XBRL Rendering Preview
Document and Entity Information - shares
3 Months Ended
Mar. 31, 2018
May 14, 2018
Document And Entity Information    
Entity Registrant Name NEWGIOCO GROUP, INC.  
Entity Central Index Key 0001080319  
Document Type 10-Q  
Document Period End Date Mar. 31, 2018  
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   74,254,590
Document Fiscal Period Focus Q1  
Document Fiscal Year Focus 2018  
Consolidated Balance Sheets - USD ($)
Mar. 31, 2018
Dec. 31, 2017
Current Assets    
Cash and cash equivalents $ 7,190,209 $ 6,469,858
Accounts receivable 53,302 116,489
Gaming accounts receivable 855,195 1,163,831
Prepaid expenses 173,836 87,692
Loan receivable-related party 48,089
Other current assets 21,466 12,543
Total Current Assets 8,342,097 7,850,413
Noncurrent Assets    
Restricted cash 602,936 587,905
Property, plant and equipment 429,334 280,111
Intangible assets 3,135,754 3,245,748
Goodwill 260,318 260,318
Investment in non-consolidated entities 350,000 1
Total Noncurrent Assets 4,778,342 4,374,083
Total Assets 13,120,439 12,224,496
Current Liabilities    
Line of credit - bank 177,060
Accounts payable and accrued liabilities 1,566,985 1,606,560
Gaming accounts balances 2,064,851 1,274,856
Taxes payable 1,741,991 1,555,371
Advances from stockholders 1,076 547,809
Liability in connection with acquisition 145,897 142,245
Debentures, net of discount 598,511 1,148,107
Derivative liability 637,752 222,915
Promissory notes payable - other 100,749
Promissory notes payable- related party 318,078 318,078
Bank loan payable - current portion 125,723 121,208
Total Current Liabilities 7,200,864 7,214,958
Bank loan payable 340,160 362,808
Other long term liabilities 613,438 532,680
Total Liabilities 8,154,462 8,110,446
Stockholders' Deficiency    
Common Stock, $0.0001 par value, 80,000,000 shares authorized; 74,254,590 and 74,143,590 shares issued and outstanding * 7,426 7,415
Additional - paid in capital 14,402,339 14,254,582
Accumulated other comprehensive income (314,845) (250,327)
Accumulated deficit (9,128,943) (9,897,620)
Total Stockholders' Equity 4,965,977 4,114,050
Total Liabilities and Stockholders' Equity $ 13,120,439 $ 12,224,496
Consolidated Balance Sheets (Parenthetical) - $ / shares
Mar. 31, 2018
Dec. 31, 2017
STOCKHOLDERS' EQUITY    
Capital stock - par value $ 0.0001 $ 0.0001
Capital stock - authorized 80,000,000 80,000,000
Capital stock - issued 74,254,590 74,143,590
Capital stock - outstanding 74,254,590 74,143,590
Consolidated Statements of Comprehensive Income (Loss) - USD ($)
3 Months Ended
Mar. 31, 2018
Mar. 31, 2017
Income Statement [Abstract]    
Revenue $ 8,593,867 $ 3,875,201
Costs and expenses    
Selling expenses 6,077,357 3,436,951
General and administrative expenses 2,059,453 1,197,571
Total Costs and Expenses 8,136,810 4,634,522
Income (Loss) from Operations 457,057 (759,321)
Other Expenses (Income)    
Interest expense, net of interest income 212,239 166,847
Changes in fair value of derivative liabilities (254,289) (144,626)
Imputed interest on related party advances 1,514 6,996
Gain on litigation settlement (516,120)
Impairment on investment 6,468
Total Other Expenses (556,656) 35,685
Income (Loss) before income taxes 1,013,713 (795,006)
Income taxes provision 245,036 47,110
Net Income (Loss) 768,677 (842,116)
Other Comprehensive Income (Loss)    
Foreign currency translation adjustment (64,518) (70,203)
Comprehensive Income (Loss) $ 704,159 $ (912,319)
Net Income (Loss) per common share - basic $ 0.01 $ (0.01)
Net Income (Loss) per common share - diluted $ 0.01 $ (0.01)
Weighted average number of common shares outstanding basic 74,186,583 74,018,590
Weighted average number of common shares outstanding diluted 76,096,053 74,018,590
Consolidated Statements of Cash Flows - USD ($)
3 Months Ended
Mar. 31, 2018
Mar. 31, 2017
Cash Flows from Operating Activities    
Net loss $ 768,677 $ (842,116)
Adjustments to reconcile net loss to net cash used in operating activities    
Depreciation and amortization 158,357 136,499
Amortization of deferred costs 13,558 55,777
Non-cash interest 87,150 121,801
Imputed interest on advances from stockholders 1,514 6,996
Changes in fair value of derivative liabilities (254,289) (144,626)
Non-cash commission and legal fees related to debenture (516,120) 6,468
Bad debt expense 6,354
Changes in operating assets and liabilities    
Prepaid expenses (119,504) (25,340)
Accounts payable and accrued liabilities (60,647) 234,461
Accounts receivable 66,109 (78,276)
Gaming accounts receivable 331,802 (117,460)
Gaming account liabilities 756,469 (15,636)
Taxes payable 146,571 49,481
Other current assets (8,983) (618)
Customer Deposits 53,684 14,607
Long term liability 13,329 7,324
Net Cash Provided by (Used in) Operating Activities 1,444,031 (590,658)
Cash Flows from Investing Activities    
Acquisition of property, plant, and equipment, and intangible assets (182,858) (55,325)
Increase in restricted cash 60 39
Net Cash Used in Investing Activities (182,798) (55,286)
Cash Flows from Financing Activities    
Proceeds from (repayment of) bank credit line, net (181,413) 60,424
Repayment of bank loan (30,526) (25,303)
Proceeds from debentures and convertible notes, net of repayment 126,849 226,117
Loan to related party (48,039)
Advances from stockholders, net of repayment (559,131) (3,472)
Net Cash Provided by (Used in) Financing Activities (692,260) 257,766
Effect of change in exchange rate 151,378 (13,091)
Net increase (decrease) in cash 720,351 (401,269)
Cash - beginning of year 6,469,858 2,230,422
Cash - end of year 7,190,209 1,829,153
Supplemental disclosure of cash flow information:    
Cash paid during the year for: Interest 118,301 64,053
Cash paid during the year for: Income taxes 340,092 3,181
Supplemental cash flow disclosure for non-cash activities:    
Common shares issued for the acquisition of subsidiaries
Common shares issued to related parties for repayment of debt
Common shares issued for cashless exercise of warrants
Nature of Business
3 Months Ended
Mar. 31, 2018
Organization, Consolidation and Presentation of Financial Statements [Abstract]  
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 March 31, 2018 and the results of operations and cash flows for the period ended March 31, 2018 and 2017. The financial data and other information disclosed in these notes to the interim financial statements related to these periods is unaudited. The results for the three months ended March 31, 2018 are not necessarily indicative of the results to be expected for any subsequent periods or for the entire year ending December 31, 2018. The balance sheet at December 31, 2017 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, 2017 as included in our Annual Report on form 10-K.

 

On December 20, 2017, the Company completed a two-for-one stock split effected in the form of a stock dividend. All references made to share or per share amounts in the accompanying consolidated financial statements and applicable disclosures have been retroactively adjusted to reflect this two-for-one stock split. See Notes 2 and 11 for additional information about the stock split effected in the form of a stock dividend.

 

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
3 Months Ended
Mar. 31, 2018
Accounting Policies [Abstract]  
Summary of Significant Accounting Policies

2. 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.

 

There was no goodwill impairment recorded as a result of the last quantitative assessment in the fourth quarter of 2017.

 

d) Loss Contingencies

 

We may be subject to claims, suits, government investigations, and other proceedings involving competition and antitrust, intellectual property, privacy, indirect taxes, labor and employment, commercial disputes, content generated by our users, goods and services offered by advertisers or publishers using our website platforms, and other matters. Certain of these matters include speculative claims for substantial or indeterminate amounts of damages. We record a liability when we believe that it is both probable that a loss has been incurred, and the amount can be reasonably estimated. If we determine that a loss is possible, and a range of the loss can be reasonably estimated, we disclose the range of the possible loss in the Notes to the Consolidated Financial Statements.

 

We evaluate, on a monthly basis, developments in our legal matters that could affect the amount of liability that has been previously accrued, and the matters and related ranges of possible losses disclosed and make adjustments and changes to our disclosures as appropriate. Significant judgment is required to determine both likelihood of there being and the estimated amount of a loss related to such matters. Until the final resolution of such matters, there may be an exposure to loss in excess of the amount recorded, and such amounts could be material. Should any of our estimates and assumptions change or prove to have been incorrect, it could have a material impact on our business, consolidated financial position, results of operations, or cash flows.

 

To date, none of these types of litigation matters, most of which are typically covered by insurance, has had a material impact on our operations or financial condition. We have insured and continue to insure against most of these types of claims.

 

e) 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.

 

 

f) 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.

 

g) 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.

 

h) 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 three months ended March 31, 2018 because the effect would have been anti-dilutive. Accordingly, basic and diluted loss per common share is the same for three months ended March 31, 2018.

 

On December 20, 2017, the Company completed a two-for-one stock split effected in the form of a stock dividend. All references made to share or per share amounts in the accompanying consolidated financial statements and applicable disclosures have been retroactively adjusted to reflect this two-for-one stock split.

 

i) 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.

 

j) Revenue Recognition

 

In May 2014, the FASB issued ASU 2014-09, “Revenue from Contracts with Customers (Topic 606),” which requires revenue to be recognized when promised goods or services are transferred to customers in an amount that reflects the consideration that is expected to be received for those goods or services. ASU 2014-09 (“ASC Topic 606”) supersedes the existing revenue recognition guidance and is effective for interim and annual reporting periods beginning after December 15, 2017. The Company has adopted ASC Topic 606 on January 1, 2018 and has determined that the new standard does not have a material impact on the nature and timing of revenues recognized.

 

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 which is representative of the point in time at which the Company has satisfied its performance obligation. 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 the Betting Platform Software (“BPS”) include license fees, training, installation, and product support services. Revenue is recognized when transfer of control to the customer has been made and the Company’s performance obligation has been 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.

 

k) 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 March 31, 2018 and December 31, 2017.

 

The Company primarily places its cash with high-credit quality financial institutions located in the United States which is insured by the Federal Deposit Insurance Corporation, in Canada which is insured by the Canadian Deposit Insurance Corporation, in Italy which is insured by the Italian government and in Germany which is a member of the Deposit Protection Fund of the Association of German Banks (Einlagensicherungsfonds des Bundesverbandes deutscher Banken).

 

l) 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 recorded bad debt expense of $6,354 and $NIL for the three months ended March 31, 2018 and March 31, 2017, respectively. All balances previously recorded as allowance for doubtful accounts were written off as uncollectible.

 

m) 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.

 

n) 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, 2016  $211,262 
Issued during the year ended December 31, 2017   268,884 
Exercised during the year ended December 31, 2017   —   
Change in fair value recognized in operations   (257,231)
Balance at December 31, 2017  $222,915 
Issued during the three months ended March 31, 2018   669,126 
Exercised during the three months ended March 31, 2018   —   
Change in fair value recognized in operations   (254,289)
Balance at March 31, 2018   $ 637,752

 

 

 

o) 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 

 

p) 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 March 31, 2018 and 2017.

 

q) 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 2012 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.

 

r) 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.

 

s) Investment in Non-Consolidated Entities

 

Investments in non-consolidated entities are accounted for using the equity method or cost basis depending upon the level of ownership and/or the Company's ability to exercise significant influence over the operating and financial policies of the investee. When the equity method is used, investments are recorded at original cost and adjusted periodically to recognize the Company's proportionate share of the investees' net income or losses after the date of investment. When net losses from an investment are accounted for under the equity method exceed its carrying amount, the investment balance is reduced to zero and additional losses are not provided for. The Company resumes accounting for the investment under the equity method if the entity subsequently reports net income and the Company's share of that net income exceeds the share of net losses not recognized during the period the equity method was suspended. Investments are written down only when there is clear evidence that a decline in value that is other than temporary has occurred.

 

The Company's investment in Zoompass Holdings Inc. and Intesa Sanpaolo Bank were accounted for at cost. The Company monitors its investment for impairment annually and makes appropriate reductions in the carrying value if it determines that an impairment charge is required based on qualitative and quantitative information.

 

t) 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 adoption of ASU 2016-01 does not have any material impact on the Company’s consolidated financial statements.

 

In February 2016, the FASB issued Accounting Standards Update No. 2016-02 (ASU 2016-02) which amends the FASB Accounting Standards Codification and created Topic 842, "Leases." Under Topic 842, lessees are required to recognize assets and liabilities on the balance sheet for most leases and provides for enhanced disclosures. Leases will continue to be classified as either finance or operating. ASU 2016-02 is effective for annual reporting periods, and interim periods within those years beginning after December 15, 2018. Entities are required to use a modified retrospective approach for leases that exist or are entered into after the beginning of the earliest comparative period in the financial statements. Full retrospective application is prohibited and early adoption by public entities is permitted. The Company is currently in the process of evaluating the impact of the adoption of this standard on our consolidated financial statements.

 

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. The adoption of ASU 2017-09 does not have any material impact on the Company’s consolidated financial statements.

  

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.

Acquisition betting software technology; offline and land-based gaming assets
3 Months Ended
Mar. 31, 2018
Business Combinations [Abstract]  
Acquisition of betting software technology; offline and land-based gaming assets

3. Acquisition of betting software technology; offline and land-based gaming assets

 

Odissea Betriebsinformatik Beratung Gmbh (“Odissea”) Acquisition

 

On June 30, 2016, the Company entered into a Share Exchange Agreement (“Odissea SPA”), 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 8,772,200 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 11.81% 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 4,386,100 shares) at a fixed price of U.S. $0.50 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 (“Ulisse SPA”), which closed on July 1, 2016, with the shareholders of Ulisse organized under the laws of Austria. Ulisse operates an existing network of approximately 170 land-based Agency locations. Pursuant to the agreement, the Company issued 3,331,200 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 4.49% of the issued and outstanding shares of common stock of the Company.

 

Pursuant to the Ulisse SPA, subject to a purchase price adjustment to equal two times earnings before income taxes calculated on a pro rata basis from the Closing Date 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 (or 1,665,600 shares) issued in consideration for the purchase price at a fixed price of U.S. $0.50 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 upon completion of the third-party valuation will adjust these estimates accordingly.

Intangible Assets
3 Months Ended
Mar. 31, 2018
Goodwill and Intangible Assets Disclosure [Abstract]  
Intangible Assets

4. Intangible Assets

 

Intangible assets consist of the following:

 

   March 31,
2018
  December 31,
2017
  Life (years)
Betting Platform Software  $1,685,371   $1,685,371    15 
Licenses   970,422    967,328    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 
    4,676,720    4,673,626      
Accumulated amortization   (1,540,966)   (1,427,878)     
Balance  $3,135,754   $3,245,748      

 

 

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 $113,088 and $110,188 for the three months ended March 31, 2018 and March 31, 2017, respectively.

 

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

Restricted Cash
3 Months Ended
Mar. 31, 2018
Accounting Policies [Abstract]  
Restricted Cash

5. Restricted Cash

 

Restricted Cash is cash held in a segregated bank account at Intesa Sanpaolo Bank S.p.A. (“Intesa Sanpaolo Bank”) as collateral against our operating line of credit with Intesa Sanpaolo Bank as well as Wirecard Bank as a security deposit for Ulisse betting operations.

Other Long Term Liabilities
3 Months Ended
Mar. 31, 2018
Debt Disclosure [Abstract]  
Other Long Term Liabilities

6. Other long term liabilities

 

Other long term liabilities 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.

 

Balances of Other long term liabilities were as follows:

 

   March 31,
2018
  December 31,
2017
Severance liability  $148,634   $131,904 
Customer deposit balance   464,804    400,776 
Total other long term liabilities  $613,438   $532,680 

 

Line of Credit-Bank
3 Months Ended
Mar. 31, 2018
Debt Disclosure [Abstract]  
Line of Credit-Bank

7. Line of Credit – Bank

 

The Company currently maintains an operating line of credit for a maximum amount of EUR 300,000 (approximately U.S. $369,180) for Multigioco and EUR 50,000 (approximately U.S. $61,530) for Rifa from Intesa Sanpaolo Bank in Italy. The line of credit is secured by restricted cash on deposit at Intesa Sanpaolo Bank 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
3 Months Ended
Mar. 31, 2018
Payables and Accruals [Abstract]  
Liability in connection with acquisition

8. 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
3 Months Ended
Mar. 31, 2018
Related Party Transactions [Abstract]  
Related party transactions and balances

9. Related party transactions and balances

 

Loan Receivable - related party

 

On February 28, 2018, the Company provided a loan of EUR 39,048 (approximately U.S. $48,090) to Engage IT Services Srl, a company in which Luca Pasquini holds a 34% stake. This loan was advanced for the purpose of financing third-party betting agencies. It bears interest at 4.47% and is due on October 31, 2018.

 

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:

 

   March 31,
2018
  December 31,
2017
Gold Street Capital Corp.  $58,384   $41,143 
Doriana Gianfelici   60,302    58,792 
Luca Pasquini   (117,610)   (119,939)
Other stockholders   —      567,813 
Total advances from stockholders  $1,076   $547,809 

 

During the three months ended March 31, 2018, Gold Street, the major stockholder of Newgioco Group, advanced $17,241 to the Company, net of repayment of $43,460. Also, the Company paid management fees to Gold Street Capital Corp. of $36,000 for the three months ended March 31, 2018.

 

Changes in advances from Doriana Gianfelici were due to the fluctuations in foreign exchange rates.

 

The Company advanced a short-term loan of EUR 100,000 (approximately U.S. $123,060) to Luca Pasquini to cover fees related to an application for a gaming license in Malta. As of the date of this report the application is pending, there is no assurance that the gaming license in Malta would be obtained. This loan is non interest-bearing and is due on June 30, 2018. Changes in the balance of the loan were due to the fluctuations in foreign exchange rates. During the three months ended March 31, 2018, Luca Pasquini advanced $5,408 to the Company.

 

During the three months ended March 31, 2018, the Company paid management fees of $5,532 to Luca Pasquini. Also, the Company paid service fees of EUR 120,000 (approximately U.S $147,516) to Ulisse Services Ltd., a company owned by Luca Pasquini. Accounts payable and accrued liabilities include EUR 40,000 (approximately U.S. $49,172) payable to Ulisse Services Ltd.

 

Advances from other stockholders comprised of the dividend accrued 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 March 31, 2018 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. These notes bear interest at a rate of 1% per month and have no fixed maturity date. Accounts payable and accrued liabilities include $78,628 in accrued interest on these notes.

Investment in Non-consolidated Entities
3 Months Ended
Mar. 31, 2018
Investments, All Other Investments [Abstract]  
Investment in Non-consolidated Entities

10. Investment in Non-Consolidated Entities

 

Investments in non-consolidated entities consists of the following:

 

   March 31,
2018
  December 31,
2017
2336414 Ontario Inc  $—     $875,459 
Banca Veneto   —      1 
Zoompass Holdings Inc.   350,000    —   
    350,000    875,459 
           
Less impairment   —      (875,459)
Total investment in non-consolidated entities  $350,000   $1

 

 

On December 9, 2014, the Company invested CDN $1,000,000 (approximately U.S. $778,150) in a private placement of common shares of 2336414 Ontario Inc. ("2336414") representing 666,664 common shares or 2.3% of 2336414. 2336414 is an Ontario corporation and the parent company of Paymobile Inc. a carrier-class, PCI compliant transaction platform, delivering Visa prepaid card programs for social disbursements, corporate payroll and check replacement.

 

The Company subscribed for 666,664 Units (CDN $1,000,000) (approximately U.S. $778,150), with each Unit being comprised of one (1) common share in the capital of 2336414 and one-quarter (1/4) of one common share purchase warrant, which will require four quarter warrants to acquire one additional common share in the capital of 2336414, for CDN $2.25 within 18 months after the closing of the Offering, or such longer period of time as 2336414 may determine.

 

The Company paid CDN $1,000,000 (approximately $875,459) in cash, and obtained a promissory note from 2336414's subsidiary, Paymobile Inc. On December 31, 2014 the Company set up a 100% impairment on the investment in 2336414 because Paymobile did not produce any meaningful income and the Company determined that it may not be able to realize its investment in 2336414.

 

In August 2016, 2336414 transferred its interest in Paymobile to Zoompass Holdings, Inc a Nevada corporation (“Zoompass”). On March 31, the Company entered into a Settlement Agreement with 2336414, Paymobile and Edward Yew (a director of 2336414) to forgive the amount due by the Company to Paymobile under the promissory note. Pursuant to the terms and conditions of the Settlement Agreement, the Company received 2,500,000 shares of common stock in Zoompass which has been reflected as an investment in non-consolidated entities. Additionally, Paymobile agreed to discharge debt and interest of $210,065.57. In connection with the settlement, the Company recorded a gain on litigation settlement of $516,120. See also Note 13.

 

On December 31, 2017, the Company recorded an impairment of $1 for the shares of Banca Veneto held.

 

We carried the value of the shares of Banca Veneto and Zoompass at cost less impairment. The Company accounts for investment in non-consolidated entities using the cost method of accounting if the Company has an ownership interest below 20% and does not have the ability to exercise significant influence over an investee. The shares of Banca Veneto and Zoompass do not have an active market.

Stockholders Equity
3 Months Ended
Mar. 31, 2018
Equity [Abstract]  
Stockholders Equity

11. Stockholders’ Equity

 

On November 28, 2017, the Board of Directors approved a 2 for 1 forward split of our common stock. The common stock dividend payment date was December 20, 2017 to stockholders of record as at December 18, 2017. Share and per-share amounts disclosed as of March 31, 2018 and for all other comparative periods provided have been retroactively adjusted to reflect the effects of the stock split.

 

In connection to the debenture units issued on February 26, 2018 the Company issued an aggregate of 111,000 shares of common stock at 100% of the market price to the debenture holders. See also Note 12.

Debentures and Convertible Notes
3 Months Ended
Mar. 31, 2018
Notes to Financial Statements  
Debentures and Convertible Notes

12. Debentures and Convertible Notes*

 

* The conversion price of the convertible debentures per share of common stock has been retroactively restated to reflect the 2-for-1 forward stock split effected on December 20, 2017.

 

Debentures and convertible notes outstanding include the following:

 

   March 31,
2018
  December 31,
2017
February 29, 2016 and April 4, 2016 Convertible Notes  $—     $750,000 
January 24, 2017 Debenture, net of discount of $5,723 and $7,446   133,885    136,032 
March 27, 2017 Convertible Debenture, net of discount of $40,818 and $50,994   75,522    68,571 
June 5, 2017 Convertible Debenture, net of discount of $60,010 and $72,541   56,330    47,024 
June 9, 2017 Convertible Debenture, net of discount of $30,608 and $36,940   27,562    22,842 
November 6, 2017 - December 11, 2017 Convertible Debentures, net of discounts of $47,839 and $55,063   149,939    148,198 
January 16, 2018 - February 26, 2018 Convertible Debentures, net of discount of $707,194   235,159    —   
    678,397    1,172,667 
Less: unamortized debt issuance costs   (79,886)   (24,560)
   $598,511   $1,148,107 

 

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 326,088 shares of Company’s common stock at $0.575 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.

 

During the three months ended March 31, 2018, the Company paid a total of $1,027,351, including penalty and interest towards the consent judgement related to the Settlement Agreement with the investor dated May 15, 2017. Accounts payable and accrued liabilities included an accrued interest on this Note of $8,425 at March 31, 2018 and $139,041 at December 31, 2017. See also Note 19 Subsequent Events.

 

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. $140,067) with a group of accredited investors. The Company incurred a total of CDN $14,400 (approximately U.S. $11,205) in finder’s fees to facilitate this transaction for net proceeds of CDN $165,600 (approximately U.S. $128,862). 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 36,000 of the Company’s common stock at $0.50 per share up to January 24, 2019. See also Note 15. Subsequent to the period covered by this report, the Debentures and Warrants issued on January 24, 2017 have been cancelled and re-issued under the same terms as the debenture units issued on February 26, 2018 as set out below. See also Note 19 Subsequent Events.

 

March 27, 2017 to January 31, 2018 Convertible Debentures

 

On March 27, 2017, the Company entered into private placement agreements with a group of accredited investors pursuant to which each CDN $1,000 debenture unit is comprised of a convertible debenture that bears an interest rate of 10% per annum due two years from the closing date and 100 warrants to purchase one common share of the Company’s common stock at a price of $0.50 per share per warrant up to two years from the closing date. The debenture is convertible in whole or in part into shares of common stock of the Company at a price of $0.75 per share at any time up to two years from the closing date. In addition, the Company paid finders fees equal to 5% of the gross proceeds received. See also Note 15.

 

Between March 27, 2017 and January 31, 2018, the Company received gross proceeds of CDN $1,175,000 (approximately U.S. $914,327) in multiple tranches in connection with the June 5, 2017 private placement agreement. The Company incurred a total of CDN $58,750 (approximately U.S. $45,716) in finder’s fees to facilitate this transaction for net proceeds of CDN $1,116,250 (approximately U.S. $868,610). The issuance dates for these convertible debentures with corresponding gross proceeds in Canadian dollars are as follows:

 

Issuance Date   Gross Proceeds      
    (CDN)    (approx. USD) 
           
March 27, 2017  $150,000   $116,723 
June 5, 2017   150,000    116,723 
June 9, 2017   75,000    58,361 
November 6, 2017   90,000    70,033 
November 14, 2017   50,000    38,908 
November 15, 2017   20,000    15,563 
November 22, 2017   30,000    23,345 
December 5, 2017   40,000    31,126 
December 11, 2017   25,000    19,454 
January 16, 2018   205,000    159,521 
January 19, 2018   130,000    101,160 
January 31, 2018   210,000    163,412 
   $1,175,000   $914,327 

 

Subsequent to the period covered by this report, the Debentures and Warrants issued between March 27, 2017 and January 31, 2018 have been cancelled and re-issued under the same terms as the debenture units issued on February 26, 2018 as set out below. See also Note 19 Subsequent Events.

 

February 26, 2018 Convertible Debenture

 

On February 26, 2018, the Company closed a private placement agreement with a group of accredited investors to raise up to CDN $1,800,000 (approximately U.S. $1,396,080). The Company received gross proceeds from the initial private placement of CDN $670,000 (approximately U.S. $519,652). The Company incurred a total of CDN $33,500 (approximately U.S. $25,982) in finder’s fees to facilitate this transaction for net proceeds of CDN $636,500 (approximately U.S. $493,669) as well as 5% of the gross amount in broker warrants with terms identical to the debenture’s warrants. The convertible debenture bears an interest rate of 10% per annum and is due in two years. As part of the purchase agreement, the debenture is convertible at the lesser price of $0.75 or the proposed IPO price at any time up to February 26, 2020. The Company also issued a warrant to purchase 167,500 of the Company’s common stock as well as a Broker Warrant to purchase up to 8,375 of the Company’s common stock, for a total of 175,875, at the lesser of $0.625 per share or 125% of the proposed IPO price per share from August 26, 2018 up to February 26, 2020. The Company also issued 160 shares of common stock for each debenture unit. An aggregate of 111,000 restricted common shares in connection with the debenture, including a total of 107,200 common shares issued to the debenture holders, and 3,800 shares of common stock were issued to the brokers on closing.

 

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

 

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.

 

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

Promissory Notes Payable - Other
3 Months Ended
Mar. 31, 2018
Debt Disclosure [Abstract]  
Promissory Notes Payable-Other

13. Promissory Notes Payable – Other

 

On December 9, 2014, the Company obtained a promissory note for CDN $500,000 (approximately U.S. $389,075) from Paymobile Inc., a subsidiary of 2336414 Ontario Inc. (“2336414”) of which the Company owned 666,664 common shares, that bears interest at a rate of 1% per month on the outstanding balance.

 

On March 31, 2018, the Company entered into a Settlement Agreement with 2336414, Paymobile and Zoompass. Pursuant to the terms and conditions of the Settlement Agreement, CAN $210,066 (approximately U.S. $162,927), in principal and accrued interest was forgiven and written off.

Bank Loan Payable
3 Months Ended
Mar. 31, 2018
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. $618,100) from Intesa Sanpaolo Bank 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. $12,065) with an underlying interest rate of 4.5 points above Euro Inter Bank Offered Rate ("EURIBOR"), subject to quarterly review.

 

The company repaid EUR 4,446 (approximately U.S. $5,465) during the three months ended March 31, 2018.

Warrants
3 Months Ended
Mar. 31, 2018
Notes to Financial Statements  
Warrants

15. Warrants*

 

* The exercise price of the warrants per share of common stock has been retroactively restated to reflect the 2-for-1 forward stock split effected on December 20, 2017.

 

On February 29, 2016, as per a Securities Purchase Agreement, the Company issued a warrant to purchase 260,870 shares of the Company’s common stock at $0.575 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.

 

On April 4, 2016, the Company issued a warrant to purchase 125,218 shares of the Company’s common stock at $0.575 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.

 

On April 4, 2016, the Company issued a warrant to purchase 124,440 shares of the Company’s common stock at $0.575 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).

 

On January 24, 2017, the Company issued a warrant to purchase 36,000 of the Company’s common stock at $0.50 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).

 

In connection with the private placement agreements entered into with a group of accredited investors between March 27, 2017 and January 31, 2018, for each CDN $1,000 debenture unit the Company issued 100 warrants to purchase one common share of the Company’s common stock per warrant at a price of $0.50 per share up to two years from the closing date. (See Note 12) The issuance dates for these warrants with corresponding number of warrants are as follows:

 

Issuance Date  Number of Warrants
    
March 27, 2017  $15,000 
June 5, 2017   15,000 
June 9, 2017   7,500 
November 6, 2017   9,000 
November 14, 2017   5,000 
November 15, 2017   2,000 
November 22, 2017   3,000 
December 5, 2017   4,000 
December 11, 2017   2,500 
January 16, 2018   20,500 
January 19, 2018   13,000 
January 31, 2018   21,000 

 

The fair value of the above warrants 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 
 November 6, 2017   $3,131 
 November 14, 2017   $1,640 
 November 15, 2017   $676 
 November 22, 2017   $948 
 December 5, 2017   $994 
 December 11, 2017   $747 
 January 16, 2018   $8,853 
 January 19, 2018   $4,327 
 January 31, 2018   $12,187 
 February 26, 2018   $76,671 

 

21


 

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  $0.575   $0.45    200%   3 yrs    0%   0.91%   0%
April 4, 2016  $0.575   $0.475    195%   3 yrs    0%   0.91%   0%
April 4, 2016  $0.575   $0.475    195%   3 yrs    0%   0.91%   0%
January 24, 2017  $0.50   $0.39    404%   2 yrs    0%   0.91%   0%
March 27, 2017  $0.50   $0.40    390%   2 yrs    0%   0.91%   0%
June 5, 2017  $0.50   $0.495    445%   2 yrs    0%   0.91%   0%
June 9, 2017  $0.50   $0.495    445%   2 yrs    0%   0.91%   0%
November 6, 2017  $0.50   $0.35    410%   2 yrs    0%   0.91%   0%
November 14, 2017  $0.50   $0.33    413%   2 yrs    0%   0.91%   0%
November 15, 2017  $0.50   $0.34    409%   2 yrs    0%   0.91%   0%
November 22, 2017  $0.50   $0.318    414%   2 yrs    0%   0.91%   0%
December 5, 2017  $0.50   $0.25    422%   2 yrs    0%   0.91%   0%
December 11, 2017  $0.50   $0.30    433%   2 yrs    0%   0.91%   0%
January 16, 2018  $0.50   $0.51    201%   2 yrs    0%   0.91%   0%
January 19, 2018  $0.50   $0.40    203%   2 yrs    0%   0.91%   0%
January 31, 2018  $0.50   $0.65    218%   2 yrs    0%   0.91%   0%
February 26, 2018  $0.625   $0.50    222%   2 yrs    0%   0.91%   0%

 

A summary of warrant transactions during the three months ended March 31, 2018 is as follows:

 

   Warrant Shares  Weighted Average Exercise Price Per Common Share  Weighted Average Life
 Outstanding at December 31, 2016    467,928   $0.58    2.13 
 Issued    162,000   $0.50    2.00 
 Exercised    —      —      —   
 Expired    (17,400)   —      —   
 Outstanding at December 31, 2017    612,528   $0.54    1.37 
 Exercisable at December 31, 2017    561,528   $0.56    1.21 
 Issued    230,375   $0.60    2.00 
 Exercised    —             
 Expired    —             
 Outstanding at March 31, 2018    842,903   $0.57    1.25 
 Exercisable at March 31, 2018    561,528   $0.56    0.97 

 

The following assumptions were used to calculate the fair value of warrants at March 31, 2018:

 

Exercises price  $0.50 - $0.625
Common stock price per share  $0.40 
Volatility   216%
Weighted average life   1.25 years 
Dividend yield   0%
Interest rate   0.91%
Forfeiture risk   0%

 

Derivative Liability and Fair Value
3 Months Ended
Mar. 31, 2018
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 $0.75 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 $0.75 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 $0.75 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 Convertible Debentures issued in November and December 2017, and accrued interest are convertible into common shares at a fixed price of $0.75 for a period of two years from the issue date. The gross proceeds from the sale of the debentures were recorded net of $50,461 related to the conversion feature and $8,136 was allocated to the warrants issued.

 

The Convertible Debenture issued January 16, 2018, and accrued interest are convertible into common shares at a fixed price of $0.75 prior to January 16, 2020. The gross proceeds from the sale of the debenture were recorded net of $105,948 related to the conversion feature and $8,853 was allocated to the warrants issued.

 

The Convertible Debenture issued January 19, 2018, and accrued interest are convertible into common shares at a fixed price of $0.75 prior to January 19, 2020. The gross proceeds from the sale of the debenture were recorded net of $51,480 related to the conversion feature and $4,327 was allocated to the warrants issued.

 

The Convertible Debenture issued January 31, 2018, and accrued interest are convertible into common shares at a fixed price of $0.75 prior to January 31, 2020. The gross proceeds from the sale of the debenture were recorded net of $302,956 related to the conversion feature and $12,187 was allocated to the warrants issued.

 

The Convertible Debenture issued February 26, 2018, and accrued interest are convertible into common shares at a fixed price of $0.75 prior to February 26, 2020. The gross proceeds from the sale of the debenture were recorded net of $351,450 related to the conversion feature and $73,020 was allocated to the warrants issued.

 

The Company accounted for the convertible debentures 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
3 Months Ended
Mar. 31, 2018
Accounting Policies [Abstract]  
Revenues

17. Revenues

 

The following table represents disaggregated revenues from our gaming operations for the three months ended March 31, 2018 and March 31, 2017:

 

   Three Months Ended
   March 31,
2018
  March 31,
2017
Turnover      
Turnover web-based  $46,065,899   $28,749,836 
Turnover land-based   44,493,960    23,969,666 
Total Turnover   90,559,859    52,719,502 
           
Winnings/Payouts          
Winnings web-based   42,617,996    27,222,482 
Winnings land-based   38,746,243    21,704,642 
Total Winnings/payouts   81,364,239    48,927,124 
           
Gross Gaming Revenues  $9,195,620   $3,792,378 
           
Less: ADM Gaming Taxes   766,833    364,451 
Net Gaming Revenues  $8,428,787   $3,427,927 
Add: Commission Revenues   99,001    81,845 
Add: Service Revenues   66,079    365,429 
Total Revenues  $8,593,867   $3,875,201 

 

Turnover represents the total bets processed for the period.

Income Taxes
3 Months Ended
Mar. 31, 2018
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 three months ended March 31, 2018 and March 31, 2017.

 

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 Company's Canadian subsidiary is governed by the income tax laws of Canada and the Province of Ontario. The combined Federal and Provincial corporate tax rate in Canada is 26.5% 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:

 

   March 31,
2018
  March 31,
2017
U.S. Statutory rate  $354,801   $(278,252)
Tax rate difference between Italy, Austria, Canada and U.S.   (227,467)   181,452 
Change in Valuation Allowance   (63,671)   145,803 
Permanent difference   181,373    (1,894)
Effective tax rate  $245,036   $47,109 

 

The Company has accumulated a net operating loss carry forward ("NOL") of approximately $11.9 million as of March 31, 2018 in the U.S. This NOL may be offset against future taxable income through the year 2037. 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.

 

Under Canadian tax law, the operating loss carryforwards available for offset against future profits can be used indefinitely.

 

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

 

   March 31,
2018
  March 31,
2017
 Current   $245,036   $47,109 
 Deferred    —      —   
 Total   $245,036   $47,109 

 

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

 

   March 31,
2018
  March 31,
2017
Net loss carryforward - Foreign  $21,272   $145,497 
Net loss carryforward - US   4,476,794    4,106,025 
    4,498,066    4,251,522 
Less valuation allowance   (4,498,066)   (4,251,522)
Deferred tax assets  $—     $—   

 

Subsequent events
3 Months Ended
Mar. 31, 2018
Subsequent Events [Abstract]  
Subsequent events

19. Subsequent Events

 

(1)On April 19, 2018, the Company paid $8,425 including $20 in bank fees, to pay the balance of the amount due under the consent judgement in full and on May 9, 2018 an order of Satisfaction of Judgement was entered to conclude the legal proceedings.

 

(2)On April 23, 2018, the Company re-issued debenture units first issued between January 24, 2017 and January 31, 2018 in order to simplify the various debentures into a single series with the same terms as new convertible debenture units issued on February 26, 2018. The carrying value of the re-issued debentures is $1,435,809 due to an interest bonus of $80,809.

 

Each re-issued debenture unit is comprised of (i) the issuance of CDN $1,000 of debentures bearing interest at a rate of 10% per annum, with a maturity date of two (2) years from the date of issuance which may be converted in whole or in part at a price of $0.40 per share, (ii) 250 warrants which may be exercised at a price equal to $0.50 per share price per warrant to receive one common share prior to February 15, 2020, and (iii) 160 shares of restricted common stock issued pursuant to an exemption under Rule 144 of the US Securities and Exchange Act.

 

Nature of Business (Policies)
3 Months Ended
Mar. 31, 2018
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 March 31, 2018 and the results of operations and cash flows for the period ended March 31, 2018 and 2017. The financial data and other information disclosed in these notes to the interim financial statements related to these periods is unaudited. The results for the three months ended March 31, 2018 are not necessarily indicative of the results to be expected for any subsequent periods or for the entire year ending December 31, 2018. The balance sheet at December 31, 2017 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, 2017 as included in our Annual Report on form 10-K.

 

On December 20, 2017, the Company completed a two-for-one stock split effected in the form of a stock dividend. All references made to share or per share amounts in the accompanying consolidated financial statements and applicable disclosures have been retroactively adjusted to reflect this two-for-one stock split. See Notes 2 and 11 for additional information about the stock split effected in the form of a stock dividend.

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)
3 Months Ended
Mar. 31, 2018
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.

 

There was no goodwill impairment recorded as a result of the last quantitative assessment in the fourth quarter of 2017.

Loss Contingencies

d) Loss Contingencies

 

We may be subject to claims, suits, government investigations, and other proceedings involving competition and antitrust, intellectual property, privacy, indirect taxes, labor and employment, commercial disputes, content generated by our users, goods and services offered by advertisers or publishers using our website platforms, and other matters. Certain of these matters include speculative claims for substantial or indeterminate amounts of damages. We record a liability when we believe that it is both probable that a loss has been incurred, and the amount can be reasonably estimated. If we determine that a loss is possible, and a range of the loss can be reasonably estimated, we disclose the range of the possible loss in the Notes to the Consolidated Financial Statements.

 

We evaluate, on a monthly basis, developments in our legal matters that could affect the amount of liability that has been previously accrued, and the matters and related ranges of possible losses disclosed and make adjustments and changes to our disclosures as appropriate. Significant judgment is required to determine both likelihood of there being and the estimated amount of a loss related to such matters. Until the final resolution of such matters, there may be an exposure to loss in excess of the amount recorded, and such amounts could be material. Should any of our estimates and assumptions change or prove to have been incorrect, it could have a material impact on our business, consolidated financial position, results of operations, or cash flows.

 

To date, none of these types of litigation matters, most of which are typically covered by insurance, has had a material impact on our operations or financial condition. We have insured and continue to insure against most of these types of claims.

Business Combinations

e) 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

f) 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

g) 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

h) 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 three months ended March 31, 2018 because the effect would have been anti-dilutive. Accordingly, basic and diluted loss per common share is the same for three months ended March 31, 2018.

 

On December 20, 2017, the Company completed a two-for-one stock split effected in the form of a stock dividend. All references made to share or per share amounts in the accompanying consolidated financial statements and applicable disclosures have been retroactively adjusted to reflect this two-for-one stock split.

Currency translation

i) 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

j) Revenue Recognition

 

In May 2014, the FASB issued ASU 2014-09, “Revenue from Contracts with Customers (Topic 606),” which requires revenue to be recognized when promised goods or services are transferred to customers in an amount that reflects the consideration that is expected to be received for those goods or services. ASU 2014-09 (“ASC Topic 606”) supersedes the existing revenue recognition guidance and is effective for interim and annual reporting periods beginning after December 15, 2017. The Company has adopted ASC Topic 606 on January 1, 2018 and has determined that the new standard does not have a material impact on the nature and timing of revenues recognized.

 

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 which is representative of the point in time at which the Company has satisfied its performance obligation. 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 the Betting Platform Software (“BPS”) include license fees, training, installation, and product support services. Revenue is recognized when transfer of control to the customer has been made and the Company’s performance obligation has been 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

k) 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 March 31, 2018 and December 31, 2017.

 

The Company primarily places its cash with high-credit quality financial institutions located in the United States which is insured by the Federal Deposit Insurance Corporation, in Canada which is insured by the Canadian Deposit Insurance Corporation, in Italy which is insured by the Italian government and in Germany which is a member of the Deposit Protection Fund of the Association of German Banks (Einlagensicherungsfonds des Bundesverbandes deutscher Banken).

Gaming accounts receivable

l) 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 recorded bad debt expense of $6,354 and $NIL for the three months ended March 31, 2018 and March 31, 2017, respectively. All balances previously recorded as allowance for doubtful accounts were written off as uncollectible.

Gaming balances

m) 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

n) 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, 2016  $211,262 
Issued during the year ended December 31, 2017   268,884 
Exercised during the year ended December 31, 2017   —   
Change in fair value recognized in operations   (257,231)
Balance at December 31, 2017  $222,915 
Issued during the three months ended March 31, 2018   669,126 
Exercised during the three months ended March 31, 2018   —   
Change in fair value recognized in operations   (254,289)
Balance at March 31, 2018   $ 637,752

 

 

Property, plant and equipment

o) 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

p) 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 December 31, 2017 and 2016.

Income Taxes

q) 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 2012 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)

r) 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.

Investment in Non-consolidated Entities

s) Investment in Non-Consolidated Entities

 

Investments in non-consolidated entities are accounted for using the equity method or cost basis depending upon the level of ownership and/or the Company's ability to exercise significant influence over the operating and financial policies of the investee. When the equity method is used, investments are recorded at original cost and adjusted periodically to recognize the Company's proportionate share of the investees' net income or losses after the date of investment. When net losses from an investment are accounted for under the equity method exceed its carrying amount, the investment balance is reduced to zero and additional losses are not provided for. The Company resumes accounting for the investment under the equity method if the entity subsequently reports net income and the Company's share of that net income exceeds the share of net losses not recognized during the period the equity method was suspended. Investments are written down only when there is clear evidence that a decline in value that is other than temporary has occurred.

 

The Company's investment in Zoompass Holdings Inc. and Intesa Sanpaolo Bank were accounted for at cost. The Company monitors its investment for impairment annually and makes appropriate reductions in the carrying value if it determines that an impairment charge is required based on qualitative and quantitative information.

Recent Accounting Pronouncements

t) 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 adoption of ASU 2016-01 does not have any material impact on the Company’s consolidated financial statements.

 

In February 2016, the FASB issued Accounting Standards Update No. 2016-02 (ASU 2016-02) which amends the FASB Accounting Standards Codification and created Topic 842, "Leases." Under Topic 842, lessees are required to recognize assets and liabilities on the balance sheet for most leases and provides for enhanced disclosures. Leases will continue to be classified as either finance or operating. ASU 2016-02 is effective for annual reporting periods, and interim periods within those years beginning after December 15, 2018. Entities are required to use a modified retrospective approach for leases that exist or are entered into after the beginning of the earliest comparative period in the financial statements. Full retrospective application is prohibited and early adoption by public entities is permitted. The Company is currently in the process of evaluating the impact of the adoption of this standard on our consolidated financial statements.

 

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. The adoption of ASU 2017-09 does not have any material impact on the Company’s consolidated financial statements.

  

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)
3 Months Ended
Mar. 31, 2018
Accounting Policies [Abstract]  
Level 3 Fair Value Measurements

 

Balance at December 31, 2016  $211,262 
Issued during the year ended December 31, 2017   268,884 
Exercised during the year ended December 31, 2017   —   
Change in fair value recognized in operations   (257,231)
Balance at December 31, 2017  $222,915 
Issued during the three months ended March 31, 2018   669,126 
Exercised during the three months ended March 31, 2018   —   
Change in fair value recognized in operations   (254,289)
Balance at March 31, 2018   $ 637,752

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 
Acquisitions (Tables)
3 Months Ended
Mar. 31, 2018
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)
3 Months Ended
Mar. 31, 2018
Goodwill and Intangible Assets Disclosure [Abstract]  
Intangibles
   March 31,
2018
  December 31,
2017
  Life (years)
Betting Platform Software  $1,685,371   $1,685,371    15 
Licenses   970,422    967,328    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 
    4,676,720    4,673,626      
Accumulated amortization   (1,540,966)   (1,427,878)     
Balance  $3,135,754   $3,245,748      
Other Long Term Liabilities (Tables)
3 Months Ended
Mar. 31, 2018
Other Long Term Liabilities Tables  
Other Long Term Liabilities
   March 31,
2018
  December 31,
2017
Severance liability  $148,634   $131,904 
Customer deposit balance   464,804    400,776 
Total other long term liabilities  $613,438   $532,680 
Related party transactions and balances (Tables)
3 Months Ended
Mar. 31, 2018
Related Party Transactions [Abstract]  
Related party transactions and balances
   March 31,
2018
  December 31,
2017
Gold Street Capital Corp.  $58,384   $41,143 
Doriana Gianfelici   60,302    58,792 
Luca Pasquini   (117,610)   (119,939)
Other stockholders   —      567,813 
Total advances from stockholders  $1,076   $547,809 
Investment in Non-consolidated Entities (Tables)
3 Months Ended
Mar. 31, 2018
Investments, All Other Investments [Abstract]  
Non-consolidated entities
   March 31,
2018
  December 31,
2017
2336414 Ontario Inc  $—     $875,459 
Banca Veneto   —      1 
Zoompass Holdings Inc.   350,000    —   
    350,000    875,459 
           
Less impairment   —      (875,459)
Total investment in non-consolidated entities  $350,000   $1
Debentures and Convertible Notes (Tables)
3 Months Ended
Mar. 31, 2018
Debentures And Convertible Notes Tables  
Debentures outstanding
   March 31,
2018
  December 31,
2017
February 29, 2016 and April 4, 2016 Convertible Notes  $—     $750,000 
January 24, 2017 Debenture, net of discount of $5,723 and $7,446   133,885    136,032 
March 27, 2017 Convertible Debenture, net of discount of $40,818 and $50,994   75,522    68,571 
June 5, 2017 Convertible Debenture, net of discount of $60,010 and $72,541   56,330    47,024 
June 9, 2017 Convertible Debenture, net of discount of $30,608 and $36,940   27,562    22,842 
November 6, 2017 - December 11, 2017 Convertible Debentures, net of discounts of $47,839 and $55,063   149,939    148,198 
January 16, 2018 - February 26, 2018 Convertible Debentures, net of discount of $707,194   235,159    —   
    678,397    1,172,667 
Less: unamortized debt issuance costs   (79,886)   (24,560)
   $598,511   $1,148,107 
Additional Debenture Proceeds
Issuance Date   Gross Proceeds      
    (CDN)    (approx. USD) 
           
March 27, 2017  $150,000   $116,723 
June 5, 2017   150,000    116,723 
June 9, 2017   75,000    58,361 
November 6, 2017   90,000    70,033 
November 14, 2017   50,000    38,908 
November 15, 2017   20,000    15,563 
November 22, 2017   30,000    23,345 
December 5, 2017   40,000    31,126 
December 11, 2017   25,000    19,454 
January 16, 2018   205,000    159,521 
January 19, 2018   130,000    101,160 
January 31, 2018   210,000    163,412 
   $1,175,000   $914,327 
Warrants (Tables)
3 Months Ended
Mar. 31, 2018
Notes to Financial Statements  
Number of warrants
Issuance Date  Number of Warrants
    
March 27, 2017  $15,000 
June 5, 2017   15,000 
June 9, 2017   7,500 
November 6, 2017   9,000 
November 14, 2017   5,000 
November 15, 2017   2,000 
November 22, 2017   3,000 
December 5, 2017   4,000 
December 11, 2017   2,500 
January 16, 2018   20,500 
January 19, 2018   13,000 
January 31, 2018   21,000 
Warrants Fair Value
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 
 November 6, 2017   $3,131 
 November 14, 2017   $1,640 
 November 15, 2017   $676 
 November 22, 2017   $948 
 December 5, 2017   $994 
 December 11, 2017   $747 
 January 16, 2018   $8,853 
 January 19, 2018   $4,327 
 January 31, 2018   $12,187 
 February 26, 2018   $76,671 
Weighted average assumptions
Warrant Date  Exercise Price/sh  Common Stock Price/sh  Volatility  Term  Dividend Yield  Interest Rate  Forfeiture Risk
February 29, 2016  $0.575   $0.45    200%   3 yrs    0%   0.91%   0%
April 4, 2016  $0.575   $0.475    195%   3 yrs    0%   0.91%   0%
April 4, 2016  $0.575   $0.475    195%   3 yrs    0%   0.91%   0%
January 24, 2017  $0.50   $0.39    404%   2 yrs    0%   0.91%   0%
March 27, 2017  $0.50   $0.40    390%   2 yrs    0%   0.91%   0%
June 5, 2017  $0.50   $0.495    445%   2 yrs    0%   0.91%   0%
June 9, 2017  $0.50   $0.495    445%   2 yrs    0%   0.91%   0%
November 6, 2017  $0.50   $0.35    410%   2 yrs    0%   0.91%   0%
November 14, 2017  $0.50   $0.33    413%   2 yrs    0%   0.91%   0%
November 15, 2017  $0.50   $0.34    409%   2 yrs    0%   0.91%   0%
November 22, 2017  $0.50   $0.318    414%   2 yrs    0%   0.91%   0%
December 5, 2017  $0.50   $0.25    422%   2 yrs    0%   0.91%   0%
December 11, 2017  $0.50   $0.30    433%   2 yrs    0%   0.91%   0%
January 16, 2018  $0.50   $0.51    201%   2 yrs    0%   0.91%   0%
January 19, 2018  $0.50   $0.40    203%   2 yrs    0%   0.91%   0%
January 31, 2018  $0.50   $0.65    218%   2 yrs    0%   0.91%   0%
February 26, 2018  $0.625   $0.50    222%   2 yrs    0%   0.91%   0%
Warrants
   Warrant Shares  Weighted Average Exercise Price Per Common Share  Weighted Average Life
 Outstanding at December 31, 2016    467,928   $0.58    2.13 
 Issued    162,000   $0.50    2.00 
 Exercised    —      —      —   
 Expired    (17,400)   —      —   
 Outstanding at December 31, 2017    612,528   $0.54    1.37 
 Exercisable at December 31, 2017    561,528   $0.56    1.21 
 Issued    230,375   $0.60    2.00 
 Exercised    —             
 Expired    —             
 Outstanding at March 31, 2018    842,903   $0.57    1.25 
 Exercisable at March 31, 2018    561,528   $0.56    0.97 
Black-scholes modle
Exercises price  $0.50 - $0.625
Common stock price per share  $0.40 
Volatility   216%
Weighted average life   1.25 years 
Dividend yield   0%
Interest rate   0.91%
Forfeiture risk   0%
Revenues (Tables)
3 Months Ended
Mar. 31, 2018
Accounting Policies [Abstract]  
Revenue
   Three Months Ended
   March 31,
2018
  March 31,
2017
Turnover      
Turnover web-based  $46,065,899   $28,749,836 
Turnover land-based   44,493,960    23,969,666 
Total Turnover   90,559,859    52,719,502 
           
Winnings/Payouts          
Winnings web-based   42,617,996    27,222,482 
Winnings land-based   38,746,243    21,704,642 
Total Winnings/payouts   81,364,239    48,927,124 
           
Gross Gaming Revenues  $9,195,620   $3,792,378 
           
Less: ADM Gaming Taxes   766,833    364,451 
Net Gaming Revenues  $8,428,787   $3,427,927 
Add: Commission Revenues   99,001    81,845 
Add: Service Revenues   66,079    365,429 
Total Revenues  $8,593,867   $3,875,201 
Income Taxes (Tables)
3 Months Ended
Mar. 31, 2018
Income Taxes Tables  
Reconciliation of income tax expense
   March 31,
2018
  March 31,
2017
U.S. Statutory rate  $354,801   $(278,252)
Tax rate difference between Italy, Austria, Canada and U.S.   (227,467)   181,452 
Change in Valuation Allowance   (63,671)   145,803 
Permanent difference   181,373    (1,894)
Effective tax rate  $245,036   $47,109 
Deferred tax assets
   March 31,
2018
  March 31,
2017
 Current   $245,036   $47,109 
 Deferred    —      —   
 Total   $245,036   $47,109 
Provisions for income taxes
   March 31,
2018
  March 31,
2017
Net loss carryforward - Foreign  $21,272   $145,497 
Net loss carryforward - US   4,476,794    4,106,025 
    4,498,066    4,251,522 
Less valuation allowance   (4,498,066)   (4,251,522)
Deferred tax assets  $—     $—   
Summary of Significant Accounting Policies (Details) - USD ($)
3 Months Ended
Mar. 31, 2018
Mar. 31, 2017
Accounting Policies [Abstract]    
Bad Debt Expense $ 6,354
Summary of Significant Accounting Policies (Details 1) - USD ($)
3 Months Ended 12 Months Ended
Mar. 31, 2018
Dec. 31, 2017
Change in the Level 3 financial instrument [Rollforward]    
Beginnng Balance $ 222,915 $ 211,262
Issued during the year 669,126 268,884
Exercised during the year  
Change in fair value recognized in operations (254,289) (257,231)
Ending Balance $ 637,752 $ 222,915
Summary of Significant Accounting Policies (Details 2)
3 Months Ended
Mar. 31, 2018
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)
3 Months Ended
Mar. 31, 2018
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 8,772,200
Ownership 11.81%
Agreement

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 4,386,100 shares) at a fixed price of U.S. $0.50 per share (the “Odissea Put Option”). As of the date of this report, the Odissea Put Option has been extended indefinitely by mutual consent.

Ulisse [Member]  
Business Acquisition [Line Items]  
Share issued for acquisition 3,331,200
Ownership 4.49%
Agreement

Pursuant to the Ulisse SPA, subject to a purchase price adjustment to equal two times earnings before income taxes calculated on a pro rata basis from the Closing Date 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 1,665,600) at a fixed price of U.S. $0.50 per share (the “Ulisse Put Option”). As of the date of this report, the Ulisse Put Option has been extended indefinitely by mutual consent..

Intangible Assets - Intangibles (Details) - USD ($)
Mar. 31, 2018
Dec. 31, 2017
Intangible assets, gross $ 4,676,720 $ 4,673,626
Accumulated amortization (1,540,966) (1,427,878)
Intangible assets 3,135,754 3,245,748
Betting Operating System [Member]    
Intangible assets, gross 1,685,371 1,685,371
Licenses [Member]    
Intangible assets, gross 970,422 967,328
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)
3 Months Ended
Mar. 31, 2018
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
Mar. 31, 2018
Mar. 31, 2017
Goodwill and Intangible Assets Disclosure [Abstract]    
Amortization Expense $ 113,088 $ 110,188
Other Long Term Liabilities (Details) - USD ($)
Mar. 31, 2018
Dec. 31, 2017
Other long term liabilities $ 613,438 $ 532,680
Severance liability [Member]    
Other long term liabilities 148,634 131,904
Customer deposit balance [Member]    
Other long term liabilities $ 464,804 $ 400,776
Line of Credit-Bank (Details Narrative)
Mar. 31, 2018
USD ($)
Mar. 31, 2018
EUR (€)
Multgioco [Member]    
Line of credit $ 369,180 € 300,000
Interest rate 5.00% 5.00%
Rifa Srl[Member]    
Line of credit $ 61,530 € 50,000