XBRL Rendering Preview
v3.20.1
Document and Entity Information - shares
6 Months Ended
Jun. 30, 2019
Aug. 14, 2019
Document And Entity Information    
Entity Registrant Name Newgioco Group, Inc.  
Entity Central Index Key 0001080319  
Document Type 10-Q/A  
Document Period End Date Jun. 30, 2019  
Amendment Flag true  
Current Fiscal Year End Date --12-31  
Is Entity's Reporting Status Current? Yes  
Entity Filer Category Non-accelerated Filer  
Entity Small Business false  
Entity Emerging Growth Company false  
Entity Shell Business false  
Entity Interactive Data Yes  
Entity Common Stock, Shares Outstanding   79,949,040
Document Fiscal Period Focus Q2  
Document Fiscal Year Focus 2019  
Amendment Restatement  
v3.20.1
Condolidated Balance Sheets - USD ($)
Jun. 30, 2019
Mar. 31, 2019
Dec. 31, 2018
Jun. 30, 2018
Mar. 31, 2018
Dec. 31, 2017
Current Assets            
Cash and cash equivalents $ 5,228,797   $ 6,289,903 $ 6,785,266    
Accounts receivable 116,398   10,082      
Gaming accounts receivable 654,016   1,021,052      
Prepaid expenses 140,107   124,712      
Related party receivable 851   49,914      
Other current assets 145,348   55,700      
Total Current Assets 6,285,517   7,551,363      
Non-current Assets            
Restricted cash 1,439,782   1,560,539      
Property, plant and equipment 519,213   476,047      
Right-of-use assets 736,625        
Intangible assets 16,197,962   12,527,980      
Goodwill 1,663,591   262,552      
Investment in non-consolidated entities 250,000   275,000      
Total Noncurrent Assets 20,807,173   15,102,118      
Total Assets 27,092,690   22,653,481      
Current Liabilities            
Line of credit - bank 1,000,000   750,000      
Accounts payable and accrued liabilities 3,594,997   4,603,608      
Gaming accounts balances 2,217,089   1,049,423      
Taxes payable 995,004   1,056,430      
Advances from stockholders 48,508   39,237      
Convertible Debt, net of discount of $2,578,995 and $4,587,228, respectively 6,083,982   3,942,523      
Notes payable, net of discount of $132,970 1,421,045        
Notes payable- related party, net of discount of $88,647 1,405,804   318,078      
Bank loan payable - current portion 122,829   120,920      
Operating lease liability 91,449          
Financial lease liability 6,194          
Total Current Liabilities 16,986,901   11,880,219      
Non-current liabilities            
Deferred tax liability 1,362,674        
Notes payable, net of discount of $54,216 498,874        
Notes payable - related party, net of discount of $36,144 332,582        
Bank loan payable 161,504   225,131      
Operating lease liability 611,718        
Financial lease liability 38,396        
Other long term liabilities 613,963   608,728      
Total Non-current liabilities 3,619,711   833,859      
Total Liabilities 20,606,612   12,714,078      
Stockholders' Equity            
Preferred stock, $0.0001 par value; 5,000,000 shares authorized, none issued        
Common Stock, $0.0001 par value, 80,000,000 shares authorized; 9,918,517 and 9,442,537 shares issued and outstanding as of June 30, 2019 and December 31, 2018* 992   944      
Additional paid-in capital 25,462,926   23,962,920      
Accumulated other comprehensive income (118,638)   (57,431)      
Accumulated deficit (18,859,202)   (13,967,030)      
Total Stockholders' Equity 6,486,078 $ 7,811,828 9,939,403 $ 13,180,375 $ 4,934,352 $ 4,338,217
Total Liabilities and Stockholders Equity $ 27,092,690   $ 22,653,481      
v3.20.1
Condolidated Balance Sheets (Parenthetical) - USD ($)
6 Months Ended
Jun. 30, 2019
Dec. 31, 2018
STOCKHOLDERS' EQUITY    
Preferred Stock - par value $ 0.0001 $ 0.0001
Preferred stock - authorized 20,000,000 5,000,000
Preferred stock - issued
Preferred stock - outstanding
Common Stock - par value $ 0.0001 $ 0.0001
Common Stock - authorized 80,000,000 80,000,000
Common Stock - issued 9,795,396 9,442,537
Common Stock - outstanding 9,795,396 9,442,537
Reverse stock split 1 to 8  
Convertible Debt [Member]    
Debt Discount $ 2,578,995 $ 4,587,228
Notes payable [Member]    
Debt Discount 132,970  
Notes payable Related Party [Member]    
Debt Discount 88,647  
Notes payable - Non Current [Member]    
Debt Discount 54,216  
Notes payable Related Party - Non Current [Member]    
Debt Discount $ 36,144  
v3.20.1
Consolidated Statements of Operations and Comprehensive Income (Loss) - USD ($)
3 Months Ended 6 Months Ended
Jun. 30, 2019
Jun. 30, 2018
Jun. 30, 2019
Jun. 30, 2018
Income Statement [Abstract]        
Revenue $ 9,105,353 $ 8,822,659 $ 18,371,648 $ 17,416,526
Costs and Expenses        
Selling expenses 6,268,772 5,826,243 13,676,478 11,903,600
General and administrative expenses 3,360,284 2,201,805 6,557,739 4,407,119
Total Costs and Expenses 9,629,056 8,028,048 20,234,217 16,310,719
(Loss) income from Operations (523,703) 794,611 (1,862,569) 1,105,807
Other (Expenses) Income        
Other income 7,725 7,725
Interest expense, net of interest income (1,017,243) (1,050,270) (2,521,355) (1,262,509)
Imputed interest on related party advances 753 (761)
Gain on litigation settlement 516,120
Loss on debt modification (212,270) (212,270)
Loss on conversion of debt (35,943) (35,943)
Loss on marketable securities (155,000) (25,000) (155,000)
Total Other (Expenses) Income (1,045,461) (1,416,787) (2,574,573) (1,114,420)
Loss Before Income Taxes (1,569,164) (622,176) (4,437,142) (8,613)
Income tax provision (209,056) (512,406) (455,030) (757,442)
Net Loss (1,778,220) (1,134,582) (4,892,172) (766,055)
Other Comprehensive Loss        
Foreign currency translation adjustment 69,023 63,305 (61,207) 160,778
Comprehensive Loss $ (1,709,197) $ (1,071,277) $ (4,953,379) $ (605,277)
Loss per common share - basic and diluted* $ (0.17) $ (0.13) $ (0.50) $ (0.08)
Weighted average number of common shares outstanding- basic and diluted* 9,870,357 9,344,282 9,870,357 9,308,511
v3.20.1
Consolidated Statements of Changes in Stockholders' Equity (Deficiency) - USD ($)
Common Stock
Additional Paid-In Capital
Accumlulated Other Comprehensive Income
Accumulated Deficit
Total
Beginning Balance, Shares at Dec. 31, 2017 9,267,948        
Beginning Balance, Amount at Dec. 31, 2017 $ 927 $ 14,548,951 $ 126,612 $ (10,338,273) $ 4,338,217
Imputed interest on stock advances   1,251     1,251
Common stock issued with debentures, shares 13,875        
Common stock issued with debentures $ 1 55,499     55,500
Beneficial conversion feature debentures   91,017     1,017
ASU 2017-11 adjustment to common stock issued debentures   (10,853)     (10,853)
ASU2017-11 adjustment to beneficial conversion feature of debentures   (6,780)     (6,780)
ASU 2017-11 Elimination of derivative liability movement       (254,289) (254,289)
Foreign currency translation adjustment     97,473   97,473
Net income (loss)       622,816 622,816
Ending Balance, Shares at Mar. 31, 2018 9,281,823        
Ending Balance, Amount at Mar. 31, 2018 $ 928 14,679,085 224,085 (9,969,746) 4,934,352
Common stock issued with debentures, shares 215,028        
Common stock issued with debentures $ 22 1,770,175     1,770,197
Common stock retired on acquisition of Multigioco, shares (255,000)        
Common stock retired on acquisition of Multigioco $ (26) (2,260,948)     (2,260,974)
Common stock issued net of stock retired on acquisition of Ulisse, shares 175,550        
Common stock issued net of stock retired on acquisition of Ulisse $ 18 5,587,656     5,587,679
ASU 2017-11 adjustment to common stock issued debentures   (1,232,358)     (1,232,358)
ASU2017-11 adjustment to beneficial conversion feature of debentures   2,501,332     2,501,332
Fair value of warrants issued   2,951,429     2,951,429
Foreign currency translation adjustment     63,305   63,305
Net income (loss)       (1,134,582) (1,134,582)
Ending Balance, Shares at Jun. 30, 2018 9,417,401        
Ending Balance, Amount at Jun. 30, 2018 $ 942 23,996,371 287,390 (11,104,328) 13,180,375
Beginning Balance, Shares at Dec. 31, 2018 9,442,537        
Beginning Balance, Amount at Dec. 31, 2018 $ 944 23,962,920 (57,431) (13,967,030) 9,939,403
Common stock issued with debentures, shares 287,561        
Common stock issued with debentures $ 29 919,795     979,824
Common stock issued for the purchase of subsidiaries,shares 65,298        
Common stock issued for the purchase of subsidiaries $ 7 196,776     196,783
Foreign currency translation adjustment     (130,230)   (130,230)
Net income (loss)       (3,113,952) (3,113,952)
Ending Balance, Shares at Mar. 31, 2019 9,795,396        
Ending Balance, Amount at Mar. 31, 2019 $ 980 25,079,491 (187,661) (17,080,982) 7,811,828
Beginning Balance, Shares at Dec. 31, 2018 9,442,537        
Beginning Balance, Amount at Dec. 31, 2018 $ 944 23,962,920 (57,431) (13,967,030) 9,939,403
Ending Balance, Shares at Jun. 30, 2019 9,918,517        
Ending Balance, Amount at Jun. 30, 2019 $ 992 25,462,926 (118,638) (18,859,202) 6,486,078
Beginning Balance, Shares at Mar. 31, 2019 9,795,396        
Beginning Balance, Amount at Mar. 31, 2019 $ 980 25,079,491 (187,661) (17,080,982) 7,811,828
Common stock issued with debentures, shares 32,785        
Common stock issued with debentures $ 3 104,908     104,911
Common stock issued for the purchase of subsidiaries,shares 90,336        
Common stock issued for the purchase of subsidiaries $ 9 278,527     278,536
Foreign currency translation adjustment     69,023   69,023
Net income (loss)       (1,778,220) (1,778,220)
Ending Balance, Shares at Jun. 30, 2019 9,918,517        
Ending Balance, Amount at Jun. 30, 2019 $ 992 $ 25,462,926 $ (118,638) $ (18,859,202) $ 6,486,078
v3.20.1
Consolidated Statements of Cash Flows - USD ($)
6 Months Ended
Jun. 30, 2019
Jun. 30, 2018
Cash Flows from Operating Activities    
Net (loss) income $ (4,892,172) $ (766,055)
Adjustments to reconcile net (loss) income to net cash (used in) provided by operating activities    
Depreciation and amortization 445,990 330,832
Amortization of deferred costs 2,096,080 1,012,225
Non-cash interest 409,114 58,188
Loss on debt conversions 35,943 212,270
Unrealized loss on trading securities 25,000 155,000
Imputed interest on advances from stockholders 1,514
Movement in deferred taxation (38,934)
Recovery of assets   (516,120)
Bad debt expense   6,354
Changes in Operating Assets and Liabilities    
Prepaid expenses (7,732) 5,225
Accounts payable and accrued liabilities (444,743) 756,987
Accounts receivable (57,679) 98,833
Gaming accounts receivable 357,886 31,409
Gaming accounts liabilities 1,167,454 (583,899)
Taxes payable (53,941) 439,731
Other current assets (57,163) (270,259)
Long term liability 9,296 78,346
Net Cash (Used in) Provided by Operating Activities (1,005,601) 1,050,581
Cash Flows from Investing Activities    
Acquisition of property, plant, and equipment, and intangible assets (54,283) (4,577,886)
Acquisition of Virtual Generation, net of cash of $47,268 (216,150)
Net Cash Used in Investing Activities (270,433) (4,577,886)
Cash Flows from Financing Activities    
Proceeds from bank credit line 250,000
Repayment of bank credit line (177,060)
Repayment of bank loan (59,007) (71,143)
Proceeds from debentures and convertible notes, net of repayment 6,883,905
Repayment of deferred purchase consideration- non related parties (173,862)
Repayment of deferred purchase consideration-related parties (107,986)
Repayment of financial leases (5,449) (215,745)
Loan to related party (11,992)
Purchase of treasury stock (2,261,307)
Loans advanced to stockholders (485,036)
Repayment of loans advanced to stockholders 6,605
Net Cash Provided by (Used) in Financing Activities (101,691) 3,673,614
Effect of change in exchange rate 195,864 153,442
Net (decrease) increase in cash (1,181,861) 299,751
Cash- beginning of the period 7,850,442 7,057,763
Cash- end of the period 6,668,581 7,357,514
Reconciliation of cash, cash equivalents and restricted cash within the Balance Sheets to the Statement of Cash Flows    
Cash and cash equivalents 5,228,797 6,785,266
Restricted cash included in non-current assets 1,439,784 572,248
Cash- end of the period 6,668,581 7,357,514
Supplemental disclosure of cash flow information    
Cash paid during the period for: Interest 13,955 140,815
Cash paid during the period for: Income tax 473,679 341,830
Supplemental cash flow disclosure for non-cash activities    
Common shares issued for the acquisition of subsidiaries 272,307 5,588,088
Common shares issued with conversion of debentures 104,911
Common shares issued to related parties for repayment of debt 54,402
Retirement of treasury stock 2,260,770
Common shares issued for cashless exercise of warrants $ 201,088
v3.20.1
Consolidated Statements of Cash Flows (Parenthetical)
6 Months Ended
Jun. 30, 2019
USD ($)
Statement of Cash Flows [Abstract]  
Acquisition of Virtual Generation, cash $ 47,268
v3.20.1
Nature of Business
6 Months Ended
Jun. 30, 2019
Organization, Consolidation and Presentation of Financial Statements [Abstract]  
Nature of Business

1. Nature of Business

 

Established in the state of Delaware in 1998, Newgioco Group, Inc. (“Newgioco Group” or the “Company”) is an international commercial-stage, vertically integrated company engaged in various aspects of the leisure gaming industry. We own and operate an innovative state-of-the-art betting platform (“Platform”) and are a licensed leisure lottery and gaming operator offering online and offline leisure gaming services, including a variety of lottery and casino gaming products, as well as sports betting products through a distribution network of retail betting locations situated throughout Italy and internationally through various agents in eleven other countries located in Africa and South America.

 

The Company’s subsidiaries include: Multigioco Srl (“Multigioco”), acquired on August 15, 2014, Rifa Srl (“Rifa”), acquired on January 1, 2015, and Ulisse GmbH (“Ulisse”) and Odissea Betriebsinformatik Beratung GmbH (“Odissea”) which were both acquired on July 1, 2016, Virtual Generation Limited (“VG”) and Naos Holding Limited, acquired on January 30, 2019 and a non-operating subsidiary Newgioco Group, Inc. based in Canada.

 

The Company operates in one line of business that provides certified betting Platform software (“Platform”) services to and the operating of leisure betting establishments situated throughout Italy and in 11 other countries and is comprised of 3 geographically organized groups: an Operational Group; Technology Group; and a Corporate Group, organized as follows:

 

a.the Operational Group is based in Europe and maintains administrative and customer service offices headquartered in Rome, Italy with satellite offices for operations administration, and risk management and trading in Naples and Teramo, Italy and Valetta, Malta;
b.the Technology Group is based in Innsbruck, Austria and manages software development, training and administration; and
c.the Corporate Group is based in North America which includes a head office situated in Toronto, Canada with a satellite office in Boca Raton, Florida through which our CEO and CFO carry-out our corporate duties, handle day-to-day reporting and other operations such as U.S. development and planning, and through which various independent contractors and vendors are engaged.

 

v3.20.1
Accounting Policies and Estimates
6 Months Ended
Jun. 30, 2019
Accounting Policies [Abstract]  
Accounting Policies and Estimates

2. Accounting Policies and Estimates

 

Basis of Presentation

 

The accompanying unaudited consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States (“GAAP”) for interim financial information and the rules and regulations of the Securities and Exchange Commission. Accordingly, they do not include all of the information and footnotes required by U.S. GAAP for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the three and six months ended June 30, 2019 are not necessarily indicative of the results that may be expected for the fiscal year ending December 31, 2019. The balance sheet at December 31, 2018 has been derived from the Company’s audited consolidated financial statements at that date but does not include all of the information and footnotes required by U.S. GAAP for complete financial statements. For further information, please refer to the consolidated financial statements and footnotes thereto included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2018, as filed with the U.S. Securities and Exchange Commission (“SEC”).

 

All amounts referred to in the Notes to the unaudited condensed consolidated financial statements are in United States Dollars ($) unless stated otherwise.

 

Basis of Consolidation

 

The unaudited condensed consolidated financial statements include the financial statements of the Company and its subsidiaries in which it has at least a majority voting interest. All significant inter-company accounts and transactions have been eliminated in the unaudited condensed consolidated financial statements. The entities included in these unaudited condensed consolidated financial statements are as follows:

 

Company Country of Incorporation

Percentage owned

%

     
Newgioco Group, Inc. United States – Delaware Parent
Newgioco Group, Inc (Canada) Canada 100
Ulisse GmbH Austria 100
Odissea Betriebsinformatik Beratung GMBH Austria 100
Multigioco Srl. Italy 100
Rifa Srl. Italy 100
Virtual Generation Limited Malta 100
Naos Holding Limited Malta 100

 

Currency Translation

 

The Company's subsidiaries operate in Europe with a functional currency of Euro and in Canada with a functional currency of Canadian dollars. In the consolidated financial statements, revenue and expense accounts are translated at the average rates during the period, assets and liabilities are translated at period-end rates and equity accounts are translated at historical rates. 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.

 

Use of Estimates

 

The preparation of the unaudited financial statements in conformity with 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.

 

Loss Contingencies

 

The Company 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. The Company records 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.

 

The Company evaluates, 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. The Company has insured and continue to insure against most of these types of claims.

 

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 debentures 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.

 

As a result of the adoption of ASU 2017-11 in the third quarter of 2018, the Company has no derivative financials instruments classified as a liability at June 30, 2019 and December 31, 2018.

 

Business Combinations

 

The Company allocates 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.

  

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 markets 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.

 

Cash and Cash Equivalents

 

The Company considers all highly liquid debt instruments with maturities of three months or less at the time acquired to be cash equivalents. The Company had no cash equivalents as of June 30, 2019 and December 31, 2018.

 

The Company primarily places cash with high-credit quality financial institutions located in the United States which are insured by the Federal Deposit Insurance Corporation up to a limit of $250,000 per institution, in Canada which are insured by the Canadian Deposit Insurance Corporation up to a limit of CDN$100,000 per institution, in Italy which is insured by the Italian deposit guarantee fund Fondo Interbancario di Tutela dei Depositi (FITD) up to a limit of €100,000 per institution, and in Germany which is a member of the Deposit Protection Fund of the Association of German Banks (Einlagensicherungsfonds des Bundesverbandes deutscher Banken) up to a limit of €100,000 per institution.

 

Gaming Accounts Receivable

 

Gaming accounts receivable represent 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 the Company’s 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 $0 and $0 for the three months ended June 30, 2019 and 2018, respectively, and $0 and $6,354 bad debt expense for the six months ended June 30, 2019 and 2018, respectively. All balances previously recorded as allowance for doubtful accounts were written off as uncollectible.

 

Gaming Accounts Payable

 

Gaming accounts payable 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.

  

Long-Lived Assets

 

The Company evaluates 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.

 

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:

 

Description Useful Life (in years)
   
Office equipment 5
Office furniture 8 1/3
Signs and displays 5

 

Intangible Assets

 

Intangible assets are stated at acquisition cost less accumulated amortization, if applicable, less any adjustments for impairment losses.

 

Amortization is charged on a straight-line basis over the estimated remaining useful lives of the individual intangibles. Where intangibles are deemed to be impaired the Company recognizes an impairment loss measured as the difference between the estimated fair value of the intangible and its book value.

 

The range of the estimated useful lives is as follows:

 

Description Useful Life (in years)
   
Betting Platform Software 15
Ulisse Bookmaker License
Multigioco and Rifa ADM Licenses 1.5 - 7
VG Licenses
Location contracts 5 - 7
Customer relationships 10 - 15
Trademarks/names 14
Websites 5
   

 

The Ulisse Bookmaker License and the VG Licenses have no expiration date and are therefore not amortized.

 

Goodwill

 

The Company allocates 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.

 

The Company annually assesses whether the carrying value of its intangible assets exceeds their fair value and, if necessary, records an impairment loss equal to any such excess. Each interim reporting period, the Company assesses whether events or circumstances have occurred which indicate that the carrying amount of an intangible asset exceeds its fair value. If the carrying amount of the intangible asset exceeds its fair value, an asset impairment charge will be recognized in an amount equal to that excess. No asset impairment charges were incurred during the three and six months ended June 30, 2019 or June 30, 2018. The Company recorded 1,401,608 of goodwill arising from an acquisition during the six months ended June 30, 2019.

 

Income Taxes

 

The Company uses 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 2015 forward, are open and subject to examination, while in Austria companies are open and subject to inspection for five years and ten years for inspection of serious infractions. In the United States and Canada, tax years beginning 2015 forward, are subject to examination. The Company is not currently under examination and it has not been notified of a pending examination.

 

Revenue Recognition

 

In May 2014, the FASB issued Accounting Standards Update (“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. The Company 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.

  

The Company recognizes revenue when control of its products and services is transferred to its customers in an amount that reflects the consideration the Company expects to receive from its customers in exchange for those products and services. 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 Platform 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 are recognized on an accrual basis as earned.

 

Stock-Based Compensation

 

The Company records its compensation expense associated with stock options and other forms of equity compensation based on their fair value at the date of grant using the Black-Scholes option pricing model. Stock-based compensation includes amortization related to stock option awards based on the estimated grant date fair value. Stock-based compensation expense related to stock options is recognized ratably over the vesting period of the option. In addition, the Company records expense related to Restricted Stock Units (“RSU’s”) granted based on the fair value of those awards on the grant date. The fair value related to the RSUs is amortized to expense over the vesting term of those awards. Forfeitures of stock options and RSUs are recognized as they occur.

 

Stock-based compensation expense for a stock-based award with a performance condition is recognized when the achievement of such performance condition is determined to be probable. If the outcome of such performance condition is not determined to be probable or is not met, no compensation expense is recognized and any previously recognized compensation expense is reversed.

 

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 and foreign currency translation adjustments.

 

Earnings Per Share

 

Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“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 and include warrants granted and convertible debt.

 

Related Parties

 

Parties are considered to be related to the Company if the parties directly or indirectly, through one or more intermediaries, control, are controlled by, or are under common control with the Company. Related parties also include principal owners of the Company, its management, members of the immediate families of principal owners of the Company and its management and other parties with which the Company may deal if one party controls or can significantly influence the management or operating policies of the other to an extent that one of the transacting parties might be prevented from fully pursuing its own separate interests. The Company discloses all related party transactions. All transactions are recorded at fair value of the goods or services exchanged.

 

 

Recent Accounting Pronouncements Not Yet Adopted

 

In August 2018, the FASB issued ASU No. 2018-13, Fair Value Measurement (Topic 820): Disclosure Framework-Changes to the Disclosure Requirements for Fair Value Measurement. The purpose of this updated guidance is to improve the effectiveness and disclosures in the Notes to the financial statements. The ASU removes the requirement to disclose the amount of and reasons for transfers between Level 1 and Level 2 of the fair value hierarchy; removes the policy for timing of transfers between levels; and removes the disclosure related to the valuation process for Level 3 fair value measurements. The ASU also modifies existing disclosure requirements which relate to the disclosure for investments in certain entities which calculate net asset value and clarifies the disclosure about uncertainty in the measurements as of the reporting date. For all entities, the effective date for this guidance is fiscal years beginning after December 15, 2019, including interim periods within the reporting period, with early adoption permitted. Entities are also allowed to elect early adoption of the eliminated or modified disclosure requirements and delay adoption of the new disclosure requirements until their effective date. The Company is currently evaluating the impact of the new guidance on its consolidated financial statements.

 

In January 2017, the FASB issued ASU No. 2017-04, Intangibles-Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment. The main objective of this guidance is to simplify the accounting for goodwill impairment by requiring that impairment charges be based upon the first step in the current two-step impairment test under ASC 350. Currently, if the fair value of a reporting unit is lower than its carrying amount (Step 1), an entity calculates any impairment charge by comparing the implied fair value of goodwill with its carrying amount (Step 2). The implied fair value of goodwill is calculated by deducting the fair value of all assets and liabilities of the reporting unit from the reporting unit’s fair value as determined in Step 1. To determine the implied fair value of goodwill, entities estimate the fair value of any unrecognized intangible assets and any corporate-level assets or liabilities that were included in the determination of the carrying amount and fair value of the reporting unit in Step 1. Under this guidance, if a reporting unit’s carrying amount exceeds its fair value, an entity will record an impairment charge based on that difference. The impairment charge will be limited to the amount of goodwill allocated to that reporting unit. This guidance eliminates the requirement to calculate a goodwill impairment charge using Step 2. This guidance does not change the guidance on completing Step 1 of the goodwill impairment test. Under this guidance, an entity will still be able to perform the current optional qualitative goodwill impairment assessment before determining whether to proceed to Step 1. The guidance in the ASU will be applied prospectively and is effective for the Company for annual and interim impairment tests performed in periods beginning after December 15, 2019. The Company does not expect the adoption of this ASU to have a significant impact on its consolidated financial statements.

 

In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842). ASU 2016-02 requires that a lessee recognize the assets and liabilities that arise from operating leases. A lessee should recognize in the statement of financial position a liability to make lease payments (the lease liability) and a right of use asset representing its right to use the underlying asset for the lease term. For leases with a term of 12 months or less, a lessee is permitted to make an accounting policy election by class of underlying asset not to recognize lease assets and lease liabilities. In transition, lessees and lessors are required to recognize and measure leases at the beginning of the earliest period presented using a modified retrospective approach. Public business entities should apply the amendments in ASU 2016-02 for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. Early application is permitted for all public business entities and all nonpublic business entities upon issuance. The Company is currently not in compliance with ASU 2016-02 as it is continuing its evaluation of the impact of its pending adoption of ASU 2016-02 on our consolidated financial statements. The adoption of this guidance is not expected to have a material impact on the Company’s financial statements and related disclosures.

 

The Company has reviewed all recently issued, but not yet adopted, accounting standards in order to determine their effects, if any, on our consolidated results of operations, financial position, and cash flows. Based on that review, the Company believes that none of these pronouncements will have a significant effect on current or future earnings or operations.

 

Comparatives

 

Certain items in prior periods were reclassified to conform to the current period presentation. These reclassifications had no impact on net loss or comprehensive loss.

v3.20.1
Restatement of prior period results
6 Months Ended
Jun. 30, 2019
Accounting Changes and Error Corrections [Abstract]  
Restatement of prior period results

3. Restatement of prior period results

 

The company identified the following errors in the financial results for the periods ended June 30, 2019 and 2018.

 

Three and six months ended June 30, 2019

 

The company restated its financial statements for the year ended December 31, 2018, to correct the recording of non-cash amortization of intangible assets and the depreciation of revalued plant and equipment which was incorrectly classified as other comprehensive income, the unrealized foreign currency loss on convertible debentures denominated in Canadian Dollars and other immaterial adjustments, resulting in a restatement of opening balances of plant and equipment of $121,243, intangible assets of $(55,475), other comprehensive income of $(1,023,907) and opening retained earnings of $(958,138).

 

The Company had not accounted for ASC 842 – leases, which was effective for periods beginning January 1, 2019, in its interim financial statements for the periods ended June 30, 2019, June 30, 2019 and September 30, 2019.

 

The Company recorded a right-of-use asset of $646,138 and an operating lease liability of $617,352 and an accrued liability of $28,786 as of January 1, 2019. An additional $217,352 of operating leases were entered into and a further $27,517 of operating leases were terminated before maturity during the six months ended June 30, 2019. The amortization of the right-of-use asset during the six months ended June 30, 2019 amounted to $95,622, the amortization of the operating lease liability of $90,086 and the increase in the accrued liability of $4,834.

 

The Company adjusted its accounting for financial leases by recording an office equipment asset of $34,638 and a finance lease liability of $34,524 as of January 1, 2019. During the six months ended June 30, 2019, an additional $15,118 of additional office equipment under financial leases was recorded. The Company recorded a depreciation charge of $5,623 related to these assets, an interest charge of $699 and amortization of financial leases of $5,336.

 

The Company modified its accounting for the acquisition of Virtual Generation by accounting for the imputed deferred tax liability on the value of the Platform acquired, resulting in an adjustment of $1,401,608 to deferred tax liability and recording of a goodwill asset on acquisition of $1,401,608. The Virtual Generation platform valued at $4,004,954 was amortized for the six months ended June 30, 2019, resulting in an amortization expense of $111,239 and a reduction in the deferred tax liability of $38,934.

 

Other immaterial adjustments relating to the recording of intercompany movements and certain expenses were incorrectly reflected in other comprehensive income, the net adjustment amounted to $16,233 and an adjustment of comprehensive loss of $28,223. Included in other adjustments is a reclassification of selling expenses of $770,025 to general and administrative expenses to conform to current disclosure.

 

Due to a 1 for 8 reverse stock split which took place on December 12, 2019, the outstanding shares and additional paid in capital was adjusted to take into account the effects of the reverse stock split.

 

Three and six months ended June 30, 2018

 

The error corrected in the financial statements for the year ended December 31, 2018, resulted in an adjustment to depreciation and amortization expense of $235,296, an adjustment to foreign exchange movements of $55,764 and an immaterial $331 adjustment to general and administrative expenses.

 

  

The restatement recorded by the Company for the six months ended June 30, 2019 was as follows:

 

   Prior year adjustment  Lease adjustments  Acquisition of Virtual Generation adjustments  Other adjustments  Total Restated
                
Opening retained earnings  $958,136   $—     $—     $—     $958,136 
 Selling Expenses   —      —      —      (770,025)   (770,025)
General and administrative expenses   —      (6,148)   —      

798,248

    

792,100

 
Depreciation and amortization   —      5,623    111,239    (11,990)   104,872 
Interest expense   —      699    —      —      699 
Deferred taxation   —      —      (38,934)   —      (38,934)
Net increase in accumulated deficit   958,136    174    72,305    16,233    1,046,848 
                          
Net decrease in other Comprehensive loss   (1,023,907)   617    —      (28,223)   (1,051,513)
                          
Net increase in plant and equipment and intangibles   65,771    780,586    1,290,369    11,990    2,148,716 
                          
Total increase in current liabilities   —      (131,263)   —      —      (131,263)
                          
Net increase in non-current liabilities  $—     $(650,114)  $(1,362,674)  $—     $(2,012,788)

 

The restatement recorded by the Company for the six months ended June 30, 2018 was as follows:

 

   Plant and equipment and intangibles adjustments  Foreign currency adjustments  Other adjustments  Total Restated
             
General and administrative expenses  $—     $55,764   $331   $56,095 
Depreciation and amortization   235,296    —      —      235,296 
Net increase in accumulated deficit  $235,296   $55,764   $331   $291,391 

 

 

 

The reconciliation of the consolidated balance sheet as of June 30, 2019 is as follows:

 

   As Previously Reported  Prior year adjustment  Lease adjustments  Acquisition of Virtual Generation  Other Adjustments  As Restated
Current Assets                  
Cash and cash equivalents  $5,228,797   $—     $—     $—     $—     $5,228,797 
Accounts receivable   116,398    —      —      —      —      116,398 
Gaming accounts receivable   654,016    —      —      —      —      654,016 
Prepaid expenses   140,107    —      —      —      —      140,107 
Related party receivable   851    —      —      —      —      851 
Other current assets   145,348    —      —      —      —      145,348 
Total Current Assets   6,285,517    —      —      —      —      6,285,517 
                               
Non-Current Assets                              
Restricted cash   1,439,782    —      —      —      —      1,439,782 
Property, plant and equipment   347,824    121,248    43,961    —      6,180    519,213 
Right-of-use assets   —      —      736,625    —      —      736,625 
Intangible assets   16,353,775    (55,477)   —      (111,239)   10,903    16,197,962 
Goodwill   267,076    —      —      1,401,608    (5,093)   1,663,591 
Investment in non-consolidated entities   250,000    —      —      —      —      250,000 
Total Non-Current Assets   10,658,457    65,771    780,586    1,290,369    11,990    20,807,173 
Total Assets  $24,943,974   $65,771   $780,586   $1,290,369   $11,990   $27,092,690 
                               
Current Liabilities                              
Line of credit - bank  $1,000,000   $—     $—     $—     $—     $1,000,000 
Accounts payable and accrued liabilities   3,982,319    —      33,620    —      (420,942)   3,594,997 
Gaming accounts balances   2,217,089    —      —      —      —      2,217,089 
Taxes payable   995,004    —      —      —      —      995,004 
Advances from stockholders   48,508    —      —      —      —      48,508 
Convertible Debt, net of discount of $2,578,995 and $4,587,228, respectively   6,083,982    —      —      —      —      6,083,982 
Notes payable, net of discount of $132,970   1,421,045    —      —      —      —      1,421,045 
Notes payable – related party, net of discount of $88,647   1,405,804    —      —      —      —      1,405,804 
Bank loan payable – current portion   122,829    —      —      —      —      122,829 
Operating lease liability   —      —      91,449    —           91,449 
Financial lease liability   —      —      6,194    —           6,194 
Total Current Liabilities   17,276,580    —      131,263    —      —      16,986,901 
                               
Non-current liabilities                              
Deferred tax liability        —      —      1,362,674    —      1,362,674 
Notes payable, net of discount of $54,216   498,874                        498,874 
Notes payable – related party, net of discount of $36,144   332,582                        332,582 
Bank loan payable   161,504    —      —      —      —      161,504 
Operating lease liability        —      611,718    —      —      611,718 
Financial lease liability        —      38,396    —      —      38,396 
Other long-term liabilities   193,021    —      —      —      420,942    613,963 
Total Non-Current Liabilities  1,185,981    —      650,114    1,362,674    —      3,619,711 
Total Liabilities   18,462,561    —      781,377    1,362,674    —      20,606,612 
                               
Stockholders' Equity                              
Preferred stock, $0.0001 par value; 20,000,000 shares authorized, none issued  —      —      —      —      —      —   
Common Stock, $0.0001 par value, 80,000,000 shares authorized; 9,795,396 shares issued and outstanding as of June 30, 2019*   7,935    —      —      —      (6,943)   992 
Additional paid-in capital*   25,455,983    —      —      —      6,943    25,462,926 
Accumulated other comprehensive income   (1,170,151)   1,023,907    (617)   —      28,223    (118,638)
Accumulated deficit   (17,812,354)   (958,136)   (174)   (72,305)   (16,233)   (18,859,202)
Total Stockholders' Equity   6,481,413    65,771    (791)   (72,305)   11,990    6,486,078 
Total Liabilities and Stockholders’ Equity  $24,943,974   $65,771   $780,586   $1,290,369   $11,990   $27,092,690 

 

* Adjusted for a 1 for 8 reverse stock split effective December 12, 2019.

  

 

 

The reconciliation of the consolidated statement of operations and comprehensive loss for the three months ended June 30, 2019 is as follows:

 

   As Previously Reported 

Lease

adjustments

  Acquisition of Virtual Generation  Other Adjustments  As Restated
                
Revenue  $9,105,353   $—     $—     $—     $9,105,353 
                          
Costs and Expenses                         
Selling expenses   7,038,797    —      —      (770,025   6,268,772 
General and administrative expenses   2,487,299    (214)   66,744    806,553    3,360,284 
Total Costs and Expenses   9,526,096    (214)   66,744    36,430    9,629,056 
                          
Loss from Operations   (420,743)   214    (66,744)   (36,430)   (523,703)
                          
Other (Expenses) Income                         
Other income   7,725    —      —      —      7,725 
Interest expense, net of interest income   (1,016,866)   (377)   —      —      (1,017,243)
Loss on conversion of debt   (35,943)   —      —      —      (35,943)
Total Other (Expenses) Income   (1,045,084)   (377)   —      —      (1,045,461)
                          
Loss Before Income Taxes   (1,465,827)   (163)   (66,744)   (36,430)   (1,569,164)
                          
Income tax provision   (232,417)   —      23,361    —      (209,056)
                          
Net Loss  $(1,698,244)  $(163)  $(43,383)  $(36,430)  $(1,778,220)
                          
Other Comprehensive Loss                         
Foreign currency translation adjustment   (32,633)   (55)   —      101,711    69,023 
                          
Comprehensive Loss  $(1,730,877)  $(218)  $(43,383)  $65,281   $(1,709,197)
                          
Loss per common share – basic and diluted*  $(0.18)                 $(0.17)
Weighted average number of common shares outstanding – basic and diluted*   9,870,357                   9,870,357 

 

 

The reconciliation of the consolidated statement of operations and comprehensive loss for the six months ended June 30, 2019 is as follows:

   As Previously Reported 

Lease

adjustments

  Acquisition of Virtual Generation  Other Adjustments  As Restated
                
Revenue  $18,371,648   $—     $—     $—     $18,371,648 
                          
Costs and Expenses                         
Selling expenses   14,446,503    —      —      (770,025   13,676,478 
General and administrative expenses   5,660,767    (525)   111,239    786,258    

6,557,739

 
Total Costs and Expenses   20,107,270    (525)   111,239    16,233    20,234,217 
                          
Loss from Operations   (1,735,622)   525    (111,239)   (16,233)   (1,862,569)
                          
Other (Expenses) Income                         
Other income   7,725    —                7,725 
Interest expense, net of interest income   (2,520,656)   (699)   —      —      (2,521,355)
Loss on conversion of debt   (35,943)   —      —      —      (35,943)
    (25,000)   —      —      —      (25,000)
Total Other (Expenses) Income   (2,573,874)   (699)   —      —      (2,574,573)
                          
Loss Before Income Taxes   (4,309,496)   (174)   (111,239)   (16,233)   (4,437,142)
                          
Income tax provision   (493,964)   —      38,934    —      (455,030)
                          
Net Loss  $(4,803,460)  $(174)  $(72,305)  $(16,233)  $(4,892,172)
                          
Other Comprehensive Loss                         
Foreign currency translation adjustment   (88,813)   (617)   —      28,223    (61,207)
                          
Comprehensive Loss  $(4,892,273)  $(791)  $(72,305)  $11,990   $(4,953,379)
                          
Loss per common share – basic and diluted*  $(0.50)                 $(0.50)
Weighted average number of common shares outstanding – basic and diluted*   9,764,450                   9,870,357 

 

 

* Adjusted for a 1 for 8 reverse stock split effective December 12, 2019.

  

 

The reconciliation of the consolidated statement of operations and comprehensive loss for the three months ended June 30, 2018 is as follows:

 

   As Previously Reported  Depreciation and amortization adjustments  Foreign Exchange adjustments  Other Adjustments  As Restated
                
Revenue  $8,822,659   $—     $—     $—     $8,822,659 
                          
Costs and Expenses                         
Selling expenses   5,826,243    —      —      —      5,826,243 
General and administrative expenses   2,056,275    117,648    27,882    —      2,201,805 
Total Costs and Expenses   7,882,518    117,648    27,882    —      8,028,048 
                          
Income from Operations   940,141    (117,648    (27,882)   —      794,611 
                          
Other (Expenses) Income                         
Interest expense, net of interest income   (1,050,270)   —      —      —      (1,050,270)
Imputed interest on related party advances   753    —      —      —      753 
Loss on debt modification   (212,270)   —      —      —      (212,270)
Loss on marketable securities   (155,000)   —      —      —      (155,000)
Total Other (Expenses) Income   (1,416,787)   —      —      —      (1,416,787)
                          
Loss Before Income Taxes   (476,646)   (117,648)   (27,882)   —      (622,176)
                          
Income tax provision   (512,406)   —      —      —      (512,406)
                          
Net Loss  $(989,052)  $(117,648)  $(27,882)  $—     $(1,134,582)
                          
Other Comprehensive Loss                         
Foreign currency translation adjustment   (98,355)   —      —      —      (98,355)
                          
Comprehensive Loss  $(1,087,407)  $(117,648)  $(27,882)  $—     $(1,232,937)
                          
Loss per common share – basic and diluted*  $(0.12)                 $(0.13)
Weighted average number of common shares outstanding – basic and diluted*   9,344,282                   9,344,282 

 

The reconciliation of the consolidated statement of operations and comprehensive loss for the six months ended June 30, 2018 is as follows:

 

   As Previously Reported  Depreciation and amortization adjustments  Foreign Exchange adjustments  Other Adjustments  As Restated
                
Revenue  $17,416,526   $—     $—     $—     $17,416,526 
                          
Costs and Expenses                         
Selling expenses   11,903,600    —      —      —      11,903,600 
General and administrative expenses   4,115,728    235,296    55,764    331    4,407,119 
Total Costs and Expenses   16,019,328    235,296    55,764    331    16,310,719 
                          
Income from Operations   1,397,198    (235,296)   (55,764)   (331)   1,105,807 
                          
Interest expense, net of interest income   (1,262,509)   —      —      —      (1,262,509)
Imputed interest on related party advances   (761)   —      —      —      (761)
Gain on litigation settlement   516,120    —      —      —      516,120 
Loss on debt modification   (212,270)                  (212,270)
Loss on marketable securities   (155,000)                  (155,000)
Total Other Expenses (Income)   (1,114,420)   —      —      —      (1,114,420)
                          
Income (Loss) Before Income Taxes   282,778    (235,296)   (55,764)   (331)   (8,613)
                          
Income tax provision   (757,442)   —      —      —      (757,442)
                          
Net Loss  $(474,664)  $(235,296)  $(55,764)  $(331)  $(766,055)
                          
Other Comprehensive Income (Loss)                         
Foreign currency translation adjustment   (162,873)   267,556    55,764    331    160,778 
                          
Comprehensive Loss  $(637,537)  $32,260   $—     $—     $(605,277)
                          
Loss per common share – basic and diluted*  $(0.05)                 $(0.08)
Weighted average number of common shares outstanding – basic and diluted*   9,308,511                   9,308,511 

 

* Adjusted for a 1 for 8 reverse stock split effective December 12, 2019.

 

 

The reconciliation of the consolidated statement of cash flows for the ix months ended June 30, 2019 is as follows:

 

   As Previously Reported 

Lease

adjustments

  Acquisition of Virtual Generation  Other Adjustments and reclassifications  As Restated
                
Cash Flows from Operating Activities                         
Net loss  $(4,803,460)  $(174)  $(72,305)  $(16,233)  $(4,892,172)
                          
Adjustments to reconcile net loss to net cash generated by operating activities                         
Depreciation and amortization   291,332    5,623    111,239    37,796    445,990 
Amortization of deferred costs   2,096,080    —      —      —      2,096,080 
Non-cash interest   409,114    —      —      —      409,114 
Loss on debt conversions   35,943              —      35,943 
Unrealized loss on trading securities   25,000    —      —      —      25,000 
Deferred taxation movements   —      —      (38,934)   —      (38,934)
Foreign translation loss   173,400    —           (173,400)   —   
Changes in Operating Assets and Liabilities                         
Prepaid expenses   (7,732)   —      —      —      (7,732)
Accounts payable and accrued liabilities   (26,789)   —      —      (417,954)   (444,743)
Accounts receivable   (57,679)   —      —      —      (57,679)
Gaming accounts receivable   357,886    —      —      —      357,886 
Gaming accounts liabilities   727,433    —      —      440,021    1,167,454 
Taxes payable   (53,941)   —      —      —      (53,941)
Other current assets   (57,163)   —      —      —      (57,163)
Long term liability   30,995    —      —      (21,699)   9,296 
Net Cash used in operating Activities   (859,581)   5,449    —      (151,469)   (1,005,601)
                          
Cash Flows from Investing Activities                         
Acquisition of property, plant, and equipment, and intangible assets   (59,253)   —      4,954    16    (54,283)
Decrease in restricted cash   100,140    —      —      (100,140)   —   
Acquisition of Virtual Generation, net of cash of $47,268   46,668    —      (262,818)   —      (216,150)
Net Cash Used in Investing Activities   87,555    —      (257,864)   (100,124)   (270,433)
                          
Cash Flows from Financing Activities                         
Proceeds from bank credit line, net   250,000    —      —      —      250,000 
Repayment of bank loan   (59,007)   —      —      —      (59,007)
Repayment of deferred purchase consideration – non-related parties   (331,913)   —      158,051    —      (173,862)
Repayment of deferred purchase consideration – related parties   (213,353)        105,367         (107,986)
Movement in financial leases   —      (5,449)   —      —      (5,449)
Advance to related party   (11,992)   —      —      —      (11,992)
Repayment of loans advanced to stockholders   6,605    —      —      —      6,605 
Net Cash Used in Financing Activities   (359,660)   (5,449)   263,418    —      (101,691)
                          
Effect of change in exchange rate   70,580    —      (5,554)   130,838    195,864 
                          
Net decrease in cash   (1,061,106)   —      —      (120,755)   (1,181,861)
Cash, cash equivalents and restricted cash  – beginning of the period   6,289,903    —      —      1,560,539    7,850,442 
Cash, cash equivalents and restricted cash – end of the period  $5,228,797   $—     $—     $1,439,784   $6,668,581 
                          
Reconciliation of cash, cash equivalents and restricted cash within the balance sheet to the statement of cash flows                         
                          
Cash and cash equivalents  $5,228,797   $—     $—     $—     $5,228,797 
Restricted cash   —                1,439,784    1,439,784 
   $5,228,797             $1,439,784   $6,668,581 

 

  

 

The reconciliation of the consolidated statement of cash flows for the six months ended June 30, 2018 is as follows:

 

   As Previously Reported 

Depreciation
and

amortization

adjustments

 

Foreign

Exchange adjustments

  Other Adjustments and reclassifications  As Restated
                
Cash Flows from Operating Activities               
Net Loss  $(474,664)  $(235,296)  $(55,764)  $(331)  $(766,055)
                          
Adjustments to reconcile net loss to net cash provided by operating activities                         
Depreciation and amortization   226,436    104,396    —      —      330,832 
Amortization of deferred costs   1,012,225    —      —      —      1,012,225 
Non-cash interest   58,188    —      —      —      58,188 
Loss on debt modification   212,270