Fiscal period values are FY, Q1, Q2, and Q3. 1st, 2nd and 3rd quarter 10-Q or 10-QT statements have value Q1, Q2, and Q3 respectively, with 10-K, 10-KT or other fiscal year statements having FY.
This is focus fiscal year of the document report in CCYY format. For a 2006 annual report, which may also provide financial information from prior periods, fiscal 2006 should be given as the fiscal year focus. Example: 2006.
The end date of the period reflected on the cover page if a periodic report. For all other reports and registration statements containing historical data, it is the date up through which that historical data is presented. If there is no historical data in the report, use the filing date. The format of the date is CCYY-MM-DD.
The type of document being provided (such as 10-K, 10-Q, 485BPOS, etc). The document type is limited to the same value as the supporting SEC submission type, or the word 'Other'.
Indicate number of shares or other units outstanding of each of registrant's classes of capital or common stock or other ownership interests, if and as stated on cover of related periodic report. Where multiple classes or units exist define each class/interest by adding class of stock items such as Common Class A [Member], Common Class B [Member] or Partnership Interest [Member] onto the Instrument [Domain] of the Entity Listings, Instrument.
Indicate 'Yes' or 'No' whether registrants (1) have filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that registrants were required to file such reports), and (2) have been subject to such filing requirements for the past 90 days. This information should be based on the registrant's current or most recent filing containing the related disclosure.
Indicate whether the registrant is one of the following: Large Accelerated Filer, Accelerated Filer, Non-accelerated Filer. Definitions of these categories are stated in Rule 12b-2 of the Exchange Act. This information should be based on the registrant's current or most recent filing containing the related disclosure.
Boolean flag that is true when the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Amount, after allowance for credit loss, of right to consideration from customer for product sold and service rendered in normal course of business, classified as current.
Carrying amount as of the balance sheet date of the unpaid sum of the known and estimated amounts payable to satisfy all currently due domestic and foreign income tax obligations.
Carrying value as of the balance sheet date of obligations incurred and payable, pertaining to costs that are statutory in nature, are incurred on contractual obligations, or accumulate over time and for which invoices have not yet been received or will not be rendered. Examples include taxes, interest, rent and utilities. Used to reflect the current portion of the liabilities (due within one year or within the normal operating cycle if longer).
Accumulated change in equity from transactions and other events and circumstances from non-owner sources, net of tax effect, at period end. Excludes Net Income (Loss), and accumulated changes in equity from transactions resulting from investments by owners and distributions to owners. Includes foreign currency translation items, certain pension adjustments, unrealized gains and losses on certain investments in debt and equity securities, other than temporary impairment (OTTI) losses related to factors other than credit losses on available-for-sale and held-to-maturity debt securities that an entity does not intend to sell and it is not more likely than not that the entity will be required to sell before recovery of the amortized cost basis, as well as changes in the fair value of derivatives related to the effective portion of a designated cash flow hedge.
Excess of issue price over par or stated value of the entity's capital stock and amounts received from other transactions involving the entity's stock or stockholders. Includes adjustments to additional paid in capital. Some examples of such adjustments include recording the issuance of debt with a beneficial conversion feature and certain tax consequences of equity instruments awarded to employees. Use this element for the aggregate amount of additional paid-in capital associated with common and preferred stock. For additional paid-in capital associated with only common stock, use the element additional paid in capital, common stock. For additional paid-in capital associated with only preferred stock, use the element additional paid in capital, preferred stock.
Sum of the carrying amounts as of the balance sheet date of all assets that are recognized. Assets are probable future economic benefits obtained or controlled by an entity as a result of past transactions or events.
Sum of the carrying amounts as of the balance sheet date of all assets that are expected to be realized in cash, sold, or consumed within one year (or the normal operating cycle, if longer). Assets are probable future economic benefits obtained or controlled by an entity as a result of past transactions or events.
Sum of the carrying amounts as of the balance sheet date of all assets that are expected to be realized in cash, sold or consumed after one year or beyond the normal operating cycle, if longer.
Amount of currency on hand as well as demand deposits with banks or financial institutions. Includes other kinds of accounts that have the general characteristics of demand deposits. Also includes short-term, highly liquid investments that are both readily convertible to known amounts of cash and so near their maturity that they present insignificant risk of changes in value because of changes in interest rates. Excludes cash and cash equivalents within disposal group and discontinued operation.
Aggregate par or stated value of issued nonredeemable common stock (or common stock redeemable solely at the option of the issuer). This item includes treasury stock repurchased by the entity. Note: elements for number of nonredeemable common shares, par value and other disclosure concepts are in another section within stockholders' equity.
The portion of the carrying value of long-term convertible debt as of the balance sheet date that is scheduled to be repaid within one year or in the normal operating cycle if longer. Convertible debt is a financial instrument which can be exchanged for a specified amount of another security, typically the entity's common stock, at the option of the issuer or the holder.
The aggregate amount of receivables to be collected from related parties where one party can exercise control or significant influence over another party; including affiliates, owners or officers and their immediate families, pension trusts, and so forth, at the financial statement date. which are usually due within one year (or one business cycle).
Amount after accumulated impairment loss of an asset representing future economic benefits arising from other assets acquired in a business combination that are not individually identified and separately recognized.
Sum of the carrying amounts of all intangible assets, excluding goodwill, as of the balance sheet date, net of accumulated amortization and impairment charges.
Sum of the carrying amounts as of the balance sheet date of all liabilities that are recognized. Liabilities are probable future sacrifices of economic benefits arising from present obligations of an entity to transfer assets or provide services to other entities in the future.
Total obligations incurred as part of normal operations that are expected to be paid during the following twelve months or within one business cycle, if longer.
The carrying value as of the balance sheet date of the current portion of long-term obligations drawn from a line of credit, which is a bank's commitment to make loans up to a specific amount. Examples of items that might be included in the application of this element may consist of letters of credit, standby letters of credit, and revolving credit arrangements, under which borrowings can be made up to a maximum amount as of any point in time conditional on satisfaction of specified terms before, as of and after the date of drawdowns on the line. Includes short-term obligations that would normally be classified as current liabilities but for which (a) postbalance sheet date issuance of a long term obligation to refinance the short term obligation on a long term basis, or (b) the enterprise has entered into a financing agreement that clearly permits the enterprise to refinance the short-term obligation on a long term basis and the following conditions are met (1) the agreement does not expire within 1 year and is not cancelable by the lender except for violation of an objectively determinable provision, (2) no violation exists at the BS date, and (3) the lender has entered into the financing agreement is expected to be financially capable of honoring the agreement.
Including the current and noncurrent portions, carrying value as of the balance sheet date of loans from a bank with maturities initially due after one year or beyond the normal operating cycle if longer.
Carrying value as of the balance sheet date of current portion of long-term loans payable to bank due within one year or the operating cycle if longer.
Including the current and noncurrent portions, aggregate carrying amount of all types of notes payable, as of the balance sheet date, with initial maturities beyond one year or beyond the normal operating cycle, if longer.
Aggregate par or stated value of issued nonredeemable preferred stock (or preferred stock redeemable solely at the option of the issuer). This item includes treasury stock repurchased by the entity. Note: elements for number of nonredeemable preferred shares, par value and other disclosure concepts are in another section within stockholders' equity.
Amount of asset related to consideration paid in advance for costs that provide economic benefits within a future period of one year or the normal operating cycle, if longer.
Amount after accumulated depreciation, depletion and amortization of physical assets used in the normal conduct of business to produce goods and services and not intended for resale. Examples include, but are not limited to, land, buildings, machinery and equipment, office equipment, and furniture and fixtures.
The noncurrent cash, cash equivalents and investments that is restricted as to withdrawal or usage. Restrictions may include legally restricted deposits held as compensating balances against borrowing arrangements, contracts entered into with others, or entity statements of intention with regard to particular deposits classified as long-term; that is not expected to be released from such existing restrictions within one year of the balance sheet date or operating cycle, whichever is longer. Excludes compensating balance arrangements that are not agreements which legally restrict the use of cash amounts shown on the balance sheet. Includes noncurrent cash equivalents and investments that are similarly restricted as to withdrawal, usage or disposal.
Total of all stockholders' equity (deficit) items, net of receivables from officers, directors, owners, and affiliates of the entity which are attributable to the parent. The amount of the economic entity's stockholders' equity attributable to the parent excludes the amount of stockholders' equity which is allocable to that ownership interest in subsidiary equity which is not attributable to the parent (noncontrolling interest, minority interest). This excludes temporary equity and is sometimes called permanent equity.
Total number of common shares of an entity that have been sold or granted to shareholders (includes common shares that were issued, repurchased and remain in the treasury). These shares represent capital invested by the firm's shareholders and owners, and may be all or only a portion of the number of shares authorized. Shares issued include shares outstanding and shares held in the treasury.
The maximum number of nonredeemable preferred shares (or preferred stock redeemable solely at the option of the issuer) permitted to be issued by an entity's charter and bylaws.
Total number of nonredeemable preferred shares (or preferred stock redeemable solely at the option of the issuer) issued to shareholders (includes related preferred shares that were issued, repurchased, and remain in the treasury). May be all or portion of the number of preferred shares authorized. Excludes preferred shares that are classified as debt.
Aggregate share number for all nonredeemable preferred stock (or preferred stock redeemable solely at the option of the issuer) held by stockholders. Does not include preferred shares that have been repurchased.
Amount of noncash expense included in interest expense to amortize debt discount and premium associated with the related debt instruments. Excludes amortization of financing costs. Alternate captions include noncash interest expense.
Amount after tax of increase (decrease) in equity from transactions and other events and circumstances from net income and other comprehensive income, attributable to parent entity. Excludes changes in equity resulting from investments by owners and distributions to owners.
The amount of net income or loss for the period per each share in instances when basic and diluted earnings per share are the same amount and reported as a single line item on the face of the financial statements. Basic earnings per share is the amount of net income or loss for the period per each share of common stock or unit outstanding during the reporting period. Diluted earnings per share includes the amount of net income or loss for the period available to each share of common stock or common unit outstanding during the reporting period and to each share or unit that would have been outstanding assuming the issuance of common shares or units for all dilutive potential common shares or units outstanding during the reporting period.
The aggregate total of expenses of managing and administering the affairs of an entity, including affiliates of the reporting entity, which are not directly or indirectly associated with the manufacture, sale or creation of a product or product line.
Consideration given by issuer of convertible debt to provide an incentive for debt holders to convert the debt to equity securities. The expense is equal to the fair value of all securities and other consideration transferred in the transaction in excess of the fair value of securities issuable pursuant to the original conversion terms.
The aggregate amount of gains or losses resulting from nonoperating activities (for example, interest and dividend revenue, property, plant and equipment impairment loss, and so forth).
Amount of revenue recognized from goods sold, services rendered, insurance premiums, or other activities that constitute an earning process. Includes, but is not limited to, investment and interest income before deduction of interest expense when recognized as a component of revenue, and sales and trading gain (loss).
Adjustment to additional paid in capital resulting from the recognition of convertible debt instruments as two separate components - a debt component and an equity component. This bifurcation may result in a basis difference associated with the liability component that represents a temporary difference for purposes of applying accounting for income taxes. The initial recognition of deferred taxes for the tax effect of that temporary difference is as an adjustment to additional paid in capital.
Amount of decrease in additional paid in capital (APIC) resulting from direct costs associated with issuing stock. Includes, but is not limited to, legal and accounting fees and direct costs associated with stock issues under a shelf registration.
Number of shares of stock issued as of the balance sheet date, including shares that had been issued and were previously outstanding but which are now held in the treasury.
Total of all stockholders' equity (deficit) items, net of receivables from officers, directors, owners, and affiliates of the entity which are attributable to the parent. The amount of the economic entity's stockholders' equity attributable to the parent excludes the amount of stockholders' equity which is allocable to that ownership interest in subsidiary equity which is not attributable to the parent (noncontrolling interest, minority interest). This excludes temporary equity and is sometimes called permanent equity.
Amount of currency on hand as well as demand deposits with banks or financial institutions. Includes other kinds of accounts that have the general characteristics of demand deposits. Also includes short-term, highly liquid investments that are both readily convertible to known amounts of cash and so near their maturity that they present insignificant risk of changes in value because of changes in interest rates. Excludes cash and cash equivalents within disposal group and discontinued operation.
Amount of increase (decrease) in cash and cash equivalents. Cash and cash equivalents are the amount of currency on hand as well as demand deposits with banks or financial institutions. Includes other kinds of accounts that have the general characteristics of demand deposits. Also includes short-term, highly liquid investments that are both readily convertible to known amounts of cash and so near their maturity that they present insignificant risk of changes in value because of changes in interest rates. Includes effect from exchange rate changes.
Amount of cash and cash equivalents, and cash and cash equivalents restricted to withdrawal or usage. Excludes amount for disposal group and discontinued operations. Cash includes, but is not limited to, currency on hand, demand deposits with banks or financial institutions, and other accounts with general characteristics of demand deposits. Cash equivalents include, but are not limited to, short-term, highly liquid investments that are both readily convertible to known amounts of cash and so near their maturity that they present insignificant risk of changes in value because of changes in interest rates.
The aggregate expense recognized in the current period that allocates the cost of tangible assets, intangible assets, or depleting assets to periods that benefit from use of the assets.
The increase (decrease) during the reporting period in the amount due from customers for the credit sale of goods and services; includes accounts receivable and other types of receivables.
The increase (decrease) during the reporting period in amount due within one year (or one business cycle) from customers for the credit sale of goods and services.
The increase (decrease) during the reporting period in the account that represents the temporary difference that results from Income or Loss that is recognized for accounting purposes but not for tax purposes and vice versa.
The increase (decrease) during the reporting period in receivables to be collected from other entities that could exert significant influence over the reporting entity.
The increase (decrease) during the reporting period in the amounts payable to taxing authorities for taxes that are based on the reporting entity's earnings, net of amounts receivable from taxing authorities for refunds of overpayments or recoveries of income taxes.
The increase (decrease) during the reporting period in the amount of outstanding money paid in advance for goods or services that bring economic benefits for future periods.
Amount of cash paid for interest, including, but not limited to, capitalized interest and payment to settle zero-coupon bond attributable to accreted interest of debt discount and debt instrument with insignificant coupon interest rate in relation to effective interest rate of borrowing attributable to accreted interest of debt discount; classified as operating and investing activities.
Amount of cash inflow (outflow) from financing activities, including discontinued operations. Financing activity cash flows include obtaining resources from owners and providing them with a return on, and a return of, their investment; borrowing money and repaying amounts borrowed, or settling the obligation; and obtaining and paying for other resources obtained from creditors on long-term credit.
Amount of cash inflow (outflow) from investing activities, including discontinued operations. Investing activity cash flows include making and collecting loans and acquiring and disposing of debt or equity instruments and property, plant, and equipment and other productive assets.
Amount of cash inflow (outflow) from operating activities, including discontinued operations. Operating activity cash flows include transactions, adjustments, and changes in value not defined as investing or financing activities.
The cash outflow for a loan, supported by a promissory note, granted to related parties where one party can exercise control or significant influence over another party; including affiliates, owners or officers and their immediate families, pension trusts, and so forth.
Interest paid other than in cash for example by issuing additional debt securities. As a noncash item, it is added to net income when calculating cash provided by or used in operations using the indirect method.
The cash outflow associated with the acquisition of long-lived, physical assets that are used in the normal conduct of business to produce goods and services and not intended for resale; includes cash outflows to pay for construction of self-constructed assets.
The cash inflow from the issuance of a long-term debt instrument which can be exchanged for a specified amount of another security, typically the entity's common stock, at the option of the issuer or the holder.
The cash inflow from a long-term borrowing made from related parties where one party can exercise control or significant influence over another party; including affiliates, owners or officers and their immediate families, pension trusts, and so forth. Alternate caption: Proceeds from Advances from Affiliates.
Amount of cash restricted as to withdrawal or usage. Cash includes, but is not limited to, currency on hand, demand deposits with banks or financial institutions, and other accounts with general characteristics of demand deposits.
Amount of net unrealized gain (loss) related to the change in fair value of foreign currency exchange rate derivatives designated as cash flow hedging instruments. Recorded in accumulated other comprehensive income to the extent that the cash flow hedge is determined to be effective.
The cash outflow associated with the acquisition of a controlling interest in another entity or an entity that is related to it but not strictly controlled (for example, an unconsolidated subsidiary, affiliate, joint venture or equity method investment).
On November 2, 2020, the Company filed a Certificate
of Amendment to its Certificate of Incorporation with the Secretary of State of the State of Delaware to reflect its corporate
name change from Newgioco Group, Inc. to Elys Game Technology, Corp.
Established in the state of Delaware in 1998,
Elys Game Technology, Corp. (“Elys” or the “Company”) is an international, vertically integrated commercial-stage
company engaged in various aspects of the leisure gaming industry. The Company is a licensed gaming operator in the regulated Italian
leisure betting market offering gaming services, including a variety of lottery, casino gaming and sports betting products through
two distribution channels: an online channel and a land-based retail channel. Additionally, the Company is a global gaming technology
company (known as a “Provider”), which owns and operates a betting software designed with a unique “distributed
model” (“shop-client”) software architecture colloquially named Elys Game Board (the “Platform”).
The Platform is a fully integrated “omni-channel” framework that combines centralized technology for updating, servicing
and operations with multi-channel functionality to accept all forms of customer payment through the two distribution channels described
above. The omni-channel software design is fully integrated with a built-in player gaming account management system and sports
book.
The entities included in these unaudited condensed
consolidated financial statements are as follows:
The Company distributed all of the earnings
of Naos Holdings Limited and dissolved the Company effective December 31, 2019.
The operations of the Company’s previous
subsidiary, Rifa Srl, were absorbed into the operations of Multigioco Srl with effect from January 30, 2020, the remaining legal
entity was dissolved with effect from January 20, 2020.
The Company operates in two lines of business:
(i) provider of certified betting platform software services to leisure betting establishments in Italy and 11 other countries
and; (ii) the operating of web based as well as land based leisure betting establishments situated throughout Italy. The Company’s
operations are carried out through the following three geographically organized groups:
a)
an operational group is based in Europe and maintains administrative offices headquartered in Rome, Italy with satellite offices for operations administration in Naples and Teramo, Italy and San Gwann, Malta;
b)
a technology group which is based in Innsbruck, Austria and manages software development, training and administration; and
c)
a corporate group which is based in North America and operates out of our principal executive offices in Toronto, Canada and U.S. offices in Fort Lauderdale and Boca
Raton, Florida, through which we carry-out corporate activities, handle day-to-day reporting and U.S. development planning, and
through which various employees, independent contractors and vendors are engaged.
The entire disclosure for the nature of an entity's business, major products or services, principal markets including location, and the relative importance of its operations in each business and the basis for the determination, including but not limited to, assets, revenues, or earnings. For an entity that has not commenced principal operations, disclosures about the risks and uncertainties related to the activities in which the entity is currently engaged and an understanding of what those activities are being directed toward.
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 nine months ended September 30, 2020 are not necessarily indicative of the results that may be expected
for the fiscal year ending December 31, 2020. The balance sheet at December 31, 2019 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, 2019, 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.
Impact of COVID-19
As a result of the global outbreak of the COVID-19
virus, on March 8, 2020 the Italian government issued a decree which imposed certain restrictions and closures of public gatherings
and travel which included betting shops, arcades and bingo halls across Italy until April 3, 2020. Accordingly, the Company temporarily
closed approximately 150 betting shop locations throughout Italy as a result of the decree until May 4, 2020, when the Company
began reopening physical web-shop locations. Subsequently, on March 10, 2020 the Italian government imposed further restrictions
on travel throughout Italy as well as transborder crossings and have either postponed or cancelled most professional sports events
which has had an effect on the Company’s overall sports betting handle and revenues and may negatively impact the Company’s
operating results. On June 19, 2020 all land-based betting shops, including corner locations such as coffee shops throughout Italy
reopened. The closing of physical betting shop locations did not affect our online and mobile business operations which mitigated
some of the impact. To date, despite the global resurgence of COVID-19 cases, all betting shops remain open for business, however
the Italian Government is closely monitoring the pandemic and has indicated that although it’s important to keep the economy
operational, it may be compelled to impose limited restrictions on social gatherings.
We anticipate that COVID-19 will continue to
negatively impact our operating results in future periods, however, the duration and scope of the COVID-19 outbreak worldwide,
including the impact to the state and local economies is not readily determinable at this time.
Principles of consolidation
The unaudited condensed consolidated financial
statements include the financial statements of the Company and its subsidiaries, all of which are wholly-owned. All significant
inter-company accounts and transactions have been eliminated in the unaudited condensed consolidated financial statements.
Certain items in the prior periods were reclassified
to conform to the current period presentation.
Foreign operations
The Company translated the assets and liabilities
of its foreign subsidiaries into US Dollars at the exchange rate in effect at year end and the results of operations and cash flows
at the average rate throughout the year. The translation adjustments are recorded directly as a separate component of stockholders’
equity, while transaction gains (losses) are included in net income (loss).
All revenues were generated in Euro and Colombian
Pesos during the years presented.
Gains and losses from foreign currency transactions
are recognized in current operations.
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.
Use of Estimates
The preparation of unaudited condensed consolidated
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, leasing arrangements,
convertible debentures, contingencies 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
the Company’s industry and general economic conditions. It is possible that these external factors could have an effect on
the Company’s estimates that could cause actual results to differ from the Company’s estimates. The Company re-evaluates
all of its 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 the Company’s 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 it believes that it is both probable
that a loss has been incurred, and the amount can be reasonably estimated. If the Company determines that a loss is possible, and
a range of the loss can be reasonably estimated, it discloses the range of the possible loss in the Notes to the unaudited condensed
Consolidated Financial Statements.
The Company evaluates, on a regular basis,
developments in its 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 makes 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 the Company’s estimates and assumptions change or prove to have been incorrect, it could have a material impact
on its 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 the Company’s operations or financial
condition. The Company has insured and continues to insure against most of these types of claims.
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 using estimates and assumptions developed by us, which reflect those that a market participant
would use.
The carrying value of the Company's accounts
receivables, gaming accounts receivable, lines of credit - bank, accounts payable, gaming accounts payable and bank loans payable
approximate fair value because of the short-term maturity of these financial instruments.
Derivative Financial Instruments
ASC 815 generally provides three criteria that,
if met, require companies to bifurcate conversion options from their host instruments and account for them as free standing derivative
financial instruments. These three criteria include circumstances in which (a) the economic characteristics and risks of the embedded
derivative instrument are not clearly and closely related to the economic characteristics and risks of the host contract, (b) the
hybrid instrument that embodies both the embedded derivative instrument and the host contract is not re- measured at fair value
under otherwise applicable generally accepted accounting principles with changes in fair value reported in earnings as they occur
and (c) a separate instrument with the same terms as the embedded derivative instrument would be considered a derivative instrument
subject to the requirements of ASC 815. ASC 815 also provides an exception to this rule when the host instrument is deemed to be
conventional, as described.
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 September 30, 2020 and December 31, 2019, respectively.
The Company primarily places cash balances
in the United States 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 a bad debt expense of $214,820 and
$0 for the three months ended September 30, 2020, respectively, and $214,820 and $0 for nine months ended September 30, 2020 and
2019, respectively.
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 of winnings 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
its 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 is 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 operations 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)
Leasehold improvements
Life of the underlying lease
Computer and office equipment
3 to5
Furniture and fittings
7 to 10
Computer Software
3 to 5
Vehicles
4 to 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
Indefinite
Multigioco and Rifa ADM Licenses
1.5 - 7
Location contracts
5 - 7
Customer relationships
10 - 15
Trademarks/Tradenames
14
Websites
5
The Ulisse Bookmaker has no expiration date
and is 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 goodwill exceeds their fair value and, if necessary, records an impairment loss equal to any such excess. Each interim
reporting period, the Company performs a qualitative assessment to determine whether events or circumstances have occurred which
indicate that the carrying amount of goodwill exceeds its fair value. If there are indications that impairment may be appropriate
the Company will perform a quantitative analysis to determine if impairment is necessary.
As of September 30, 2020, there were no qualitative
indications that impairment of intangible assets or goodwill may be appropriate. Although the COVID-19 pandemic had and is expected
to have an impact on the Company’s business, the impact is expected to be temporary and the Company has a mitigating factor
in that the web-based turnover generated by the Company has increased, mitigating a portion of the effect of the COVID-19 pandemic
on the Company's land-based turnover.
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. The Company has no material uncertain tax positions for any of the reporting periods presented.
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
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 betting 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.
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 options and warrants
granted and convertible debt, adding back any expenditure directly associated with the convertible instruments, if any. When the
Company incurs a net loss, the effect of the Company’s outstanding stock options and warrants and convertible debt are not
included in the calculation of diluted earnings (loss) per share as the effect would be anti-dilutive.
On December 12, 2019, the Company effected
a 1 for 8 reverse stock split, all references made to share or per share amounts in the accompanying unaudited condensed consolidated
financial statements and applicable disclosures have been retroactively adjusted to reflect the reverse stock split.
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
In August 2020, the FASB issued ASU No. 2020-06,
debt with Conversion and Other Options (subtopic 470-20): and Derivatives and Hedging – Contracts in Entity’s Own Equity
(Subtopic 815-40). Certain accounting models for convertible debt instruments with beneficial conversion features or cash conversion
features are removed from the guidance and for equity instruments the contracts affected are free standing instruments and embedded
features that are accounted for as derivatives, the settlement assessment was simplified by removing certain settlement requirements.
This ASU is effective for fiscal years and
interim periods beginning after December 15, 2021.
The effects of this ASU on the Company’s
condensed consolidated financial statements is currently being assessed and is expected to have an immaterial impact on the financial
statements.
In June 2016, the FASB issued ASU No. 2016-13,
Financial Instruments-Credit Losses (Topic 326): “Measurement of Credit Losses on Financial Instruments”, which replaces
the incurred loss methodology with an expected credit loss methodology that is referred to as the current expected credit loss
(CECL) methodology. ASU 2016-13 is effective for fiscal years beginning after December 15, 2019, with early adoption permitted.
The amendments in this update are required to be applied using the modified retrospective method with an adjustment to accumulated
deficit and are effective for the Company beginning with fiscal year 2020, including interim periods. The measurement of expected
credit losses under the CECL methodology is applicable to financial assets measured at amortized cost, including loan receivables
and held-to-maturity debt securities. An entity with trade receivables will be required to use historical loss information, current
conditions, and reasonable and supportable forecasts to determine expected lifetime credit losses. Pooling of assets with similar
risk characteristics is also required.
Since adopted on January 1, 2020, there has
not been any material impact on the Company’s financial position, results of operations, and related disclosures.
In December 2019, the FASB issued ASU 2019-12,
Income Taxes (Topic 740), this update reduce the complexity in accounting for income taxes by removing certain exceptions
to accounting for income taxes and deferred taxes and simplifying the accounting treatment of franchise taxes, a step up in the
tax basis of goodwill as part of business combinations, the allocation of current and deferred tax to a legal entity not subject
to tax in its own financial statements, reflecting changes in tax laws or rates in the annual effective rate in interim periods
that include the enactment date and minor codification improvements.
This ASU is effective for fiscal years and
interim periods beginning after December 15, 2020.
The effects of this ASU on the Company’s
financial statements is not considered to be material.
The FASB issued several updates during the
period, none of these standards are either applicable to the Company or require adoption at a future date and none are expected
to have a material impact on the consolidated financial statements upon adoption.
Reporting by segment
The Company has two operating segments from
which it derives revenue. These segments are:
(i)
provider of certified betting Platform software services to leisure
betting establishments in Italy and 11 other countries and;
(ii)
the operating of web based as well as land based leisure betting
establishments situated throughout Italy.
Comparatives
Certain items in the prior year were reclassified
to conform to the current period presentation. These reclassifications had no impact on net loss or comprehensive loss.
On January 17, 2019, the Company entered into
a Share Purchase Agreement (“VG SPA”), with the shareholders of VG organized under the laws of Republic of Malta (the
“VG Sellers”) and acquired all of the issued and outstanding ordinary shares of VG, together with all the ordinary
shares of Naos Holding Limited, a company organized under the laws of Republic of Malta (“Naos”) that owned 3,999 of
the 4,000 issued and outstanding ordinary shares of VG. VG owns and has developed a virtual gaming software platform.
In terms of the agreement, the purchase price
was allocated to the fair market value of tangible and intangible assets acquired and liabilities assumed, as follows:
Amount
Purchase consideration, net of discount of $382,778
$
4,193,375
Fair value of assets acquired
Cash
47,268
Current assets
178,181
Property, Plant and Equipment
41,473
Betting Platform
4,004,594
4,271,516
Less: liabilities assumed
(78,141
)
Less: Imputed Deferred taxation on identifiable intangible acquired (Betting Platform)
(1,401,608
)
Total identifiable assets less liabilities assumed
2,791,767
Goodwill arising on acquisition
1,401,608
Total purchase consideration
$
4,193,375
The Betting Platform value was determined by
management, based on prior experience, and is being amortized over a period of 15 years, the expected useful life.
The entire disclosure for a business combination (or series of individually immaterial business combinations) completed during the period, including background, timing, and recognized assets and liabilities. The disclosure may include leverage buyout transactions (as applicable).
cash held in a segregated bank account at Intesa Sanpaolo Bank S.p.A. (“Intesa Sanpaolo Bank”) as collateral against the Company’s operating line of credit with Intesa Sanpaolo Bank as well as Wirecard Bank as a security deposit for Ulisse betting operations.
·
The Company previously maintained a $1,000,000 deposit at Metropolitan
Commercial bank as security against a $1,000,000 line of credit. See Note 10. This line of credit was repaid during August 2020
and the cash deposit is no longer restricted.
The entire disclosure for cash and cash equivalent footnotes, which may include the types of deposits and money market instruments, applicable carrying amounts, restricted amounts and compensating balance arrangements. Cash and equivalents include: (1) currency on hand (2) demand deposits with banks or financial institutions (3) other kinds of accounts that have the general characteristics of demand deposits (4) short-term, highly liquid investments that are both readily convertible to known amounts of cash and so near their maturity that they present insignificant risk of changes in value because of changes in interest rates. Generally, only investments maturing within three months from the date of acquisition qualify.
The aggregate depreciation charge to operations
was $173,983 and $169,892 for the nine months ended September 30, 2020 and 2019, respectively. The depreciation policies followed
by the Company are described in Note 2.
The entire disclosure for long-lived, physical asset used in normal conduct of business and not intended for resale. Includes, but is not limited to, work of art, historical treasure, and similar asset classified as collections.
The entire disclosure for lessee entity's leasing arrangements including, but not limited to, all of the following: (a.) The basis on which contingent rental payments are determined, (b.) The existence and terms of renewal or purchase options and escalation clauses, (c.) Restrictions imposed by lease agreements, such as those concerning dividends, additional debt, and further leasing.
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 and the impairment is deemed to be permanent in nature.
The Company recorded $527,011 and $511,929
in amortization expense for finite-lived assets for the nine months ended September 30, 2020 and 2019, respectively.
Licenses obtained by the Company in the acquisitions
of Multigioco and Rifa include a Gioco a Distanza (“GAD”) online license as well as a Bersani and Monti land-based
licenses issued by the Italian gaming regulator to Multigioco and Rifa, respectively, as well as an Austrian Bookmaker License
through the acquisition of Ulisse.
Goodwill represents the excess purchase price
paid over the fair value of assets acquired, including any other identifiable intangible assets.
On January 30, 2019, the Company acquired VG,
as disclosed in Note 3 above. The goodwill on acquisition arose as the proceeds paid on acquisition exceeded the fair value of
the identifiable assets less assumed liabilities and imputed deferred tax liabilities on identifiable intangible assets by $1,401,608.
The Company evaluates goodwill for impairment
on an annual basis during the last month of each year and at an interim date if indications of impairment exist. Goodwill 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 and the impairment is deemed to be permanent in nature.
Investments in marketable securities consists
of 2,500,000 shares of Zoompass Holdings (“Zoompass”) and is accounted for at fair value, with changes recognized in
earnings.
The shares of Zoompass were last quoted on
the OTC market at $0.26 per share on September 30, 2020, resulting in an unrealized gain recorded to earnings related to these
securities of $472,500 and an unrealized gain of $100,000 for the nine months ended September 30, 2020 and 2019, respectively.
The entire disclosure for financial instruments. This disclosure includes, but is not limited to, fair value measurements of short and long term marketable securities, international currencies forward contracts, and auction rate securities. Financial instruments may include hedging and non-hedging currency exchange instruments, derivatives, securitizations and securities available for sale at fair value. Also included are investment results, realized and unrealized gains and losses as well as impairments and risk management disclosures.
The Company maintained a $1,000,000 secured
revolving line of credit from Metropolitan Commercial Bank in New York, which bore a fixed rate of interest of 3.00% on the outstanding
balance with an interest only monthly minimum payment, no maturity or due date and was secured by a $1,000,000 security deposit,
see Note 4. The line of credit was repaid during August 2020.
The accounting treatment relating to the convertible
debentures issued was in accordance with the guidance in ASC 480 and ASC 815.
As of September 30, 2020 and December 31, 2019,
the Company has outstanding, US Dollar convertible debentures in the aggregate principal amount of $100,000 and $2,083,000, respectively
and Canadian Dollar denominated convertible debentures in the aggregate principal amount of CDN$307,000 (approximately $230,423)
and CDN$1,794,600 (approximately $1,381,737), respectively. The aggregate principal amount of convertible debentures outstanding
at September 30, 2020, was repaid during the period ended November 16, 2020.
During the nine months ended September 30,
2020 and the year ended December 31, 2019, investors in Canadian Dollar convertible debentures converted an aggregate principal
amount of CDN$317,600 and CDN$5,006,565, respectively including interest thereon of CDN$45,029 and CDN$770,705, respectively,
and investors in US Dollar convertible debentures converted an aggregate principal amount of $400,000 and $1,185,000, respectively,
including interest thereon of $70,492 and $133,959, respectively, into 230,326 and 1,866,528 shares of common stock, respectively.
The Aggregate convertible debentures outstanding
consisted of the following:
In terms of the acquisition of VG on January
31, 2019, disclosed in Note 3 above, the Company issued non-interest bearing promissory notes of €3,803,000 owing to both
related parties and non-related parties. The value of the promissory notes payable related parties was €1,521,200 and to non-related
parties was €2,281,800.
The promissory notes payable to non-related
parties is to be settled as follows:
(a)
an aggregate of €1,435,200 in cash in 23 equal and consecutive monthly instalments of €62,400 with the first such payment due and payable on the date that was one month after the Closing Date; and
(b)
an aggregate of €846,600 in shares of the Company’s common stock in 17 equal and consecutive monthly instalments of €49,800 as determined by the average of the closing prices of such shares on the last 10 trading days immediately preceding the determination date of each monthly issuance, which issuances commenced on March 1, 2019.
Pursuant to the terms of the Purchase Agreement
that the Company entered into with VG, the Company agreed to pay the VG Sellers an earnout payment in shares of our common stock
equal to an aggregate amount of €500,000 (approximately $561,500), if the amounts of bets made by users of the VG platform
grew by more than 5% for the year ended December 31, 2019 compared to the year ended December 31, 2018, based on the 18,449,380
tickets sold in 2019 VG qualified for the earnout payment of 132,735 shares of common stock at a price of $4.23 per share, which
shares were issued effective January 2020.
The amount due to the non-related VG Sellers
amounted to €300,000 (approximately $336,810) and was settled during January 2020 by the issuance of 79,641 shares of common
stock at $4.23 per share.
The movement on deferred purchase consideration consists
of the following:
In September 2016, the Company obtained a loan
of €500,000 (approximately $580,000) from Intesa Sanpaolo Bank in Italy, which loan is secured by the Company's assets. The
loan has an underlying interest rate of 4.5 points above Euro Inter Bank Offered Rate, subject to quarterly review and is amortized
over 57 months ending March 31, 2021. Monthly repayments of €9,760 (approximately $11,000) began in January 2017.
The Company made payments in the aggregate
principal amount of €27,165 (approximately $30,539) for the nine months ended September 30, 2020.
The Company was granted a CDN$40,000 (approximately
$29,822) COVID assistance loan on April 20, 2020, with a term of 68 months and a coupon of 0%.
Other long term liabilities represents the
Italian “Trattamento di Fine Rapporto” 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:
Effective September 21, 2020, the Board of
Directors (the “Board”) appointed Mr. Monteverdi, as President of the Company.
Mr. Monteverdi has previously served as an
independent strategic advisor to the Company since March 2020 and has developed a firm understanding of the unique technological
capabilities of the Company’s Elys Game Board betting platform and has established a strong rapport with the Company’s
current management team.
In connection with his appointment, the Company
and Mr. Monteverdi have entered into a written employment agreement (the “Employment Agreement”) for an initial four-year
term, which provides for the following compensation terms:
·
an annual base salary of $395,000 subject to increase, but not decrease, at the discretion of the Board;
·
the opportunity to earn a Management by Objectives bonus (“MBO Bonus”) of 0 to 100% of annual base salary with a target bonus of 50% upon the achievement of 100% of a target objective that is mutually agreed on by both the Company and Mr. Monteverdi; and
·
Equity Incentive Options to purchase 648,000 shares of common stock that vest pro rata on each of September 1, 2021, September 1, 2022, September 1, 2023 and September 1, 2024.
Mr. Monteverdi is also eligible to participate
in the Company’s 2018 Equity Incentive Plan and to participate in the Company’s employee benefit plans as in effect
from time to time on the same basis as generally made available to other senior executives of the Company or in the alternative
may substitute the payment amount that would be paid for health benefits towards contributions to a 401k plan.
In addition, the Employment Agreement also
provides for certain payments and benefits in the event of a termination of his employment under specific circumstances. If, during
the term of the Employment Agreement, his employment is terminated by the Company other than for “cause,” death or
disability or by Mr. Monteverdi for “good reason” (each as defined in his agreement), he would be entitled to receive
from the Company in equal installments over a period of six (6) months (1) an amount equal to one (1) times the sum of: (A) his
base salary and (B) an amount equal to the highest annual MBO Bonus paid to him (if any) in respect of the two (2) most recent
fiscal years of the Company but not more than his MBO Bonus for the-then current fiscal year (provided if such termination occurs
within the first twelve (12) months of the Agreement, the amount shall be Executive’s MBO Bonus for the-then current fiscal
year); (2) in lieu of any MBO Bonus for the year in which such termination occurs, payment of an amount equal to (A) the MBO Bonus
(if any) which would have been payable to Mr. Monteverdi had he remained in employment with the Company during the entire year
in which such termination occurred, multiplied by (B) a fraction the numerator of which is the number of days Mr. Monteverdi was
employed in the year in which such termination occurs and the denominator of which is the total number of days in the year in which
such termination occurs. In addition, he will be entitled to continue to receive under the Employment Agreement an amount equal
to the reimbursement of up to $2,000 a month in third-party medical and welfare benefits for Mr. Monteverdi and his dependents,
until the earlier of: (A) a period of twelve (12) months after the termination date, or (B) the date Mr. Monteverdi becomes eligible
to receive such coverage under a subsequent employer’s insurance plan.
Mr. Monteverdi’s receipt of the termination
payments and benefits is contingent upon execution of a general release of any and all claims arising out of or related to his
employment with the Company and the termination of his employment, and compliance with the restrictive covenants described in the
following paragraph.
Notes Payable, Related Party
The Company received an advance of $301,071
in terms of a Promissory Note (“PN”) entered into with Forte Fixtures and Millwork, Inc., a Company controlled by the
brother of our CEO. The PN bears no interest and is repayable on demand.
The movement on notes payable, Related Party,
consists of the following:
September 30,
2020
December 31,
2019
Principal Outstanding
Opening balance
$
—
$
318,078
Additions
301,071
—
Settled by issuance of common shares
—
(318,078
)
301,071
—
Accrued Interest
Opening balance
—
113,553
Interest expense
—
25,830
Conversion to equity
—
(139,383
)
—
—
Promissory Notes Payable – Related Party
$
301,071
$
—
Deferred Purchase consideration, Related
Party
In terms of the acquisition of VG on January
17, 2019, disclosed in Note 3 above, the Company issued non-interest bearing promissory notes in the principal amount of €3,803,000
owing to both related parties and non-related parties. The value of the promissory notes payable to non-related parties was €2,281,800
and to related parties was €1,521,200.
The related party promissory notes are due
to Luca Pasquini, a director and officer of the Company and Gabriele Peroni, an officer of the Company.
The promissory notes are to be settled as follows:
(a)
an aggregate of €956,800 in cash in 23 equal and consecutive monthly instalments of €41,600 with the first such payment due and payable on the date that is one month after the closing of the acquisition (the “Closing Date”); and
(b)
an aggregate of €564,400 in shares of the Company’s common stock in 17 equal and consecutive monthly instalments of €33,200 as determined by the average of the closing prices of such shares on the last 10 trading days immediately preceding the determination date of each monthly issuance, commencing on March 1, 2019.
Pursuant to the terms of the Purchase Agreement
that the Company entered into with VG, the Company agreed to pay the VG Sellers an earnout payment in shares of our common stock
equal to an aggregate amount of €500,000 (approximately $561,500), if the amounts of bets made by users of the VG platform
grew by more than 5% for the year ended December 31, 2019 compared to the year ended December 31, 2018, based on the 18,449,380
tickets sold in 2019 VG qualified for the earnout payment of 132,735 shares of common stock at a price of $4.23 per share, which
shares were issued effective January 2020.
The amount due to the related party VG Sellers
amounted to €200,000 (approximately $224,540) and was settled during January 2020 by the issuance of 53,094 shares of common
stock at $4.23 per share.
The movement on deferred purchase consideration
consists of the following:
Description
September 30,
2020
December 31,
2019
Principal Outstanding
Promissory notes due to related parties
$
1,279,430
$
1,830,541
Additional earnout earned
—
224,540
Settled by the issuance of common shares
(482,978
)
(410,925
)
Repayment in cash
(92,444
)
(328,734
)
Foreign exchange movements
27,555
(35,992
)
731,563
1,279,430
Present value discount on future payments
Present value discount
(80,069
)
(161,393
)
Amortization
61,220
78,128
Foreign exchange movements
(862
)
3,196
(19,711
)
(80,069
)
Deferred purchase consideration, net
$
711,852
$
1,199,361
Related party (payables) receivables
Related party payables and receivables represent
non-interest-bearing (payables) receivables that are due on demand.
The balances outstanding are as follows:
September 30,
2020
December 31,
2019
Related Party payables
Gold Street Capital Corp.
$
—
$
(2,551
)
Luca Pasquini
(4,591
)
—
$
(4,591
)
$
(2,551
)
Related Party Receivables
Luca Pasquini
$
1,456
$
4,123
Amounts due to Gold Street Capital Corp., the
major stockholder of Elys, are for reimbursement of expenses.
Amounts due to Luca Pasquini is for advances
made to various subsidiaries for working capital purposes.
Michele Ciavarella
On July 5, 2019, the Company granted to Mr.
Ciavarella, the Chief Executive Officer and chairman of the board and officer of the Company, ten year options to purchase 39,375
shares of common stock at an exercise price of $2.96 per share.
On August 29, 2019, the Company granted to
Mr. Ciavarella ten year options to purchase 25,000 shares of common stock at an exercise price of $2.80 per share.
On September 4, 2019, Mr. Ciavarella converted
$500,000 of accrued salaries into 125,000 shares of common stock at. Conversion price of $4.00 per share.
Gold Street Capital
Gold Street Capital is wholly owned by Gilda
Ciavarella, the spouse of Mr. Ciavarella.
On September 4, 2019, the Company issued 15,196
shares of common stock to Gold Street Capital in settlement of $48,508 of advances made to the Company for certain reimbursable
expenses.
Luca Pasquini
On January 31, 2019, the Company acquired VG
for €4,000,000 (approximately $4,576,352), Mr. Pasquini was a 20% owner of VG and was due gross proceeds of €800,000
(approximately $915,270). The gross proceeds of €800,000 was to be settled by a payment in cash of €500,000 over a twelve
month period and by the issuance of common stock valued at €300,000 over an eighteen month period. As of September 30, 2020,
the Company has paid Mr. Pasquini cash of €167,200 (approximately $187,290) and issued 112,521 shares valued at €300,000
(approximately $334,791).
In addition, due to the attainment of an earnout
clause per the agreement, a further €500,000 (approximately $561,351) was earned as of December 31, 2019, of which Mr. Pasquini’s
share was €100,000 (approximately $112,270), which earnout was settled by the issue of 26,547 shares of common stock during
January 2020.
On August 29, 2019, the Company granted to
Mr. Pasquini, ten year options to purchase 25,000 shares of common stock at an exercise price of $2.80 per share.
Gabriele Peroni
On January 31, 2019, the Company acquired VG
for €4,000,000 (approximately $4,576,352), Mr. Peroni was a 20% owner of VG and was due gross proceeds of €800,000 (approximately
$915,270). The gross proceeds of €800,000 was to be settled by a payment in cash of €500,000 over a twelve month period
and by the issuance of common stock valued at €300,000 over an eighteen month period. As of September 30, 2020, the Company
has paid Mr. Peroni cash of €208,800 (approximately $233,888) and issued 112,521 shares valued at €300,000 (approximately
$334,791).
In addition, due to the attainment of an earnout
clause per the agreement, a further €500,000 (approximately $561,351) was earned as of December 31, 2019, of which Mr. Peroni’s
share was €100,000 (approximately $112,270), which earnout was settled by the issue of 26,547 shares of common stock during
January 2020.
On August 29, 2019, the Company granted to
Mr. Peroni, ten year options to purchase 25,000 shares of common stock at an exercise price of $2.80 per share.
Alessandro Marcelli
On August 29, 2019, the Company granted to
Mr. Marcelli, an officer of the Company, ten year options to purchase 25,000 shares of common stock at an exercise price of $2.80
per share.
Franco Salvagni
On August 29, 2019, the Company granted to
Mr. Salvagni, an officer of the Company, ten year options to purchase 25,000 shares of common stock at an exercise price of $2.80
per share.
Beniamino Gianfelici
On August 29, 2019, the Company granted to
Mr. Gianfelici, an officer of the Company, ten year options to purchase 25,000 shares of common stock at an exercise price of $2.80
per share.
Mark Korb
On July 5, 2019, the Company granted to Mr.
Korb, the chief financial officer of the Company, seven year options to purchase 25,000 shares of common stock at an exercise price
of $2.72 per share.
Paul Sallwasser
On July 5, 2019, the Company granted to Mr.
Sallwasser, a director of the Company, ten year options to purchase 20,625 shares of common stock at an exercise price of $2.96
per share.
Steven Shallcross
On July 5, 2019, the Company granted to Mr.
Shallcross, a director of the Company, ten year options to purchase 10,313 shares of common stock at an exercise price of $2.96
per share.
The entire disclosure for related party transactions. Examples of related party transactions include transactions between (a) a parent company and its subsidiary; (b) subsidiaries of a common parent; (c) and entity and its principal owners; and (d) affiliates.
The Company issued the following shares of
common stock to promissory note holders in terms of the agreement entered into for the acquisition of VG, as disclosed in Note
3 above.
·
On January 1, 2020, 22,030 shares of common stock valued at $93,077;
·
On January 1, 2020, 132,735 shares of common stock valued at $561,350;
·
On February 27, 2020, 23,890 shares of common stock valued at $91,541;
·
On March 1, 2020, 25,690 shares of common stock valued at $96,372;
·
On April 1, 2020, 61,040 shares of common stock valued at $90,745;
·
On May 1, 2020, 24,390 shares of common stock valued at $91,265;
·
On June 1, 2020, 29,300 shares of common stock valued at $92,321;
·
On July 1, 2020, 35,130 shares of common stock valued at $91,265.
For the nine months ended September 30, 2020,
the Company issued a total of 230,326 shares of common stock, valued at $739,004, upon the conversion of convertible debentures
into equity and for the year ended December 31, 2019, the Company issued a total of 1,866,528 shares of common stock, valued at
$5,972,507, upon the conversion of convertible debentures into equity (Note 11).
On April 22, 2019, the Company issued 14,083
shares of common stock, valued at $45,066, to certain convertible debenture holders as an incentive for them to transfer their
convertible debentures to another investor.
Between September 4, 2019 and September 17,
2019, the Company issued 284,721 shares of common stock, valued at $728,884 in settlement of promissory notes amounting to $457,461
and other liabilities amounting to $553,525.
On August 17, 2020, the Company closed its
underwritten public offering of 4,166,666 units at a price of $2.40 per unit for gross proceeds of $9,999,998, before underwriting
commission of $800,000 and other offering expenses. Each unit consists of one share of common stock and one five year warrant exercisable
for one share of common stock at an exercise price of $2.50 per share.
The Company granted the underwriters a forty-five
day option to purchase up to 624,999 shares of common stock and/or warrants at a price of $2.39 per share and $0.01 per five year
warrant exercisable for one share of common stock at an exercise price of $2.50 per share. The underwriters were also issued a
five year warrant exercisable for 208,333 shares of common stock at an exercise price of $3.00 per share.
On September 3, 2020, the underwriters executed
a partial exercise of the option to purchase 624,999 units and purchased only the warrants at a purchase price of $0.01 per warrant,
less underwriters commission of $500, for net proceeds of $5,250.
The entire disclosure for shareholders' equity comprised of portions attributable to the parent entity and noncontrolling interest, including other comprehensive income. Includes, but is not limited to, balances of common stock, preferred stock, additional paid-in capital, other capital and retained earnings, accumulated balance for each classification of other comprehensive income and amount of comprehensive income.
In terms of the underwritten public offering
disclosed in note 16 above, the Company granted 4,166,666 five year warrants, exercisable at $2.50 per share to the subscribers.
In addition, the Company granted the underwriter 208,333 three year warrants exercisable at $3.00 per share, and in terms of the
underwriters’ over-allotment option, the Company granted an additional 624,999 five year warrants exercisable at $2.50 per
share to the Underwriter.
These warrants were assessed in terms of ASC480-10,
Distinguishing between Liabilities and Equity, and ASC 815-10, Derivatives and Hedging Transactions to determine
if they met equity classification or liability classification. After considering the guidance provided by the ASC under both ASC
480-10 and ASC 815-10, the Company determined that equity classification was appropriate.
A summary of all of the Company’s warrant
activity during the period January 1, 2019 to September 30, 2020 is as follows:
Number of shares
Exercise price per share
Weighted average exercise price
Outstanding January 1, 2019
76,566
$
4.32
$
4.32
Granted
1,096,224
4.00
4.00
Forfeited/cancelled
(27,000
)
5.04
5.04
Exercised
(40,761
)
4.64
4.64
Expired
(15,555
)
4.64
4.64
Outstanding December 31, 2019
1,089,474
$
4.00
$
4.00
Granted
5,374,371
2.50 to 5.00
2.62
Forfeited/cancelled
(1,089,474
)
4.00
4.00
Exercised
—
—
—
Outstanding September 30, 2020
5, 374,371
$
2.50 to 5.00
$
2.62
The following tables summarize information
about warrants outstanding as of September 30, 2020:
In September 2018, our stockholders approved
our 2018 Equity Incentive Plan, which provides for a maximum of 1,150,000 awards that can be granted as options, stock appreciation
rights, restricted stock, stock units, other equity awards or cash awards. No awards were granted under the 2018 Equity Incentive
Plan as of December 31, 2018. During July 2019, our Board granted an aggregate of 95,313 options to purchase common stock, of which
options to purchase 25,000 shares of common stock were granted to our Chief Financial Officer, options to purchase 39,375 shares
of common stock were granted to our Chief Executive Officer and options to purchase 30,938 shares of common stock were granted
to directors. During August 2019, our Board granted an aggregate of 150,000 options to purchase shares of common stock of which
options to purchase 25,000 shares of common stock were granted to each of Michele Ciavarella, our Chief Executive Officer, Alessandro
Marcelli, our Vice President of Operations, Luca Pasquini, our Vice President of Technology, Gabriele Peroni, our Vice President
Business Development, Franco Salvagni, our Vice President of Land-based Operations and Beniamino Gianfelici, our Vice President
Regulatory Affairs. On November 11, 2019 our Board granted options to purchase 70,625 shares of common stock to various employees
at an exercise price of $2.80 per share.
On September 23, 2020, our Board granted non-plan
options to purchase 648,000 shares to our newly appointed president, Mr. Matteo Monteverdi at an exercise price of $1.84 per share.
These options were valued using a Black-Scholes valuation model at $1,204,986.
The following assumptions were used in the
Black-Scholes model:
Nine months ended
September 30, 2020
Exercise price
$
1.84
Risk free interest rate
0.68
%
Expected life of options
10 years
Expected volatility of underlying stock
231.4
%
Expected dividend rate
0
%
As of September 30, 2020, there was an aggregate
of 315,938 options to purchase shares of common stock granted under our 2018 Equity Incentive Plan and 834,062 reserved for future
grants.
A summary of all of the Company’s option
activity during the period January 1, 2019 to September 30, 2020 is as follows:
Number of shares
Exercise price per share
Weighted average exercise price
Outstanding January 1, 2019
—
$
—
$
—
Granted – plan options
315,938
2.72 to 2.96
2.84
Forfeited/cancelled
—
—
—
Exercised
—
—
—
Expired
—
—
—
Outstanding December 31, 2019
315,938
$
2.72 to 2.96
2.84
Granted – non-plan options
648,000
1.84
1.84
Forfeited/cancelled
—
—
—
Exercised
—
—
—
Outstanding September 30, 2020
963,938
$
1.84 to 2.96
$
2.16
The following tables summarize information
about stock options outstanding as of September 30, 2020:
Options outstanding
Options exercisable
Exercise price
Number of shares
Weighted
average
remaining years
Weighted
Average
exercise price
Number of shares
Weighted
average
exercise price
$
1.84
648,000
9.98
—
$
2.72
25,000
5.75
—
$
2.80
220,625
8.98
97,800
$
2.96
70,313
8.77
67,734
963,938
8.80
$
2.16
165,534
$
2.86
As of September 30, 2020, there were unvested
options to purchase 813,286 shares of common stock. Total expected unrecognized compensation cost related to such unvested options
is $1,659,003 which is expected to be recognized over a period of 47 months.
The intrinsic value of the options at September
30, 2020 was $142,560.
The following table represents disaggregated
revenues from our gaming operations for the three and nine months ended September 30, 2020 and 2019. Net Gaming Revenues represents
Turnover (also referred to as “Handle”), the total bets processed for the period, less customer winnings paid out,
commissions paid to agents, and taxes due to government authorities, while betting platform and services is revenue invoiced for
our Platform software service, fees earned on lotto ticket sales and royalties invoiced for the sale of virtual products..
The entire disclosure of revenue from contract with customer to transfer good or service and to transfer nonfinancial asset. Includes, but is not limited to, disaggregation of revenue, credit loss recognized from contract with customer, judgment and change in judgment related to contract with customer, and asset recognized from cost incurred to obtain or fulfill contract with customer. Excludes insurance and lease contracts.
The Company entered into extension agreements
with convertible debenture holders in the aggregate principal amount of $10,000 and CDN$65,000 (approximately $48,416) that had
matured on May 31, 2020 and extended the maturity date to August 29, 2020 and a further aggregate principal amount of $600,000
and CDN$242,000 (approximately $180,257) that had matured on May 31, 2020 and extended the maturity date to September 28, 2020.
In terms of the agreements entered into with the convertible note holders, the Company agreed to issue the convertible note holders
two year warrants exercisable for an aggregate of 301,644 shares of common stock at an exercise price of $3.75 per share and three
year warrants exercisable for an aggregate of 72,729 shares of common stock at an exercise price of $5.00 per share. These warrants
were valued using a Black-Scholes valuation model at $719,390.
The following assumptions were used in the
Black-Scholes model:
Nine months ended
September 30, 2020
Exercise price
$3.75 to $5.00
Risk free interest rate
0.16% to 0.19%
Expected life of warrants
2 to 3 years
Expected volatility of underlying stock
139.5% to 183.5%
Expected dividend rate
0%
The Company considered the extension of the
maturity date in terms of ASC 470 – Debt, and determined that, based on the guidance contained in ASC 470 that the extension
of the maturity date and the value of the warrants issued to the convertible debt holders resulted in an extinguishment of the
existing convertible debt and the creation of a new convertible debt.
In terms of ASC 470, the valuation of the warrants
of $719,930 is expensed immediately upon the convertible debt extinguishment and any transaction related expenses, of which there
were none, would be amortized over the term of the convertible debt.
Basic income (loss) per share is based on the
weighted-average number of common shares outstanding during each period. Diluted income (loss) per share is based on basic shares
as determined above, plus the incremental shares that would be issued upon the assumed exercise of “in-the-money” options
and warrants using the treasury stock method and the inclusion of all convertible securities, including convertible debentures,
assuming these securities were converted at the beginning of the period or at the time of issuance, if later, adding back any direct
incremental expenses related to the convertible securities, including interest expense, debt discount amortization. The computation
of diluted net income (loss) per share does not assume the issuance of common shares that have an anti-dilutive effect on net loss
per share.
The computation of the diluted income per share
for the three and nine months ended September 30, 2020 was anti-dilutive due to the losses realized.
For the three and nine months ended September
30, 2020 and 2019, the following options, warrants and convertible debentures were excluded from the computation of diluted loss
per share as the result of the computation being anti-dilutive:
The entire disclosure for reporting segments including data and tables. Reportable segments include those that meet any of the following quantitative thresholds a) it's reported revenue, including sales to external customers and intersegment sales or transfers is 10 percent or more of the combined revenue, internal and external, of all operating segments b) the absolute amount of its reported profit or loss is 10 percent or more of the greater, in absolute amount of 1) the combined reported profit of all operating segments that did not report a loss or 2) the combined reported loss of all operating segments that did report a loss c) its assets are 10 percent or more of the combined assets of all operating segments.
On October 1, 2020, Richard Cooper resigned
as a director of the Company and Philippe Blanc was appointed as a director. Mr. Blanc serves on the audit committee and his term
as a director will continue until such time as his successor is duly elected and qualified, or until his earlier resignation or
removal.
On October 1, 2020, the Board granted to each
of Michele Ciavarella, Alessandro Marcelli, Luca Pasquini, Gabriele Peroni, Frank Salvagni, Beniamino Gianfelici and Mark Korb,
an option to purchase 140,000, 56,000, 58,000, 36,000, 36,000, 35,000 and 58,000 shares of the Company’s common stock, respectively,
under the Company’s 2018 Equity Incentive Plan. The shares of common stock underlying the option awards each vest pro rata
on a monthly basis over a thirty-six month period. The options are exercisable for a period of ten years from the date of grant
and have an exercise price of $2.03 per share.
On October 1, 2020, the Board also granted
to each of Paul Sallwasser, Steven Shallcross and Philippe Blanc, as non-executive members of the Board, an option to purchase
55,000, 35,000 and 55,000 shares of the Company’s common stock, respectively, under the Company’s 2018 Equity Incentive
Plan. The shares of common stock underlying the option awards each vest pro rata on a monthly basis over a twelve month period.
The options are exercisable for a period of ten years from the date of grant and have an exercise price of $2.03 per share.
On October 1, 2020, the Board approved an amendment
(the “First Amendment”) to the Company’s 2018 Equity Incentive Plan (the “Plan”) to increase the
maximum number of shares that may be granted as an award under the Plan to any non-employee director during any one calendar year
to: (i) chairperson or lead director – 300,000 shares of common stock; and (ii) other non-employee director - 250,000 shares
of common stock, which reflects an increase in the annual limits for awards to be granted to non-employee directors under the Plan.
On November 2, 2020, the Company filed a Certificate
of Amendment to its Certificate of Incorporation with the Secretary of State of the State of Delaware to reflect its corporate
name change from Newgioco Group, Inc. to Elys Game Technology, Corp. and on November 6, 2020 the Company filed a Certificate of
Correction to the Certificate of Amendment with the Secretary of State of the State of Delaware.
In connection with the name change, the Company’s
shares of common stock began trading on the Nasdaq Stock Market LLC under the new ticker symbol “ELYS” on November
10, 2020 and ceased trading under the ticker symbol “NWGI”.
Subsequent to September 30, 2020, the Company
repaid the remaining convertible debentures in the aggregate principal amount of $100,000 and CDN$307,000, including interest thereon,
thereby extinguishing the remaining convertible debenture liability.
The global coronavirus pandemic has created
a significant disruption and uncertainty since March 2020. On March 11, 2020, the Company reported that approximately 150 betting
shop locations throughout Italy were temporarily closed and that the closing of the physical locations did not affect the Company’s
continuing online and mobile operations. The Company also implemented a smart-work initiative to permit the safe separation of
office staff during that period because government forced lockdowns made it impossible for the Company to access its administrative
offices in Europe. Additionally, the cancellation of sports events around the world disrupted the Company’s ability to provide
its sports betting products through both our land-based establishments and online channels. These restrictions and other difficulties,
of both not having sports betting events available to wager on and the backlog of tasks imposed on the Company’s employees
upon the return to work, affected the Company’s ability to consistently deliver its products to market. The ongoing pandemic
and continuing resurgences of transmission of COVID-19 continues to cause uncertainty of our ability to keep our land-based establishments
open and to continue to offer sports betting products on both land-based and online channels.
The Company has evaluated subsequent events
through the date the financial statements were issued, other than disclosed above, we did not identify any other subsequent events
that would have required adjustment or disclosure in the financial statements.
The entire disclosure for significant events or transactions that occurred after the balance sheet date through the date the financial statements were issued or the date the financial statements were available to be issued. Examples include: the sale of a capital stock issue, purchase of a business, settlement of litigation, catastrophic loss, significant foreign exchange rate changes, loans to insiders or affiliates, and transactions not in the ordinary course of business.
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 nine months ended September 30, 2020 are not necessarily indicative of the results that may be expected
for the fiscal year ending December 31, 2020. The balance sheet at December 31, 2019 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, 2019, 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.
As a result of the global outbreak of the COVID-19
virus, on March 8, 2020 the Italian government issued a decree which imposed certain restrictions and closures of public gatherings
and travel which included betting shops, arcades and bingo halls across Italy until April 3, 2020. Accordingly, the Company temporarily
closed approximately 150 betting shop locations throughout Italy as a result of the decree until May 4, 2020, when the Company
began reopening physical web-shop locations. Subsequently, on March 10, 2020 the Italian government imposed further restrictions
on travel throughout Italy as well as transborder crossings and have either postponed or cancelled most professional sports events
which has had an effect on the Company’s overall sports betting handle and revenues and may negatively impact the Company’s
operating results. On June 19, 2020 all land-based betting shops, including corner locations such as coffee shops throughout Italy
reopened. The closing of physical betting shop locations did not affect our online and mobile business operations which mitigated
some of the impact. To date, despite the global resurgence of COVID-19 cases, all betting shops remain open for business, however
the Italian Government is closely monitoring the pandemic and has indicated that although it’s important to keep the economy
operational, it may be compelled to impose limited restrictions on social gatherings.
We anticipate that COVID-19 will continue to
negatively impact our operating results in future periods, however, the duration and scope of the COVID-19 outbreak worldwide,
including the impact to the state and local economies is not readily determinable at this time.
The unaudited condensed consolidated financial
statements include the financial statements of the Company and its subsidiaries, all of which are wholly-owned. All significant
inter-company accounts and transactions have been eliminated in the unaudited condensed consolidated financial statements.
Certain items in the prior periods were reclassified
to conform to the current period presentation.
The Company translated the assets and liabilities
of its foreign subsidiaries into US Dollars at the exchange rate in effect at year end and the results of operations and cash flows
at the average rate throughout the year. The translation adjustments are recorded directly as a separate component of stockholders’
equity, while transaction gains (losses) are included in net income (loss).
All revenues were generated in Euro and Colombian
Pesos during the years presented.
Gains and losses from foreign currency transactions
are recognized in current operations.
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 preparation of unaudited condensed consolidated
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, leasing arrangements,
convertible debentures, contingencies 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
the Company’s industry and general economic conditions. It is possible that these external factors could have an effect on
the Company’s estimates that could cause actual results to differ from the Company’s estimates. The Company re-evaluates
all of its accounting estimates at least quarterly based on these conditions and record adjustments when necessary.
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 the Company’s 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 it believes that it is both probable
that a loss has been incurred, and the amount can be reasonably estimated. If the Company determines that a loss is possible, and
a range of the loss can be reasonably estimated, it discloses the range of the possible loss in the Notes to the unaudited condensed
Consolidated Financial Statements.
The Company evaluates, on a regular basis,
developments in its 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 makes 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 the Company’s estimates and assumptions change or prove to have been incorrect, it could have a material impact
on its 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 the Company’s operations or financial
condition. The Company has insured and continues to insure against most of these types of claims.
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 using estimates and assumptions developed by us, which reflect those that a market participant
would use.
The carrying value of the Company's accounts
receivables, gaming accounts receivable, lines of credit - bank, accounts payable, gaming accounts payable and bank loans payable
approximate fair value because of the short-term maturity of these financial instruments.
ASC 815 generally provides three criteria that,
if met, require companies to bifurcate conversion options from their host instruments and account for them as free standing derivative
financial instruments. These three criteria include circumstances in which (a) the economic characteristics and risks of the embedded
derivative instrument are not clearly and closely related to the economic characteristics and risks of the host contract, (b) the
hybrid instrument that embodies both the embedded derivative instrument and the host contract is not re- measured at fair value
under otherwise applicable generally accepted accounting principles with changes in fair value reported in earnings as they occur
and (c) a separate instrument with the same terms as the embedded derivative instrument would be considered a derivative instrument
subject to the requirements of ASC 815. ASC 815 also provides an exception to this rule when the host instrument is deemed to be
conventional, as described.
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 September 30, 2020 and December 31, 2019, respectively.
The Company primarily places cash balances
in the United States 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 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 a bad debt expense of $214,820 and
$0 for the three months ended September 30, 2020, respectively, and $214,820 and $0 for nine months ended September 30, 2020 and
2019, respectively.
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 of winnings 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.
The Company evaluates the carrying value of
its 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 is 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 operations 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:
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
Indefinite
Multigioco and Rifa ADM Licenses
1.5 - 7
Location contracts
5 - 7
Customer relationships
10 - 15
Trademarks/Tradenames
14
Websites
5
The Ulisse Bookmaker has no expiration date
and is therefore not amortized.
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 goodwill exceeds their fair value and, if necessary, records an impairment loss equal to any such excess. Each interim
reporting period, the Company performs a qualitative assessment to determine whether events or circumstances have occurred which
indicate that the carrying amount of goodwill exceeds its fair value. If there are indications that impairment may be appropriate
the Company will perform a quantitative analysis to determine if impairment is necessary.
As of September 30, 2020, there were no qualitative
indications that impairment of intangible assets or goodwill may be appropriate. Although the COVID-19 pandemic had and is expected
to have an impact on the Company’s business, the impact is expected to be temporary and the Company has a mitigating factor
in that the web-based turnover generated by the Company has increased, mitigating a portion of the effect of the COVID-19 pandemic
on the Company's land-based turnover.
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. The Company has no material uncertain tax positions for any of the reporting periods presented.
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.
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 betting 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.
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) 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.
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 options and warrants
granted and convertible debt, adding back any expenditure directly associated with the convertible instruments, if any. When the
Company incurs a net loss, the effect of the Company’s outstanding stock options and warrants and convertible debt are not
included in the calculation of diluted earnings (loss) per share as the effect would be anti-dilutive.
On December 12, 2019, the Company effected
a 1 for 8 reverse stock split, all references made to share or per share amounts in the accompanying unaudited condensed consolidated
financial statements and applicable disclosures have been retroactively adjusted to reflect the reverse stock split.
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.
In August 2020, the FASB issued ASU No. 2020-06,
debt with Conversion and Other Options (subtopic 470-20): and Derivatives and Hedging – Contracts in Entity’s Own Equity
(Subtopic 815-40). Certain accounting models for convertible debt instruments with beneficial conversion features or cash conversion
features are removed from the guidance and for equity instruments the contracts affected are free standing instruments and embedded
features that are accounted for as derivatives, the settlement assessment was simplified by removing certain settlement requirements.
This ASU is effective for fiscal years and
interim periods beginning after December 15, 2021.
The effects of this ASU on the Company’s
condensed consolidated financial statements is currently being assessed and is expected to have an immaterial impact on the financial
statements.
In June 2016, the FASB issued ASU No. 2016-13,
Financial Instruments-Credit Losses (Topic 326): “Measurement of Credit Losses on Financial Instruments”, which replaces
the incurred loss methodology with an expected credit loss methodology that is referred to as the current expected credit loss
(CECL) methodology. ASU 2016-13 is effective for fiscal years beginning after December 15, 2019, with early adoption permitted.
The amendments in this update are required to be applied using the modified retrospective method with an adjustment to accumulated
deficit and are effective for the Company beginning with fiscal year 2020, including interim periods. The measurement of expected
credit losses under the CECL methodology is applicable to financial assets measured at amortized cost, including loan receivables
and held-to-maturity debt securities. An entity with trade receivables will be required to use historical loss information, current
conditions, and reasonable and supportable forecasts to determine expected lifetime credit losses. Pooling of assets with similar
risk characteristics is also required.
Since adopted on January 1, 2020, there has
not been any material impact on the Company’s financial position, results of operations, and related disclosures.
In December 2019, the FASB issued ASU 2019-12,
Income Taxes (Topic 740), this update reduce the complexity in accounting for income taxes by removing certain exceptions
to accounting for income taxes and deferred taxes and simplifying the accounting treatment of franchise taxes, a step up in the
tax basis of goodwill as part of business combinations, the allocation of current and deferred tax to a legal entity not subject
to tax in its own financial statements, reflecting changes in tax laws or rates in the annual effective rate in interim periods
that include the enactment date and minor codification improvements.
This ASU is effective for fiscal years and
interim periods beginning after December 15, 2020.
The effects of this ASU on the Company’s
financial statements is not considered to be material.
The FASB issued several updates during the
period, none of these standards are either applicable to the Company or require adoption at a future date and none are expected
to have a material impact on the consolidated financial statements upon adoption.
Certain items in the prior year were reclassified
to conform to the current period presentation. These reclassifications had no impact on net loss or comprehensive loss.
Disclosure of accounting policy for completed business combinations (purchase method, acquisition method or combination of entities under common control). This accounting policy may include a general discussion of the purchase method or acquisition method of accounting (including for example, the treatment accorded contingent consideration, the identification of assets and liabilities, the purchase price allocation process, how the fair values of acquired assets and liabilities are determined) and the entity's specific application thereof. An entity that acquires another entity in a leveraged buyout transaction generally discloses the accounting policy followed by the acquiring entity in determining the basis used to value its interest in the acquired entity, and the rationale for that accounting policy.
Disclosure of accounting policy for cash and cash equivalents, including the policy for determining which items are treated as cash equivalents. Other information that may be disclosed includes (1) the nature of any restrictions on the entity's use of its cash and cash equivalents, (2) whether the entity's cash and cash equivalents are insured or expose the entity to credit risk, (3) the classification of any negative balance accounts (overdrafts), and (4) the carrying basis of cash equivalents (for example, at cost) and whether the carrying amount of cash equivalents approximates fair value.
Disclosure of accounting policy regarding (1) the principles it follows in consolidating or combining the separate financial statements, including the principles followed in determining the inclusion or exclusion of subsidiaries or other entities in the consolidated or combined financial statements and (2) its treatment of interests (for example, common stock, a partnership interest or other means of exerting influence) in other entities, for example consolidation or use of the equity or cost methods of accounting. The accounting policy may also address the accounting treatment for intercompany accounts and transactions, noncontrolling interest, and the income statement treatment in consolidation for issuances of stock by a subsidiary.
Disclosure of accounting policy related to debt. Includes, but is not limited to, debt issuance costs, the effects of refinancings, method of amortizing debt issuance costs and original issue discount, and classifications of debt.
Disclosure of accounting policy for computing basic and diluted earnings or loss per share for each class of common stock and participating security. Addresses all significant policy factors, including any antidilutive items that have been excluded from the computation and takes into account stock dividends, splits and reverse splits that occur after the balance sheet date of the latest reporting period but before the issuance of the financial statements.
Disclosure of accounting policy for fair value measurements of financial and non-financial assets, liabilities and instruments classified in shareholders' equity. Disclosures include, but are not limited to, how an entity that manages a group of financial assets and liabilities on the basis of its net exposure measures the fair value of those assets and liabilities.
Disclosure of accounting policy for goodwill. This accounting policy also may address how an entity assesses and measures impairment of goodwill, how reporting units are determined, how goodwill is allocated to such units, and how the fair values of the reporting units are determined.
Disclosure of accounting policy for income taxes, which may include its accounting policies for recognizing and measuring deferred tax assets and liabilities and related valuation allowances, recognizing investment tax credits, operating loss carryforwards, tax credit carryforwards, and other carryforwards, methodologies for determining its effective income tax rate and the characterization of interest and penalties in the financial statements.
Disclosure of accounting policy for finite-lived intangible assets. This accounting policy also might address: (1) the amortization method used; (2) the useful lives of such assets; and (3) how the entity assesses and measures impairment of such assets.
The entire disclosure for loss and gain contingencies. Describes any existing condition, situation, or set of circumstances involving uncertainty as of the balance sheet date (or prior to issuance of the financial statements) as to a probable or reasonably possible loss incurred by an entity that will ultimately be resolved when one or more future events occur or fail to occur, and typically discloses the amount of loss recorded or a range of possible loss, or an assertion that no reasonable estimate can be made.
Disclosure of accounting policy pertaining to new accounting pronouncements that may impact the entity's financial reporting. Includes, but is not limited to, quantification of the expected or actual impact.
Disclosure of accounting policy for long-lived, physical asset used in normal conduct of business and not intended for resale. Includes, but is not limited to, work of art, historical treasure, and similar asset classified as collections.
Disclosure of accounting policy for award under share-based payment arrangement. Includes, but is not limited to, methodology and assumption used in measuring cost.
The entire disclosure when substantial doubt is raised about the ability to continue as a going concern. Includes, but is not limited to, principal conditions or events that raised substantial doubt about the ability to continue as a going concern, management's evaluation of the significance of those conditions or events in relation to the ability to meet its obligations, and management's plans that alleviated or are intended to mitigate the conditions or events that raise substantial doubt about the ability to continue as a going concern.
Disclosure of accounting policy for the use of estimates in the preparation of financial statements in conformity with generally accepted accounting principles.
Tabular disclosure of a material business combination completed during the period, including background, timing, and recognized assets and liabilities. This table does not include leveraged buyouts.
Tabular disclosure of physical assets used in the normal conduct of business and not intended for resale. Includes, but is not limited to, balances by class of assets, depreciation and depletion expense and method used, including composite depreciation, and accumulated deprecation.
Tabular disclosure of undiscounted cash flows of finance lease liability. Includes, but is not limited to, reconciliation of undiscounted cash flows to finance lease liability recognized in statement of financial position.
Tabular disclosure of lessee's lease cost. Includes, but is not limited to, interest expense for finance lease, amortization of right-of-use asset for finance lease, operating lease cost, short-term lease cost, variable lease cost and sublease income.
Tabular disclosure of undiscounted cash flows of lessee's operating lease liability. Includes, but is not limited to, reconciliation of undiscounted cash flows to operating lease liability recognized in statement of financial position.
Tabular disclosure of assets, excluding financial assets and goodwill, lacking physical substance with a finite life, by either major class or business segment.
Tabular disclosure of information on an original debt issue that has been converted in a noncash (or part noncash) transaction during the accounting period. "Part noncash" refers to that portion of the transaction not resulting in cash receipts or cash payments in the period. The information may be presented entirely or partially in this block of text or in the associated elements.
Tabular disclosure of related party transactions. Examples of related party transactions include, but are not limited to, transactions between (a) a parent company and its subsidiary; (b) subsidiaries of a common parent; (c) and entity and its principal owners and (d) affiliates.
Tabular disclosure of warrants or rights issued. Warrants and rights outstanding are derivative securities that give the holder the right to purchase securities (usually equity) from the issuer at a specific price within a certain time frame. Warrants are often included in a new debt issue to entice investors by a higher return potential. The main difference between warrants and call options is that warrants are issued and guaranteed by the company, whereas options are exchange instruments and are not issued by the company. Also, the lifetime of a warrant is often measured in years, while the lifetime of a typical option is measured in months. Disclose the title of issue of securities called for by warrants and rights outstanding, the aggregate amount of securities called for by warrants and rights outstanding, the date from which the warrants or rights are exercisable, and the price at which the warrant or right is exercisable.
Tabular disclosure of assumption used to determine benefit obligation and net periodic benefit cost of defined benefit plan. Includes, but is not limited to, discount rate, rate of compensation increase, expected long-term rate of return on plan assets and interest crediting rate.
Tabular disclosure for stock option plans. Includes, but is not limited to, outstanding awards at beginning and end of year, grants, exercises, forfeitures, and weighted-average grant date fair value.
Tabular disclosure of the number and weighted-average exercise prices (or conversion ratios) for stock options and stock appreciation rights that were outstanding at the beginning and end of the year, exercisable at the end of the year, and the number of stock options and stock appreciation rights that were granted, exercised or converted, forfeited, and expired during the year.
Tabular disclosure of the extent of the entity's reliance on its major customers, if revenues from transactions with a single external customer amount to 10 percent or more of entity revenues, including the disclosure of that fact, the total amount of revenues from each such customer, and the identity of the reportable segment or segments reporting the revenues. The entity need not disclose the identity of a major customer or the amount of revenues that each segment reports from that customer. For these purposes, a group of companies known to the entity to be under common control is considered a single customer, and the federal government, a state government, a local government such as a county or municipality, or a foreign government is each considered a single customer.
Tabular disclosure of input and valuation technique used to measure fair value and change in valuation approach and technique for each separate class of asset and liability measured on recurring and nonrecurring basis.
Tabular disclosure of an entity's basic and diluted earnings per share calculations, including a reconciliation of numerators and denominators of the basic and diluted per-share computations for income from continuing operations.
Tabular disclosure of the profit or loss and total assets for each reportable segment. An entity discloses certain information on each reportable segment if the amounts (a) are included in the measure of segment profit or loss reviewed by the chief operating decision maker or (b) are otherwise regularly provided to the chief operating decision maker, even if not included in that measure of segment profit or loss.
Description of the reverse stock split arrangement. Also provide the retroactive effect given by the reverse split that occurs after the balance sheet date but before the release of financial statements.
Useful life of long lived, physical assets used in the normal conduct of business and not intended for resale, in 'PnYnMnDTnHnMnS' format, for example, 'P1Y5M13D' represents the reported fact of one year, five months, and thirteen days. Examples include, but not limited to, land, buildings, machinery and equipment, office equipment, furniture and fixtures, and computer equipment.
Useful life of finite-lived intangible assets, in 'PnYnMnDTnHnMnS' format, for example, 'P1Y5M13D' represents the reported fact of one year, five months, and thirteen days.
The aggregate expected value at the end of their useful life of a major finite-lived intangible asset class acquired during the period either individually or as part of a group of assets (in either an asset acquisition or business combination). A major class is composed of intangible assets that can be grouped together because they are similar, either by their nature or by their use in the operations of a company.
Amount of currency on hand as well as demand deposits with banks or financial institutions, acquired at the acquisition date. Includes other kinds of accounts that have the general characteristics of demand deposits. Also includes short-term, highly liquid investments that are both readily convertible to known amounts of cash and so near their maturity that they present insignificant risk of changes in value because of changes in interest rates.
Amount of assets that are expected to be realized or consumed within one year or the normal operating cycle, if longer, acquired at the acquisition date.
Carrying amount as of the balance sheet date of cash collateral held for borrowed securities, for which the cash is restricted as to withdrawal or usage.
The carrying value as of the balance sheet date of the current portion of long-term obligations drawn from a line of credit, which is a bank's commitment to make loans up to a specific amount. Examples of items that might be included in the application of this element may consist of letters of credit, standby letters of credit, and revolving credit arrangements, under which borrowings can be made up to a maximum amount as of any point in time conditional on satisfaction of specified terms before, as of and after the date of drawdowns on the line. Includes short-term obligations that would normally be classified as current liabilities but for which (a) postbalance sheet date issuance of a long term obligation to refinance the short term obligation on a long term basis, or (b) the enterprise has entered into a financing agreement that clearly permits the enterprise to refinance the short-term obligation on a long term basis and the following conditions are met (1) the agreement does not expire within 1 year and is not cancelable by the lender except for violation of an objectively determinable provision, (2) no violation exists at the BS date, and (3) the lender has entered into the financing agreement is expected to be financially capable of honoring the agreement.
Amount of accumulated depreciation, depletion and amortization for physical assets used in the normal conduct of business to produce goods and services.
Amount before accumulated depreciation, depletion and amortization of physical assets used in the normal conduct of business and not intended for resale. Examples include, but are not limited to, land, buildings, machinery and equipment, office equipment, and furniture and fixtures.
Amount after accumulated depreciation, depletion and amortization of physical assets used in the normal conduct of business to produce goods and services and not intended for resale. Examples include, but are not limited to, land, buildings, machinery and equipment, office equipment, and furniture and fixtures.
The amount of expense recognized in the current period that reflects the allocation of the cost of tangible assets over the assets' useful lives. Includes production and non-production related depreciation.
Amount of asset retirement obligations settled, or otherwise disposed of, during the period. This may include asset retirement obligations transferred to third parties associated with the sale of a long-lived asset.
Weighted average remaining lease term for finance lease, in 'PnYnMnDTnHnMnS' format, for example, 'P1Y5M13D' represents reported fact of one year, five months, and thirteen days.
Amount of single lease cost, calculated by allocation of remaining cost of lease over remaining lease term. Includes, but is not limited to, single lease cost, after impairment of right-of-use asset, calculated by amortization of remaining right-of-use asset and accretion of lease liability.
Weighted average remaining lease term for operating lease, in 'PnYnMnDTnHnMnS' format, for example, 'P1Y5M13D' represents reported fact of one year, five months, and thirteen days.
Amount of lessee's undiscounted obligation for lease payment for finance lease to be paid in next fiscal year following current fiscal year. Excludes interim and annual periods when interim periods are reported from current statement of financial position date (rolling approach).
Amount of lessee's undiscounted obligation for lease payment for finance lease to be paid in fifth fiscal year following current fiscal year. Excludes interim and annual periods when interim periods are reported from current statement of financial position date (rolling approach).
Amount of lessee's undiscounted obligation for lease payment for finance lease to be paid in fourth fiscal year following current fiscal year. Excludes interim and annual periods when interim periods are reported from current statement of financial position date (rolling approach).
Amount of lessee's undiscounted obligation for lease payment for finance lease to be paid in third fiscal year following current fiscal year. Excludes interim and annual periods when interim periods are reported from current statement of financial position date (rolling approach).
Amount of lessee's undiscounted obligation for lease payment for finance lease to be paid in second fiscal year following current fiscal year. Excludes interim and annual periods when interim periods are reported from current statement of financial position date (rolling approach).
Amount of lessee's undiscounted obligation for lease payment for operating lease due after fifth fiscal year following current fiscal year. Excludes interim and annual periods when interim periods are reported from current statement of financial position date (rolling approach).
Amount of lessee's undiscounted obligation for lease payment for operating lease to be paid in next fiscal year following current fiscal year. Excludes interim and annual periods when interim periods are reported from current statement of financial position date (rolling approach).
Amount of lessee's undiscounted obligation for lease payment for operating lease to be paid in fourth fiscal year following current fiscal year. Excludes interim and annual periods when interim periods are reported from current statement of financial position date (rolling approach).
Amount of lessee's undiscounted obligation for lease payment for operating lease to be paid in third fiscal year following current fiscal year. Excludes interim and annual periods when interim periods are reported from current statement of financial position date (rolling approach).
Amount of lessee's undiscounted obligation for lease payment for operating lease to be paid in second fiscal year following current fiscal year. Excludes interim and annual periods when interim periods are reported from current statement of financial position date (rolling approach).
If disclosed, the amount of imputed interest necessary to reduce an unconditional purchase obligation to present value on an unrecorded unconditional purchase obligation.
Sum of the carrying amounts of all intangible assets, excluding goodwill, as of the balance sheet date, net of accumulated amortization and impairment charges.
The aggregate expense charged against earnings to allocate the cost of intangible assets (nonphysical assets not used in production) in a systematic and rational manner to the periods expected to benefit from such assets. As a noncash expense, this element is added back to net income when calculating cash provided by or used in operations using the indirect method.
Amount after accumulated impairment loss of an asset representing future economic benefits arising from other assets acquired in a business combination that are not individually identified and separately recognized.
Amount of increase in asset representing future economic benefits arising from other assets acquired in a business combination that are not individually identified and separately recognized resulting from a business combination.
Total loss recognized during the period from the impairment of goodwill plus the loss recognized in the period resulting from the impairment of the carrying amount of intangible assets, other than goodwill.
Carrying amount as of the balance sheet date of cash collateral held for borrowed securities, for which the cash is restricted as to withdrawal or usage.
The carrying value as of the balance sheet date of the current portion of long-term obligations drawn from a line of credit, which is a bank's commitment to make loans up to a specific amount. Examples of items that might be included in the application of this element may consist of letters of credit, standby letters of credit, and revolving credit arrangements, under which borrowings can be made up to a maximum amount as of any point in time conditional on satisfaction of specified terms before, as of and after the date of drawdowns on the line. Includes short-term obligations that would normally be classified as current liabilities but for which (a) postbalance sheet date issuance of a long term obligation to refinance the short term obligation on a long term basis, or (b) the enterprise has entered into a financing agreement that clearly permits the enterprise to refinance the short-term obligation on a long term basis and the following conditions are met (1) the agreement does not expire within 1 year and is not cancelable by the lender except for violation of an objectively determinable provision, (2) no violation exists at the BS date, and (3) the lender has entered into the financing agreement is expected to be financially capable of honoring the agreement.
Including the current and noncurrent portions, carrying amount of debt identified as being convertible into another form of financial instrument (typically the entity's common stock) as of the balance sheet date, which originally required full repayment more than twelve months after issuance or greater than the normal operating cycle of the company.
Expiration, mandatory redemption, or due date, in CCYY-MM-DD format, of the financial instrument issued in exchange for the original debt being converted in a noncash or part noncash transaction.
The portion of the carrying value of long-term convertible debt as of the balance sheet date that is scheduled to be repaid within one year or in the normal operating cycle if longer. Convertible debt is a financial instrument which can be exchanged for a specified amount of another security, typically the entity's common stock, at the option of the issuer or the holder.
Amount, before unamortized (discount) premium and debt issuance costs, of long-term debt. Includes, but is not limited to, notes payable, bonds payable, commercial loans, mortgage loans, convertible debt, subordinated debt and other types of debt.
The cash outflow for an obligation which places a lender in a lien position behind debt having a higher priority of repayment (senior loan) in liquidation of the entity's assets scheduled to be repaid within one year or in the normal operating cycle of the entity, if longer.
Amount of tangible or intangible assets, including a business or subsidiary of the acquirer transferred by the entity to the former owners of the acquiree. Excludes cash.
Line items represent financial concepts included in a table. These concepts are used to disclose reportable information associated with domain members defined in one or many axes to the table.
Sum of the carrying values as of the balance sheet date of the portions of long-term notes payable due within one year or the operating cycle if longer.
The number of shares issued in connection with an own-share lending arrangement entered into by the entity, in contemplation of a convertible debt offering or other financing.
Amount of long-term debt payable, sinking fund requirement, and other securities issued that are redeemable by holder at fixed or determinable price and date, maturing in next fiscal year following current fiscal year. Excludes interim and annual periods when interim periods are reported from current statement of financial position date (rolling approach).
Amount of borrowings as of the balance sheet date from the Federal Home Loan Bank, which are primarily used to cover shortages in the required reserve balance and liquidity shortages.
Liability for amount due employees, in addition to wages and any other money that employers owe employees, when their employment ends through a layoff or other termination. For example, a company may provide involuntarily terminated employees with a lump sum payment equal to one week's salary for every year of employment.
The amount for notes payable (written promise to pay), due to related parties. Used to reflect the current portion of the liabilities (due within one year or within the normal operating cycle if longer).
The cash inflow or outflow associated with long-term loans for related parties where one party can exercise control or significant influence over another party, including affiliates, owners or officers and their immediate families, pension trusts, and so forth. Alternate caption: Proceeds from (Payments for) Advances to Affiliates.
Amount of long-term debt payable, sinking fund requirement, and other securities issued that are redeemable by holder at fixed or determinable price and date, maturing in next fiscal year following current fiscal year. Excludes interim and annual periods when interim periods are reported from current statement of financial position date (rolling approach).
Carrying value as of the balance sheet date of the portion of long-term notes having the highest claim on the assets of the issuer in case of bankruptcy or liquidation, due within one year or the normal operating cycle, if longer. Senior note holders are paid off in full before any payments are made to debt holders having a lesser priority of repayment.
The aggregate amount of receivables to be collected from related parties where one party can exercise control or significant influence over another party; including affiliates, owners or officers and their immediate families, pension trusts, and so forth, at the financial statement date. which are usually due within one year (or one business cycle).
Amount of consideration transferred, consisting of acquisition-date fair value of assets transferred by the acquirer, liabilities incurred by the acquirer, and equity interest issued by the acquirer.
Amount of tangible or intangible assets, including a business or subsidiary of the acquirer transferred by the entity to the former owners of the acquiree. Excludes cash.
Amount of expense for salary and wage arising from service rendered by nonofficer and officer employees. Excludes allocated cost, labor-related nonsalary expense, and direct and overhead labor cost included in cost of good and service sold.
Period over which grantee's right to exercise award under share-based payment arrangement is no longer contingent on satisfaction of service or performance condition, in 'PnYnMnDTnHnMnS' format, for example, 'P1Y5M13D' represents reported fact of one year, five months, and thirteen days. Includes, but is not limited to, combination of market, performance or service condition.
Number, after forfeiture, of shares or units issued under share-based payment arrangement. Excludes shares or units issued under employee stock ownership plan (ESOP).
Amount to be paid per share that is classified as temporary equity by entity upon redemption. Temporary equity is a security with redemption features that are outside the control of the issuer, is not classified as an asset or liability in conformity with GAAP, and is not mandatorily redeemable. Includes any type of security that is redeemable at a fixed or determinable price or on a fixed or determinable date or dates, is redeemable at the option of the holder, or has conditions for redemption which are not solely within the control of the issuer. If convertible, the issuer does not control the actions or events necessary to issue the maximum number of shares that could be required to be delivered under the conversion option if the holder exercises the option to convert the stock to another class of equity. If the security is a warrant or a rights issue, the warrant or rights issue is considered to be temporary equity if the issuer cannot demonstrate that it would be able to deliver upon the exercise of the option by the holder in all cases. Includes stock with put option held by ESOP and stock redeemable by holder only in the event of a change in control of the issuer.
The Company granted the underwriters a forty five day option to purchase up to 624,999 units at a price of $2.40 per unit, each unit consisting of one share of common stock and one five year warrant exercisable for one share of common stock at an exercise price of $2.50 per share. The underwriters were also issued a five year warrant exercisable for 208,333 shares of common stock at an exercise price of $3.00 per share.
[2]
Each unit consists of one share of common stock and one five year warrant exercisable for one share of common stock
Amount to be paid per share that is classified as temporary equity by entity upon redemption. Temporary equity is a security with redemption features that are outside the control of the issuer, is not classified as an asset or liability in conformity with GAAP, and is not mandatorily redeemable. Includes any type of security that is redeemable at a fixed or determinable price or on a fixed or determinable date or dates, is redeemable at the option of the holder, or has conditions for redemption which are not solely within the control of the issuer. If convertible, the issuer does not control the actions or events necessary to issue the maximum number of shares that could be required to be delivered under the conversion option if the holder exercises the option to convert the stock to another class of equity. If the security is a warrant or a rights issue, the warrant or rights issue is considered to be temporary equity if the issuer cannot demonstrate that it would be able to deliver upon the exercise of the option by the holder in all cases. Includes stock with put option held by ESOP and stock redeemable by holder only in the event of a change in control of the issuer.
Amount to be paid per share that is classified as temporary equity by entity upon redemption. Temporary equity is a security with redemption features that are outside the control of the issuer, is not classified as an asset or liability in conformity with GAAP, and is not mandatorily redeemable. Includes any type of security that is redeemable at a fixed or determinable price or on a fixed or determinable date or dates, is redeemable at the option of the holder, or has conditions for redemption which are not solely within the control of the issuer. If convertible, the issuer does not control the actions or events necessary to issue the maximum number of shares that could be required to be delivered under the conversion option if the holder exercises the option to convert the stock to another class of equity. If the security is a warrant or a rights issue, the warrant or rights issue is considered to be temporary equity if the issuer cannot demonstrate that it would be able to deliver upon the exercise of the option by the holder in all cases. Includes stock with put option held by ESOP and stock redeemable by holder only in the event of a change in control of the issuer.
Line items represent financial concepts included in a table. These concepts are used to disclose reportable information associated with domain members defined in one or many axes to the table.
The estimated dividend rate (a percentage of the share price) to be paid (expected dividends) to holders of the underlying shares over the option's term.
The estimated measure of the minimum percentage by which a share price is expected to fluctuate during a period. Volatility also may be defined as a probability-weighted measure of the dispersion of returns about the mean. The volatility of a share price is the standard deviation of the continuously compounded rates of return on the share over a specified period. That is the same as the standard deviation of the differences in the natural logarithms of the stock prices plus dividends, if any, over the period.
Fair value of options vested. Excludes equity instruments other than options, for example, but not limited to, share units, stock appreciation rights, restricted stock.
The number of shares under options that were cancelled during the reporting period as a result of occurrence of a terminating event specified in contractual agreements pertaining to the stock option plan.
The number of shares into which fully or partially vested stock options outstanding as of the balance sheet date can be currently converted under the option plan.
Weighted-average exercise price, at which grantee can acquire shares reserved for issuance, for fully vested and expected to vest exercisable or convertible options. Includes, but is not limited to, unvested options for which requisite service period has not been rendered but that are expected to vest based on achievement of performance condition, if forfeitures are recognized when they occur.
Expected term of award under share-based payment arrangement, in 'PnYnMnDTnHnMnS' format, for example, 'P1Y5M13D' represents reported fact of one year, five months, and thirteen days.
Fair value of options vested. Excludes equity instruments other than options, for example, but not limited to, share units, stock appreciation rights, restricted stock.
Amount to be paid per share that is classified as temporary equity by entity upon redemption. Temporary equity is a security with redemption features that are outside the control of the issuer, is not classified as an asset or liability in conformity with GAAP, and is not mandatorily redeemable. Includes any type of security that is redeemable at a fixed or determinable price or on a fixed or determinable date or dates, is redeemable at the option of the holder, or has conditions for redemption which are not solely within the control of the issuer. If convertible, the issuer does not control the actions or events necessary to issue the maximum number of shares that could be required to be delivered under the conversion option if the holder exercises the option to convert the stock to another class of equity. If the security is a warrant or a rights issue, the warrant or rights issue is considered to be temporary equity if the issuer cannot demonstrate that it would be able to deliver upon the exercise of the option by the holder in all cases. Includes stock with put option held by ESOP and stock redeemable by holder only in the event of a change in control of the issuer.
The amount of excise and sales taxes included in sales and revenues, which are then deducted as a cost of sales. Includes excise taxes, which are applied to specific types of transactions or items (such as gasoline or alcohol); and sales, use and value added taxes, which are applied to a broad class of revenue-producing transactions involving a wide range of goods and services.
Amount of revenue recognized from goods sold, services rendered, insurance premiums, or other activities that constitute an earning process. Includes, but is not limited to, investment and interest income before deduction of interest expense when recognized as a component of revenue, and sales and trading gain (loss).
Including the current and noncurrent portions, carrying amount of debt identified as being convertible into another form of financial instrument (typically the entity's common stock) as of the balance sheet date, which originally required full repayment more than twelve months after issuance or greater than the normal operating cycle of the company.
The estimated dividend rate (a percentage of the share price) to be paid (expected dividends) to holders of the underlying shares over the option's term.
The estimated measure of the maximum percentage by which a share price is expected to fluctuate during a period. Volatility also may be defined as a probability-weighted measure of the dispersion of returns about the mean. The volatility of a share price is the standard deviation of the continuously compounded rates of return on the share over a specified period. That is the same as the standard deviation of the differences in the natural logarithms of the stock prices plus dividends, if any, over the period.
The estimated measure of the minimum percentage by which a share price is expected to fluctuate during a period. Volatility also may be defined as a probability-weighted measure of the dispersion of returns about the mean. The volatility of a share price is the standard deviation of the continuously compounded rates of return on the share over a specified period. That is the same as the standard deviation of the differences in the natural logarithms of the stock prices plus dividends, if any, over the period.
Securities (including those issuable pursuant to contingent stock agreements) that could potentially dilute basic earnings per share (EPS) or earnings per unit (EPU) in the future that were not included in the computation of diluted EPS or EPU because to do so would increase EPS or EPU amounts or decrease loss per share or unit amounts for the period presented.
Additional shares included in the calculation of diluted EPS as a result of the potentially dilutive effect of call options and warrants using the treasury stock method.
Additional shares included in the calculation of diluted EPS as a result of the potentially dilutive effect of convertible debt securities using the if-converted method.
Additional shares included in the calculation of diluted EPS as a result of the potentially dilutive effect of outstanding written put options using the reverse treasury stock method.
Sum of the carrying amounts as of the balance sheet date of all assets that are expected to be realized in cash, sold, or consumed within one year (or the normal operating cycle, if longer). Assets are probable future economic benefits obtained or controlled by an entity as a result of past transactions or events.
Sum of the carrying amounts as of the balance sheet date of all assets that are expected to be realized in cash, sold or consumed after one year or beyond the normal operating cycle, if longer.
Total obligations incurred as part of normal operations that are expected to be paid during the following twelve months or within one business cycle, if longer.
Amount of noncash expense included in interest expense to amortize debt discount and premium associated with the related debt instruments. Excludes amortization of financing costs. Alternate captions include noncash interest expense.
The aggregate total of expenses of managing and administering the affairs of an entity, including affiliates of the reporting entity, which are not directly or indirectly associated with the manufacture, sale or creation of a product or product line.
Consideration given by issuer of convertible debt to provide an incentive for debt holders to convert the debt to equity securities. The expense is equal to the fair value of all securities and other consideration transferred in the transaction in excess of the fair value of securities issuable pursuant to the original conversion terms.
The aggregate amount of gains or losses resulting from nonoperating activities (for example, interest and dividend revenue, property, plant and equipment impairment loss, and so forth).
Amount of revenue recognized from goods sold, services rendered, insurance premiums, or other activities that constitute an earning process. Includes, but is not limited to, investment and interest income before deduction of interest expense when recognized as a component of revenue, and sales and trading gain (loss).
The cash outflow for an obligation which places a lender in a lien position behind debt having a higher priority of repayment (senior loan) in liquidation of the entity's assets scheduled to be repaid within one year or in the normal operating cycle of the entity, if longer.
View Excel Document