taxes consist of currently payable income tax in Italy and Austria. The provisions for income taxes are summarized as follows:

 

   September 30,
2017
  September 30,
2016
Current  $333,419   $248,138 
Deferred   —      —   
Total  $333,419   $248,138 

 

The tax effects of temporary differences that give rise to the Company’s net deferred tax asset are as follows:

 

   September 30,
2017
  September 30,
2016
Net loss carryforward - Foreign  $94,848   $2,122 
Net loss carryforward - US   4,393,558    3,584,959 
    4,488,406    3,587,081 
Less valuation allowance   (4,488,406)   (3,587,081)
Deferred tax assets  $—     $—   

 

Commitments and Contingencies
9 Months Ended
Sep. 30, 2017
Commitments and Contingencies Disclosure [Abstract]  
Commitments and Contingencies

19. Commitments and Contingencies

 

On May 15, 2017, the Company and Darling Capital reached a settlement agreement related to legal proceedings brought against the Company on January 20, 2017, whereby the Company agreed to pay the Convertible Promissory Notes in three instalments of $350,000 on May 30, 2017; $350,000 on June 12, 2017 and $300,000 on June 26, 2017 totaling $1,000,000 in full. The Company paid $125,000 towards the amount due on May 30, 2017. Since the balance of the payments as agreed were late, Darling entered the Consent Judgment as stipulated in the Settlement Agreement.

 

As a result, the Company will pay an annual interest rate of 22% on agreed settlement amount of $1,000,000 less payments made from May 15, 2017, the date of the Settlement Agreement, until paid in full. The Company is currently in the process of negotiating a lower rate re-financing to pay the balance due to Darling.

 

See also Note 12.

Subsequent events
9 Months Ended
Sep. 30, 2017
Subsequent Events [Abstract]  
Subsequent events

20. Subsequent Events

 

The Company has evaluated subsequent events through the filing date of these financial statements on form 10-Q and has determined that there were no subsequent events to recognize or disclose in these financial statements.

Basis of Presentation and Nature of Business (Policies)
9 Months Ended
Sep. 30, 2017
Basis Of Presentation And Nature Of Business Policies  
Basis of Presentation

Basis of Presentation

 

The unaudited consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States for interim financial information and the rules and regulations of the Securities and Exchange Commission. In the opinion of management, the unaudited consolidated financial statements have been prepared on the same basis as the annual financial statements and reflect all adjustments, which include only normal recurring adjustments, necessary to present fairly the financial position as of September 30, 2017 and the results of operations and cash flows for the period ended September 30, 2017 and 2016. The financial data and other information disclosed in these notes to the interim financial statements related to these periods are unaudited. The results for the three and nine months ended September 30, 2017 are not necessarily indicative of the results to be expected for any subsequent periods or for the entire year ending December 31, 2017. The balance sheet at December 31, 2016 has been derived from the audited financial statements at that date.

 

Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States have been condensed or omitted pursuant to the Securities and Exchange Commission's rules and regulations. These unaudited consolidated financial statements should be read in conjunction with our audited financial statements and notes thereto for the year ended December 31, 2016 as included in our Annual Report on form 10-K.

Nature of Business

Nature of Business

 

Newgioco Group, Inc. ("Newgioco Group" or "the Company") was incorporated in the state of Delaware on August 26, 1998 as Pender International Inc. On September 30, 2005, the Company changed its name to Empire Global Corp., and on July 20, 2016 changed its name to Newgioco Group, Inc. The Company maintains its principal executive offices headquartered in Toronto, Canada with wholly owned subsidiaries in Italy and Austria.

 

Our subsidiaries include: Multigioco Srl (“Multigioco”) which was acquired on August 15, 2014, Rifa Srl (“Rifa”) which was acquired on January 1, 2015, as well as Ulisse Gmbh (“Ulisse”) and Odissea Betriebsinformatik Beratung Gmbh (“Odissea”) which were both acquired on July 1, 2016.

 

Newgioco Group is now a vertically integrated company which owns and operates an innovative, certified Betting Platform Software (“BPS”) and offering a complete suite of online and offline leisure gaming services including a variety of lottery and casino gaming, as well as sports betting through a distribution network of retail betting locations situated throughout Italy.

Summary of Significant Accounting Policies (Policies)
9 Months Ended
Sep. 30, 2017
Accounting Policies [Abstract]  
Basis of consolidation

a) Basis of consolidation

 

The consolidated financial statements include the financial statements of the Company and its subsidiaries, all of which are wholly owned. All significant inter-company transactions are eliminated upon consolidation.

 

Certain amounts of prior periods were reclassified to conform with current period presentation.

Use of estimates

b) Use of estimates

 

The preparation of the financial statements in conformity with Generally Accepted Accounting Principles ("GAAP") requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the dates of the financial statements and the reported amounts of revenue and expenses during the reporting periods. Actual results could differ from those estimates. These estimates and assumptions include valuing equity securities issued in share based payment arrangements, determining the fair value of assets acquired, allocation of purchase price, impairment of long-lived assets, the collectability of receivables and the value of deferred taxes and related valuation allowances. Certain estimates, including evaluating the collectability of receivables and advances, could be affected by external conditions, including those unique to our industry, and general economic conditions. It is possible that these external factors could have an effect on our estimates that could cause actual results to differ from our estimates. We re-evaluate all of our accounting estimates at least quarterly based on these conditions and record adjustments when necessary.

Goodwill

c) Goodwill

 

Goodwill is recognized for the excess of the purchase price over the fair value of tangible and identifiable intangible net assets of businesses acquired. Goodwill is not being amortized, but is reviewed at least annually for impairment. In our evaluation of goodwill impairment, we perform a qualitative assessment to determine if it is more likely than not that the fair value of a reporting unit is less than its carrying amount. If the qualitative assessment is not conclusive, we proceed to a two-step process to test goodwill for impairment including comparing the fair value of the reporting unit to its carrying value (including attributable goodwill). Fair value for our reporting units is determined using an income or market approach incorporating market participant considerations and management's assumptions on revenue growth rates, operating margins, discount rates and expected capital expenditures. Fair value determinations may include both internal and third-party valuations. Unless circumstances otherwise dictate, we perform our annual impairment testing in the fourth quarter.

 

We perform the allocation based on our knowledge of the market in which we operate, and our overall knowledge of the leisure betting and gaming industry.

Business Combinations

d) Business Combinations

 

We allocate the fair value of purchase consideration to the tangible and intangible assets acquired and liabilities assumed based on their estimated fair values. The excess of the fair value of purchase consideration over the fair values of these identifiable assets and liabilities is recorded as goodwill.

 

Such valuations require management to make significant estimates and assumptions, especially with respect to intangible assets. Significant estimates in valuing certain intangible assets include, but are not limited to, future expected cash flows from acquired users, acquired technology, and trade names from a market participant perspective, useful lives and discount rates. Management's estimates of fair value are based upon assumptions believed to be reasonable, but which are inherently uncertain and unpredictable and, as a result, actual results may differ from estimates.

Long-Lived Assets

e) Long-Lived Assets

 

We evaluate the carrying value of our long-lived assets for impairment by comparing the expected undiscounted future cash flows of the assets to the net book value of the assets when events or circumstances indicate that the carrying amount of a long-lived asset may not be recoverable. If the expected undiscounted future cash flows are less than the net book value of the assets, the excess of the net book value over the estimated fair value will be charged to earnings.

 

Fair value is based upon discounted cash flows of the assets at a rate deemed reasonable for the type of asset and prevailing market conditions, appraisals, and, if appropriate, current estimated net sales proceeds from pending offers.

Derivative Financial Instruments

f) Derivative Financial Instruments

 

The Company does not use derivative instruments to hedge exposures to cash flow, market, or foreign currency risks. The Company evaluates all of its financial instruments, including convertible notes and stock purchase warrants, to determine if such instruments are derivatives or contain features that qualify as embedded derivatives. For derivative financial instruments that are accounted for as liabilities, the derivative instrument is initially recorded at its fair value and is then re-valued at each reporting date, with changes in the fair value reported as charges or credits to income.

 

For option-based simple derivative financial instruments, the Company uses the Black-Scholes option-pricing model to value the derivative instruments at inception and subsequent valuation dates. The classification of derivative instruments, including whether such instruments should be recorded as liabilities or as equity, is re-assessed at the end of each reporting period.

Earnings Per Share

g) Earnings Per Share

 

FASB ASC 260, "Earnings Per Share" provides for calculation of "basic" and "diluted" earnings per share. Basic earnings per share includes no dilution and is computed by dividing net income (loss) available to common shareholders by the weighted average common shares outstanding for the period. Diluted earnings per share reflect the potential dilution of securities that could share in the earnings of an entity similar to fully diluted earnings per share. These potentially dilutive securities were not included in the calculation of loss per share for the nine months ended September 30, 2017 and nine months ended September 30, 2016, because the effect would have been anti-dilutive. while the Company had income per share for the three months ended September 30, 2017 and three months ended September 30, 2016. Accordingly, basic and diluted loss per common share is the same for these periods.

Currency translation

h) Currency translation

 

Since the Company's subsidiaries operate in Europe, the subsidiaries functional currency is the Euro. In the consolidated financial statements, revenue and expense accounts are translated at the average rates during the period, and assets and liabilities are translated at period-end rates and equity accounts are translated at historical rate. Translation adjustments arising from the use of different exchange rates from period to period are included as a component of stockholders' equity. Gains and losses from foreign currency transactions are recognized in current operations.

Revenue Recognition

i) Revenue Recognition

 

Revenues from sports-betting, casino, cash and skill games; slots, bingo and horse race wagers represent the gross pay-ins (also referred to as Turnover) from customers less gaming taxes and payouts to customers. Revenues are recorded when the game is closed. In addition, the Company receives commissions from the sale of scratch tickets and other lottery games. Commissions are recorded when the ticket for scratch off tickets and lottery tickets are sold.

 

Revenues from Betting Platform Software (“BPS”) include license fees, training, installation, and product support services. Revenue is recognized when the significant risks and rewards of ownership are transferred or when the obligation is fulfilled. License fees are calculated as a percentage of each licensee’s level of activity and are contingent upon the licensee’s usage. The license fees were recognized on an accrual basis as earned.

Cash and Cash Equivalents

j) Cash and equivalents

 

The Company considers all highly liquid debt instruments with maturities of three months or less at the time acquired to be cash equivalents. Cash equivalents represent short-term investments consisting of investment-grade corporate and government obligations, carried at cost, which approximates market value. The Company had no cash equivalents as of September 30, 2017 and December 31, 2016.

 

The Company primarily places its cash with high-credit quality financial institutions, one of which is located in the United States and is insured by the Federal Deposit Insurance Corporation for up to $250,000 and another which is located in Italy and is insured by the Italian government.

 

Gaming accounts receivable

k) Gaming accounts receivable

 

Gaming accounts receivable represents gaming deposits made by customers to their online gaming accounts either directly by credit card, bank wire, e-wallet or other accepted method through one of our websites or indirectly by cash collected at the cashier of a betting shop but not yet credited to our bank accounts and subject to normal trade collection terms without discounts. The Company periodically evaluates the collectability of its gaming accounts receivable and considers the need to record or adjust an allowance for doubtful accounts based upon historical collection experience and specific customer information. Actual amounts could vary from the recorded estimates. The Company does not require collateral to support customer receivables.The Company does not require collateral to support customer receivables. The company recorded bad debt expense of $33,118 and $98,068 for the three and nine months ended September 30, 2017, respectively. All balances previously recorded as allowance for doubtful accounts were written off as uncollectible.

Gaming balances

l) Gaming account balances

 

Gaming account balances represent customer balances, including winnings and deposits, that are held as credits in online gaming accounts and have not as of yet been used or withdrawn by the customers. Customers can request payment from the Company at any time and the payment to customers can be made through bank wire, credit card, or cash disbursement from one of our locations. Online gaming account credit balances are non-interest bearing.

Fair Value Measurements

m) Fair Value Measurements

 

ASC Topic 820, Fair Value Measurement and Disclosures, defines fair value as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. This topic also establishes a fair value hierarchy which requires classification based on observable and unobservable inputs when measuring fair value. There are three levels of inputs that may be used to measure fair value:

 

Level 1: Observable inputs such as quoted prices (unadjusted) in active market for identical assets or liabilities.

 

Level 2: Inputs other than quoted prices that are observable, either directly or indirectly. These include quoted prices for similar assets or liabilities in active markets and quoted prices for identical or similar assets or liabilities in markets that are not active.

 

Level 3: Unobservable inputs in which little or no market data exists, therefore developed using estimates and assumptions developed by us, which reflect those that a market participant would use.

 

The carrying value of the Company's short term investments, prepaid expenses, accounts receivables, other current assets, accounts payable and accrued liabilities, gaming account balance, and advances from shareholder approximate fair value because of the short-term maturity of these financial instruments.

 

The derivative liability in connection with the conversion feature of the convertible debt and warrants is classified as a level 3 liability, and is the only financial liability measured at fair value on a recurring basis.

 

The change in the Level 3 financial instrument is as follows:

 

Balance at December 31, 2015  $28,375 
Issued during the year ended December 31, 2016   609,256 
Exercised during the year ended December 31, 2016   —   
Change in fair value recognized in operations   (426,369)
Balance at December 31, 2016   211,262 
Issued during the nine months ended September 30, 2017   218,170 
Change in fair value recognized in operations   (245,445)
Balance at September 30, 2017  $183,987 

 

 

 

 

 

Property, plant and equipment

n) Property, plant and equipment

 

Property, plant and equipment are stated at acquisition cost less accumulated depreciation and adjustments for impairment losses. Expenditures are capitalized only when they increase the future economic benefits embodied in an item of property, plant and equipment. All other expenditures are recognized as expenses in the statement of income as incurred.

 

Depreciation is charged on a straight-line basis over the estimated remaining useful lives of the individual assets. Amortization commences from the time an asset is put into operation. The range of the estimated useful lives is as follows:

 

Trademarks / names   14 years 
Office equipment   5 years 
Office furniture   8 1/3 years 
Signs and displays   5 years 

 

Leases

o) Leases

 

Leases are reviewed and classified as capital or operating at their inception in accordance with ASC Topic 840, Accounting for Leases. For leases that contain rent escalations, the Company records rent expense on the straight line method. The difference between rent expense recorded and the amount paid is credited or charged to deferred rent account and is included in accrued expenses and other current liabilities.

 

All lease agreements of the Company as lessees are accounted for as operating leases as of September 30, 2017 and 2016.

Income Taxes

p) Income Taxes

 

We use the asset and liability method of accounting for income taxes in accordance with ASC Topic 740, "Income Taxes." Under this method, income tax expense is recognized for the amount of: (i) taxes payable or refundable for the current year and (ii) deferred tax consequences of temporary differences resulting from matters that have been recognized in an entity's financial statements or tax returns. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in the results of operations in the period that includes the enactment date. A valuation allowance is provided to reduce the deferred tax assets reported if based on the weight of the available positive and negative evidence, it is more likely than not some portion or all of the deferred tax assets will not be realized.

 

ASC Topic 740.10.30 clarifies the accounting for uncertainty in income taxes recognized in an enterprise's financial statements and prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. ASC Topic 740.10.40 provides guidance on derecognition, classification, interest and penalties, accounting in interim periods, disclosure, and transition. We have no material uncertain tax positions for any of the reporting periods presented.

 

The Company has elected to include interest and penalties related to uncertain tax positions, if determined, as a component of income tax expense.

 

In Italy, tax years beginning 2011 forward, are open and subject to examination, while in Austria companies are open and subject to inspection for 5 years and 10 years for inspection of serious infractions. The Company is not currently under examination and it has not been notified of a pending examination.

Comprehensive Income (Loss)

q) Comprehensive Income (Loss)

 

Comprehensive income (loss) is defined as the change in equity of a business enterprise during a period from transactions and other events and circumstances from non-owner sources, including foreign currency translation adjustments and unrealized gains and losses on marketable securities.

 

The Company adopted FASB ASC 220-10-45, "Reporting Comprehensive Income". ASC 220-10-45 establishes standards for reporting and presentation of comprehensive income and its components in a full set of financial statements. Comprehensive income consists of net income and unrealized gains (losses) on available for sale marketable securities; foreign currency translation adjustments and changes in market value of future contracts that qualify as a hedge; and negative equity adjustments.

 

Recent Accounting Pronouncements

r) Recent Accounting Pronouncements

 

In January 2016, the FASB issued ASU 2016-01, Financial Instruments - Overall (Subtopic 740): Recognition and Measurement of Financial Assets and Financial Liabilities. The provisions of this update are effective for annual and interim reporting periods beginning after December 15, 2017. ASU 2016-01 enhances the reporting model for financial instruments to provide users of financial statements with more decision-useful information. The Company is currently assessing the impact of ASU 2016.

 

In February 2016, the FASB issued ASU 2016-02, Leases. This update requires organizations that lease assets to recognize on the balance sheet the assets and liabilities for the rights and obligations created by those leases. The new guidance will also require additional disclosure about the amount, timing and uncertainty of cash flows arising from leases. The provisions of this update are effective for annual and interim periods beginning after December 15, 2018. The Company is currently assessing the impact that the adoption of ASU 2016-02 will have on the consolidated balance sheet and the consolidated results of operations.

 

In May 2017, the FASB issued ASU 2017-09, Compensation-Stock Compensation (Topic 718), Scope of Modification Accounting. The amendments in this Update provide guidance about which changes to the terms or conditions of a share-based payment award require an entity to apply modification accounting in Topic 718. The amendments in this Update are effective for all entities for annual periods, and interim periods within those annual periods, beginning after December 15, 2017.

 

In July 2017, the FASB issued ASU 2017-11, Earnings Per Share (Topic 260), Distinguishing Liabilities from Equity (Topic 480), Derivatives and Hedging (Topic 815). The amendments in Part I of this Update change the classification analysis of certain equity-linked financial instruments (or embedded features) with down round features. When determining whether certain financial instruments should be classified as liabilities or equity instruments, a down round feature no longer precludes equity classification when assessing whether the instrument is indexed to an entity’s own stock. The amendments also clarify existing disclosure requirements for equity-classified instruments. The amendments in Part I of this Update are effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2018. The Company is currently assessing the impact of ASU 2016.

  

There are no other recently issued accounting standards that are expected to have a material effect on our financial condition, results of operations or cash flows.

Summary of Significant Accounting Policies (Tables)
9 Months Ended
Sep. 30, 2017
Accounting Policies [Abstract]  
Property, plant and equipment useful life
Trademarks / names   14 years 
Office equipment   5 years 
Office furniture   8 1/3 years 
Signs and displays   5 years 
Level 3 Fair Value Measurements

 

Balance at December 31, 2015  $28,375 
Issued during the year ended December 31, 2016   609,256 
Exercised during the year ended December 31, 2016   —   
Change in fair value recognized in operations   (426,369)
Balance at December 31, 2016   211,262 
Issued during the nine months ended September 30, 2017   218,170 
Change in fair value recognized in operations   (245,445)
Balance at September 30, 2017  $183,987 

Acquisitions (Tables)
9 Months Ended
Sep. 30, 2017
Business Combinations [Abstract]  
Purchase Price - Acquisitions

Odissea Betriebsinformatik Beratung Gmbh (“Odissea”) Acquisition

 

        Remaining Useful Life
Current assets   $ 210,505      
Property, Plant and Equipment     30,638      
Identifiable intangible assets:            
Betting Operating System     1,685,371     15 years
Less: liabilities assumed     (215,935 )    
Total identifiable assets less liabilities assumed     1,710,579      
Total purchase price     1,710,579      
Excess purchase price   $      

 

 

 

Ulisse Gmbh (“Ulisse”) Acquisition

 

        Remaining Useful Life
Current assets   $ 984,647      
Property, Plant and Equipment     2,917      
Identifiable intangible assets:            
Customer relationships     83,996     10 years
Less: liabilities assumed     (421,976 )    
Total identifiable assets less liabilities assumed     649,584      
Total purchase price     649,584      
Excess purchase price   $      

 

 

 

 

Intangible Assets (Tables)
9 Months Ended
Sep. 30, 2017
Goodwill and Intangible Assets Disclosure [Abstract]  
Intangibles

 

    September 30, 2017   December 31, 2016   Life (years)
Betting Platform Software   $ 1,685,371     $ 1,685,371       15  
Licenses     965,467       953,024       1.5 - 7  
Location contracts     1,000,000       1,000,000       5 - 7  
Customer relationships     870,927       870,927       10 - 15  
Trademarks/names     110,000       110,000       14  
Websites     40,000       40,000       5  
      4,671,765       4,659,322          
Accumulated amortization     (1,313,523)       (968,344 )        
Balance   $ 3,358,242     $ 3,690,978          

Related party transactions and balances (Tables)
9 Months Ended
Sep. 30, 2017
Related Party Transactions [Abstract]  
Related party transactions and balances

 

   September 30, 2017  December 31, 2016
Gold Street Capital Corp.  $30,163   $1 
Doriana Gianfelici   57,886    51,819 
Luca Pasquini   76    5,260 
Other stockholders   559,059    500,469 
Total advances from stockholders  $647,184   $557,549 

Debentures and Convertible Notes (Tables)
9 Months Ended
Sep. 30, 2017
Debentures And Convertible Notes Tables  
Debentures outstanding

 

   September 30,
2017
  December 31,
2016
February 29, 2016 Convertible Note, net of discount of $0 and $85,000  $600,000   $514,102 
April 4, 2016 Convertible Note, net of discount of $0 and $10,968   150,000    115,812 
January 24, 2017 Debenture, net of discount of $9,207   135,027    —   
March 27, 2017 Convertible Debenture, net of discount of $61,396   58,799    —   
June 5, 2017 Convertible Debenture, net of discount of $85,351   34,844    —   
June 9, 2017 Convertible Debenture, net of discount of $43,412   16,685    —   
    995,355    629,914 
Less: unamortized debt issuance costs   (18,170)   (13,397)
   $977,185   $616,517 

Warrants (Tables)
9 Months Ended
Sep. 30, 2017
Notes to Financial Statements  
Debenture

 

Warrant  Fair Value
At issuance
February 29, 2016  $106,583 
April 4, 2016  $53,236 
April 4, 2016  $27,901 
January 24, 2017  $13,973 
March 27, 2017  $11,923 
June 5, 2017  $14,826 
June 9, 2017  $7,489 

Weighted average assumptions

 

Warrant Date  Exercise Price/sh  Common Stock Price/sh  Volatility  Term  Dividend Yield  Interest Rate  Forfeiture Risk
February 29, 2016  $1.15   $0.90    200%  3 yrs   0%   0.91%   0%
April 4, 2016  $1.15   $0.95    195%  3 yrs   0%   0.91%   0%
April 4, 2016  $1.15   $0.95    195%  3 yrs   0%   0.91%   0%
January 24, 2017  $1.00   $0.78    404%  2 yrs   0%   0.91%   0%
March 27, 2017  $1.00   $0.80    390%  2 yrs   0%   0.91%   0%
June 5, 2017  $1.00   $0.99    445%  2 yrs   0%   0.91%   0%
June 9, 2017  $1.00   $0.99    445%  2 yrs   0%   0.91%   0%

Warrants

 

   Warrant Shares  Weighted Average Exercise Price Per Common Share  Weighted Average Life
Outstanding at December 31, 2016   233,964   $1.15    2.13 
Issued   55,500   $1.00    2.00 
Exercised   —      —      —   
Expired   (8,700)   —      —   
Outstanding at September 30, 2017   280,764   $1.09    1.51 
Exercisable at September 30, 2017   258,264   $1.12    1.46 

Black-scholes modle

 

Exercises price $1.00 - $1.15
Common stock price per share $1.09
Volatility 392%
Weighted average life 1.51 years
Dividend yield 0%
Interest rate 0.91%
Forfeiture risk 0%

Revenues (Tables)
9 Months Ended
Sep. 30, 2017
Accounting Policies [Abstract]  
Revenue

 

   Three Months Ended  Nine Months Ended
   September 30,
2017
  September 30,
2016
  September 30,
2017
  September 30,
2016
Turnover            
Turnover web-based  $22,033,214   $22,220,704   $78,282,283   $73,886,726 
Turnover land-based   26,093,287    2,712,309    72,135,336    6,043,047 
Total Turnover  $48,126,501   $24,933,013   $150,417,619   $79,929,773 
                     
Winnings/Payouts                    
Winnings web-based   20,947,833    20,904,633    74,233,981    69,170,147 
Winnings land-based   21,914,946    2,019,550    62,860,944    4,729,448 
Total Winnings/payouts   42,862,779    22,924,183    137,094,925    73,899,595 
                     
Gross Gaming Revenues   5,263,722   $2,008,830   $13,322,694   $6,030,178 
                     
Less: ADM Gaming Taxes   334,647    407,190    1,159,858    1,235,285 
Net Gaming Revenues  $4,929,075   $1,601,640    12,162,836   $4,794,893 
Add: Commission Revenues   55,086    772,833    218,585    852,424 
Add: Service Revenues   136,858    232,197    709,222    232,197 
Total Revenues  $5,121,019   $2,606,670   $13,090,643   $5,879,514 

Income Taxes (Tables)
9 Months Ended
Sep. 30, 2017
Income Taxes Tables  
Reconciliation of income tax expense

 

   September 30,
2017
  September 30,
2016
U.S. Statutory rate  $(8,269)  $(130,557)
Tax rate difference between Italy, Austria and U.S.   45,860    (112,465)
Change in Valuation Allowance   330,199    483,044 
Permanent difference   (34,371)   8,116 
Effective tax rate  $333,419   $248,138 

Deferred tax assets

 

   September 30,
2017
  September 30,
2016
Current  $333,419   $248,138 
Deferred   —      —   
Total  $333,419   $248,138 

Provisions for income taxes

 

   September 30,
2017
  September 30,
2016
Net loss carryforward - Foreign  $94,848   $2,122 
Net loss carryforward - US   4,393,558    3,584,959 
    4,488,406    3,587,081 
Less valuation allowance   (4,488,406)   (3,587,081)
Deferred tax assets  $—     $—   

Going Concern (Details)
Sep. 30, 2017
USD ($)
Organization, Consolidation and Presentation of Financial Statements [Abstract]  
Working capital deficit $ 1,396,773
Summary of Significant Accounting Policies (Details)
3 Months Ended 9 Months Ended
Sep. 30, 2017
USD ($)
Sep. 30, 2017
USD ($)
Accounting Policies [Abstract]    
FDIC Insured Amount $ 250,000 $ 250,000
Bad Debt Expense $ 33,118 $ 98,068
Summary of Significant Accounting Policies (Details 1) - USD ($)
9 Months Ended 12 Months Ended
Sep. 30, 2017
Dec. 31, 2016
Change in the Level 3 financial instrument [Rollforward]    
Beginnng Balance $ 211,262 $ 28,375
Issued during the year 218,170 609,256
Exercised during the year  
Change in fair value recognized in operations (245,445) (426,369)
Ending Balance $ 183,987 $ 211,262
Summary of Significant Accounting Policies (Details 2)
12 Months Ended
Dec. 31, 2016
Trademarks / names [Member]  
Useful Life 14 years
Office equipment [Member]  
Useful Life 5 years
Office furniture [Member]  
Useful Life 8 years 4 months
Signs and displays [Member]  
Useful Life 5 years
Acquisition- Purchase price (Details)
12 Months Ended
Dec. 31, 2016
USD ($)
Odissea [Member]  
Business Combination, Separately Recognized Transactions [Line Items]  
Current assets $ 210,505
Property, Plant and Equipment 30,638
Identifiable intangible assets: $ 1,685,371
Remaining useful life 15 years
Less: liabilities assumed $ (215,935)
Total identifiable assets less liabilities assumed 1,710,579
Total purchase price 1,710,579
Ulisse [Member]  
Business Combination, Separately Recognized Transactions [Line Items]  
Current assets 984,647
Property, Plant and Equipment 2,917
Identifiable intangible assets: $ 83,996
Remaining useful life 10 years
Less: liabilities assumed $ (421,976)
Total identifiable assets less liabilities assumed 649,584
Total purchase price $ 649,584
Acquisitions (Details Narrative)
6 Months Ended
Jun. 30, 2016
shares
Odissea [Member]  
Business Acquisition [Line Items]  
Share issued for acquisition 4,386,100
Ownership 11.85%
Agreement

Pursuant to the Odissea SPA, upon completion of certification of the Betting Operating System by the ADM the sellers may exercise the option to resell to the Company 50% of the shares of common stock issued in consideration for the purchase price (or 2,193,050 shares) at a fixed price of U.S. $1.00 per share. The repurchase option expires on June 30, 2017, 12 months after the Closing Date.

Ulisse [Member]  
Business Acquisition [Line Items]  
Share issued for acquisition 1,665,600
Ownership 4.50%
Agreement

Pursuant to the Ulisse SPA, upon completion of the ADM license tender auction and the Rights obtained by the Company are assigned to the Ulisse locations the sellers may exercise the option to resell to the Company 50% of the shares of common stock issued in consideration for the purchase price (or 832,800 shares) at a fixed price of U.S. $1.00 per share. The repurchase option expires on June 30, 2017, 12 months after the Closing Date.

Intangible Assets - Intangibles (Details) - USD ($)
Sep. 30, 2017
Dec. 31, 2016
Intangible assets, gross $ 4,671,765 $ 4,659,322
Accumulated amortization (1,313,523) (968,344)
Intangible assets 3,358,242 3,690,978
Betting Operating System [Member]    
Intangible assets, gross 1,685,371 1,685,371
Licenses [Member]    
Intangible assets, gross 965,467 953,024
Location contracts [Member]    
Intangible assets, gross 1,000,000 1,000,000
Customer relationships [Member]    
Intangible assets, gross 870,927 870,927
Trademarks/names [Member]    
Intangible assets, gross 110,000 110,000
Website [Member]    
Intangible assets, gross $ 40,000 $ 40,000
Intangible Assets - Useful life (Details)
12 Months Ended
Dec. 31, 2016
Betting Operating System [Member]  
Useful Life 15 years
Licenses [Member] | Minimum [Member]  
Useful Life 1 year 5 months
Licenses [Member] | Maximum [Member]  
Useful Life 7 years
Location contracts [Member] | Minimum [Member]  
Useful Life 5 years
Location contracts [Member] | Maximum [Member]  
Useful Life 7 years
Customer relationships [Member] | Minimum [Member]  
Useful Life 10 years
Customer relationships [Member] | Maximum [Member]  
Useful Life 15 years
Trademarks/names [Member]  
Useful Life 14 years
Website [Member]  
Useful Life 5 years
Intangible Assets (Details Narrative) - USD ($)
3 Months Ended 9 Months Ended
Sep. 30, 2017
Sep. 30, 2017
Goodwill and Intangible Assets Disclosure [Abstract]    
Amortization Expense $ 112,233 $ 332,739
Long Term Debt (Details) - USD ($)
Sep. 30, 2017
Sep. 30, 2016
Italy [Member]    
Severance liability $ 117,271 $ 91,865
Ulisse [Member]    
Customer deposit $ 375,128 $ 223,714
Line of Credit-Bank (Details Narrative)
Sep. 30, 2017
USD ($)
Sep. 30, 2017
EUR (€)
Multgioco [Member]    
Line of credit $ 354,390 € 300,000
Interest rate 5.00% 5.00%
Rifa Srl[Member]    
Line of credit $ 59,065 € 50,000
Related party transactions and balances - Related party (Details) - USD ($)
Sep. 30, 2017
Dec. 31, 2016
Related Party Transaction [Line Items]    
Balance of advances from stockholders $ 647,184 $ 557,549
Gold Street Capital Corp. [Member]    
Related Party Transaction [Line Items]    
Balance of advances from stockholders 30,163 1
Doriana Gianfelici [Member]    
Related Party Transaction [Line Items]    
Balance of advances from stockholders 57,886 51,819
Luca Pasquini [Member]    
Related Party Transaction [Line Items]    
Balance of advances from stockholders 76 5,260
Other Stockholders [Member]    
Related Party Transaction [Line Items]    
Balance of advances from stockholders $ 559,059 $ 500,469
Related party transactions and balances (Details Narrative) - USD ($)
6 Months Ended 9 Months Ended 12 Months Ended
Apr. 29, 2016
Jan. 13, 2016
Dec. 15, 2015
Jun. 30, 2016
Sep. 30, 2017
Sep. 30, 2016
Dec. 31, 2016
Related Party Transaction [Line Items]              
Advance from related party         $ 24,695 $ 141,721  
Related Party [Member]              
Related Party Transaction [Line Items]              
Interest rate         5.00%    
Gold Street Capital Corp. [Member]              
Related Party Transaction [Line Items]              
Advance from related party         $ 193,046    
Debt repaid         $ 162,884    
Share price         $ 1.04    
Management fee paid       $ 90,000 $ 108,000    
Luca Pasquini [Member]              
Related Party Transaction [Line Items]              
Debt repaid         5,184    
Management fee paid         15,032    
Braydon Capital Corp. [Member]              
Related Party Transaction [Line Items]              
Interest rate   1.00% 1.00%        
Promissory note   $ 90,750 $ 186,233   $ 318,078    
Advance from related party $ 41,095 $ 90,750         $ 131,845
Stockholders Equity (Details Narrative) - Directors [Member]
9 Months Ended
Sep. 30, 2017
shares
Restricted stock award, shares 80,000 [1]
Vested 25% per year after each completed year served
[1] 20,000 units each
Debentures and Convertible Notes (Details) - USD ($)
Sep. 30, 2017
Dec. 31, 2016
Debenture $ 995,355 $ 629,914
Less: unamortized debt issuance costs (18,170) (13,397)
Debenture, net of discount 977,185 616,517
February 29, 2016 [Member]    
Debenture 600,000 514,102
Debt discount 0 85,898
April 4, 2016 [Member]    
Debenture 150,000 115,812
Debt discount 0 10,968
January 24,2017 [Member]    
Debenture 135,027
Debt discount 9,207  
March 27, 2017 [Member]    
Debenture 58,799
Debt discount 61,396  
June 5, 2017 [Member]    
Debenture 34,844
Debt discount 85,351  
June 9, 2017 [Member]    
Debenture 16,685  
Debt discount $ 43,412  
Debentures and Convertible Notes (Details Narrative)
6 Months Ended 9 Months Ended
Jun. 30, 2016
USD ($)
Sep. 30, 2017
USD ($)
$ / shares
shares
Sep. 30, 2017
CAD
shares
Penalty $ 33,756 $ 193,244  
February 29, 2016 [Member]      
Private Placement   750,000  
Proceeds from private placement   $ 600,000  
Interest rate, effective   22.00%  
Penalty   $ 71,282  
Payment on Loan   125,000  
April 4, 2016 [Member]      
Proceeds from private placement   $ 150,000  
Interest rate   12.00% 12.00%
Interest rate, effective   22.00%  
Warrants to purchase | shares   163,044 163,044
Commissions   $ 75,000  
January 24,2017 [Member]      
Private Placement   569,952  
Proceeds from private placement   136,788  
Issue Value   125,845  
Finders Fees   $ 10,943  
Interest rate   10.00% 10.00%
Warrants to purchase | shares   18,000 18,000
Warrant price | $ / shares   $ 1.0  
January 24,2017 [Member] | CDN      
Private Placement | CAD     CAD 750,000
Proceeds from private placement | CAD     180,000
Issue Value   $ 165,600  
Finders Fees | CAD     CAD 14,400
March 27, 2017 [Member]      
Private Placement   5,083,980  
Proceeds from private placement   113,000  
Issue Value   109,235  
Finders Fees   $ 3,765  
Interest rate   10.00% 10.00%
Warrants to purchase | shares   15,000 15,000
Warrant price | $ / shares   $ 1.0  
March 27, 2017 [Member] | CDN      
Private Placement | CAD     CAD 6,750,000
Proceeds from private placement | CAD     150,000
Issue Value   $ 145,000  
Finders Fees | CAD     CAD 5,000
June 5, 2017 [Member]      
Private Placement   769,800  
Proceeds from private placement   115,470  
Finders Fees   5,774  
Net Proceeds   $ 109,696  
Warrants to purchase | shares   15,000 15,000
Warrant price | $ / shares   $ 1.00  
Price per share | $ / shares   $ 1.50  
June 5, 2017 [Member] | CDN      
Private Placement   $ 1,000,000  
Proceeds from private placement   150,000  
Finders Fees   7,500  
Net Proceeds   142,500  
June 9, 2017 [Member]      
Private Placement   57,735  
Finders Fees   2,887