Document and Entity Information
Document and Entity Information - shares | 3 Months Ended | |
Mar. 31, 2023 | May 03, 2023 | |
Cover [Abstract] | ||
Entity Registrant Name | Galaxy Gaming, Inc. | |
Entity Central Index Key | 0000013156 | |
Document Type | 10-Q | |
Document Period End Date | Mar. 31, 2023 | |
Amendment Flag | false | |
Current Fiscal Year End Date | --12-31 | |
Entity Filer Category | Non-accelerated Filer | |
Entity Small Business | true | |
Entity Emerging Growth Company | false | |
Entity Common Stock, Shares Outstanding | 24,438,490 | |
Document Fiscal Period Focus | Q1 | |
Document Fiscal Year Focus | 2023 | |
Trading Symbol | GLXZ | |
Entity Current Reporting Status | Yes | |
Entity Shell Company | false | |
Entity File Number | 000-30653 | |
Entity Tax Identification Number | 20-8143439 | |
Entity Address, Address Line One | 6480 Cameron Street Ste. 305 | |
Entity Address, City or Town | Las Vegas | |
Entity Address, State or Province | NV | |
Entity Incorporation, State or Country Code | NV | |
Entity Address, Postal Zip Code | 89118 | |
City Area Code | 702 | |
Local Phone Number | 939-3254 | |
Title of 12(b) Security | Common stock | |
Entity Interactive Data Current | Yes | |
Document Quarterly Report | true | |
Document Transition Report | false |
Condensed Consolidated Balance
Condensed Consolidated Balance Sheets (Unaudited) - USD ($) | Mar. 31, 2023 | Dec. 31, 2022 |
Current assets: | ||
Cash and cash equivalents | $ 16,386,461 | $ 18,237,513 |
Accounts receivable, net of allowance of $226,588 and $183,242, respectively | 5,667,898 | 3,449,753 |
Income tax receivable | 515,259 | 515,259 |
Prepaid expenses | 1,125,816 | 1,402,824 |
Other current assets | 574,979 | 588,838 |
Total current assets | 24,270,413 | 24,194,187 |
Property and equipment, net | 134,274 | 143,438 |
Operating lease right-of-use assets | 943,691 | 1,002,749 |
Assets deployed at client locations, net | 1,331,706 | 1,399,708 |
Goodwill | 1,091,000 | 1,091,000 |
Other intangible assets, net | 13,710,632 | 13,906,111 |
Other assets | 359,348 | 273,323 |
Total assets | 41,841,064 | 42,010,516 |
Current liabilities: | ||
Accounts payable | 2,544,127 | 1,129,869 |
Accrued expenses | 2,362,647 | 3,697,504 |
Revenue contract liability | 346 | 16,667 |
Current portion of operating lease liabilities | 250,569 | 248,317 |
Current portion of long-term debt | 813,744 | 940,084 |
Total current liabilities | 5,971,433 | 6,032,441 |
Long-term operating lease liabilities | 767,619 | 830,289 |
Long-term debt and liabilities, net | 52,558,038 | 52,960,772 |
Deferred tax liabilities, net | 57,107 | 72,401 |
Total liabilities | 59,354,197 | 59,895,903 |
Commitments and Contingencies (See Note 7) | ||
Stockholders’ deficit | ||
Preferred stock, 10,000,000 shares authorized, $0.001 par value; 0 shares issued and outstanding | ||
Common stock, 65,000,000 shares authorized; $0.001 par value; 24,438,490 and 24,411,098 shares issued and outstanding, respectively | 24,439 | 24,411 |
Additional paid-in capital | 17,820,291 | 17,575,396 |
Accumulated deficit | (35,205,846) | (35,316,540) |
Accumulated other comprehensive loss | (152,017) | (168,654) |
Total stockholders’ deficit | (17,513,133) | (17,885,387) |
Total liabilities and stockholders’ deficit | $ 41,841,064 | $ 42,010,516 |
Condensed Consolidated Balanc_2
Condensed Consolidated Balance Sheets (Unaudited) (Parenthetical) - USD ($) | Mar. 31, 2023 | Dec. 31, 2022 |
Statement of Financial Position [Abstract] | ||
Accounts receivables, net allowance | $ 226,588 | $ 183,242 |
Preferred Stock, Shares authorized | 10,000,000 | 10,000,000 |
Preferred Stock, Par Value | $ 0.001 | $ 0.001 |
Preferred Stock, Issued | 0 | 0 |
Preferred Stock, Outstanding | 0 | 0 |
Common Stock, Shares authorized | 65,000,000 | 65,000,000 |
Common Stock, par value | $ 0.001 | $ 0.001 |
Common Stock, Issued | 24,438,490 | 24,411,098 |
Common Stock, Outstanding | 24,438,490 | 24,411,098 |
Condensed Consolidated Statemen
Condensed Consolidated Statements of Operations and Comprehensive Income (Loss) (Unaudited) - USD ($) | 3 Months Ended | |
Mar. 31, 2023 | Mar. 31, 2022 | |
Revenue: | ||
Total revenue | $ 7,422,534 | $ 5,918,599 |
Costs and expenses: | ||
Cost of ancillary products and assembled components | 352,010 | 52,590 |
Selling, general and administrative | 3,784,657 | 3,043,359 |
Research and development | 206,760 | 199,070 |
Depreciation and amortization | 576,342 | 724,462 |
Share-based compensation | 244,923 | 310,002 |
Total costs and expenses | 5,164,692 | 4,329,483 |
Income from operations | 2,257,842 | 1,589,116 |
Other income (expense): | ||
Interest income | 84,750 | 2,233 |
Interest expense | (2,203,635) | (1,687,022) |
Foreign currency exchange loss | (22,688) | (60,263) |
Total other expense, net | (2,141,573) | (1,745,052) |
Income (loss) before provision for income taxes | 116,269 | (155,936) |
(Provision) Benefit for income taxes | (5,575) | 141,974 |
Net income (loss) | 110,694 | (13,962) |
Foreign currency translation adjustment | 16,637 | (41,949) |
Comprehensive income (loss) | $ 127,331 | $ (55,911) |
Net income (loss) per share: | ||
Basic | $ 0 | $ 0 |
Diluted | $ 0 | $ 0 |
Weighted-average shares outstanding: | ||
Basic | 25,189,722 | 24,405,278 |
Diluted | 25,437,374 | 24,405,278 |
Licensing Fees | ||
Revenue: | ||
Total revenue | $ 7,422,534 | $ 5,918,599 |
Condensed Consolidated Statem_2
Condensed Consolidated Statements of Changes in Stockholders' Deficit (Unaudited) - USD ($) | Total | Common Stock | Additional Paid-in Capital | Accumulated Deficit | Accumulated Other Comprehensive Loss |
Beginning balance, amount at Dec. 31, 2021 | $ (17,286,423) | $ 23,524 | $ 16,380,597 | $ (33,543,351) | $ (147,193) |
Beginning balance, shares at Dec. 31, 2021 | 23,523,969 | ||||
Net income (loss) | (13,962) | (13,962) | |||
Foreign currency translation gain (loss) | (41,949) | (41,949) | |||
Stock options exercised | 195,456 | $ 220 | 195,236 | ||
Stock options exercised, share | 219,999 | ||||
Share-based compensation | 310,002 | $ 19 | 309,983 | ||
Share based compensation, share | 18,965 | ||||
Ending balance, amount at Mar. 31, 2022 | (16,836,876) | $ 23,763 | 16,885,816 | (33,557,313) | (189,142) |
Ending balance, shares at Mar. 31, 2022 | 23,762,933 | ||||
Beginning balance, amount at Dec. 31, 2022 | (17,885,387) | $ 24,411 | 17,575,396 | (35,316,540) | (168,654) |
Beginning balance, shares at Dec. 31, 2022 | 24,411,098 | ||||
Net income (loss) | 110,694 | 110,694 | |||
Foreign currency translation gain (loss) | 16,637 | 16,637 | |||
Share-based compensation | 244,923 | $ 28 | 244,895 | ||
Share based compensation, share | 27,392 | ||||
Ending balance, amount at Mar. 31, 2023 | $ (17,513,133) | $ 24,439 | $ 17,820,291 | $ (35,205,846) | $ (152,017) |
Ending balance, shares at Mar. 31, 2023 | 24,438,490 |
Condensed Consolidated Statem_3
Condensed Consolidated Statements of Cash Flows (Unaudited) - USD ($) | 3 Months Ended | |
Mar. 31, 2023 | Mar. 31, 2022 | |
Cash flows from operating activities: | ||
Net income (loss) | $ 110,694 | $ (13,962) |
Adjustments to reconcile net income (loss) to net cash used in operating activities: | ||
Depreciation and amortization | 576,342 | 724,462 |
Amortization of right-of-use assets | 59,058 | 57,182 |
Amortization of debt issuance costs and debt discount | 377,261 | 369,741 |
Bad debt expense (recovery) | 37,855 | (15,831) |
Deferred income tax | (15,294) | (168,681) |
Share-based compensation | 244,923 | 310,002 |
Changes in operating assets and liabilities: | ||
Accounts receivable | (2,263,475) | 14,836 |
Income tax receivable | (20,869) | 793,522 |
Prepaid expenses and other current assets | 290,566 | 34,989 |
Other assets | (86,025) | 27,870 |
Accounts payable | 1,716,315 | 114,236 |
Accrued expenses | (1,603,191) | (784,082) |
Revenue contract liability | (15,960) | 68,750 |
Operating lease liabilities | (60,418) | (56,088) |
Net cash (used in) provided by operating activities | (652,218) | 1,476,946 |
Cash flows from investing activities: | ||
Investment in internally developed software | (283,049) | (59,616) |
Acquisition of property and equipment | (6,908) | (6,131) |
Acquisition of assemblies in process assets | (13,937) | (110,710) |
Net cash used in investing activities | (303,894) | (176,457) |
Cash flows from financing activities: | ||
Payments of debt issuance costs | (6,829) | |
Proceeds from stock option exercises | 195,456 | |
Principal payments on long-term debt | (899,410) | (315,936) |
Net cash used in financing activities | (906,239) | (120,480) |
Effect of exchange rate changes on cash | 11,299 | 3,379 |
Net increase in cash and cash equivalents | (1,851,052) | 1,183,388 |
Cash and cash equivalents – beginning of period | 18,237,513 | 16,058,714 |
Cash and cash equivalents – end of period | 16,386,461 | 17,242,102 |
Supplemental cash flow information: | ||
Cash paid for interest | 1,823,227 | $ 1,358,531 |
Cash paid for income taxes | $ 18,350 |
NATURE OF OPERATIONS
NATURE OF OPERATIONS | 3 Months Ended |
Mar. 31, 2023 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
NATURE OF OPERATIONS | NOTE 1. NATURE OF OPERATIONS Unless the context indicates otherwise, references to “Galaxy Gaming, Inc.,” “we,” “us,” “our,” or the “Company,” refer to Galaxy Gaming, Inc., a Nevada corporation (“Galaxy Gaming”). We are an established global gaming company specializing in the design, development, acquisition, assembly, marketing and licensing of proprietary casino table games and associated technology, platforms and systems for the casino gaming industry. Casinos use our proprietary products and services to enhance their gaming operations and improve their profitability, productivity and security, as well as to offer popular cutting-edge gaming entertainment content and technology to their players. We market our products and services to online casinos worldwide, to land-based casino gaming companies in North America, the Caribbean, Central America, the United Kingdom, Europe and Africa, and to cruise ship companies. We license our products and services for use solely in legalized gaming markets. We also license our content and distribute content from other companies to iGaming operators in legalized gaming markets throughout the world. |
SIGNIFICANT ACCOUNTING POLICIES
SIGNIFICANT ACCOUNTING POLICIES | 3 Months Ended |
Mar. 31, 2023 | |
Accounting Policies [Abstract] | |
SIGNIFICANT ACCOUNTING POLICIES | NOTE 2. SIGNIFICANT ACCOUNTING POLICIES Basis of presentation. The accompanying condensed financial statements have been prepared in accordance with generally accepted accounting principles in the United States of America (“U.S. GAAP”) and the rules of the SEC. In the opinion of management, the accompanying unaudited interim condensed financial statements contain all necessary adjustments (including all those of a recurring nature and those necessary in order for the financial statements to be not misleading) and all disclosures to present fairly our financial position and the results of our operations and cash flows for the periods presented. These unaudited interim condensed financial statements should be read in conjunction with the financial statements and the related notes as of and for the year ended December 31, 2022 included in our 2022 Form 10-K ("2022 10-K"). The operating results for interim periods are not necessarily indicative of results that may be expected for any other interim period or for the full year. Use of estimates and assumptions. We are required to make estimates, judgments and assumptions that we believe are reasonable based on our historical experience, contract terms, observance of known trends in our Company and the industry as a whole, and information available from other outside sources. Our estimates affect reported amounts for assets, liabilities, revenues, expenses and related disclosures. Actual results may differ from initial estimates. Consolidation. The financial statements are presented on a consolidated basis and include the results of the Company and its wholly owned subsidiaries. All intercompany transactions and balances have been eliminated in consolidation. Reclassifications. Certain accounts and financial statement captions in the prior period have been reclassified to conform to the current period financial statement presentations and had no effect on net income (loss). Cash and cash equivalents. Our cash and cash equivalents consist of bank deposits. These deposits are in insured banking institutions, which are insured up to $ 250,000 per account. To date, we have not experienced uninsured losses. In general, we invest amounts in excess of the insurance maximums in a money market fund that invests solely in US government and agency securities. Accounts receivable and allowance for doubtful accounts. Accounts receivable are stated at face value less an allowance for doubtful accounts. Accounts receivable are non-interest bearing. The Company reviews the accounts receivable on a quarterly basis to determine if any receivables will potentially be uncollectible. The allowance for doubtful accounts is estimated based on specific customer reviews, historical collection trends and current economic and business conditions. Goodwill. Goodwill (Note 4 ) is assessed for impairment at least annually or at other times during the year if events or circumstances indicate that it is more-likely-than-not that the fair value of a reporting asset is below the carrying amount. If found to be impaired, the carrying amount will be reduced, and an impairment loss will be recognized. Other intangible assets, net. The following intangible assets have finite lives and are being amortized using the straight-line method over their estimated economic lives as follows: Patents 4 - 20 years Customer relationships 9 - 22 years Trademarks 20 - 30 years Intellectual property 12 years Non-compete agreements 9 years Software 3 years Other intangible assets (Note 4 ) are analyzed for potential impairment at least annually or whenever events or changes in circumstances indicate the carrying value may not be recoverable and exceeds the fair value, which is the sum of the undiscounted cash flows expected to result from the use and eventual disposition of the intangible assets. No impairment was recorded for the three months ended March 31, 2023. Software relates primarily to assets where costs are capitalizable during the application development phase. External labor-related costs associated with product development are included in software. Fair value of financial instruments. We estimate fair value for financial assets and liabilities in accordance with Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 820, Fair Value Measurement (“ASC 820”). ASC 820 defines fair value, provides guidance for measuring fair value, requires certain disclosures and discusses valuation techniques, such as the market approach (comparable market prices), the income approach (present value of future income or cash flow) and the cost approach (cost to replace the service capacity of an asset or replacement cost). ASC 820 utilizes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value into three broad levels: • 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 for the asset or liability, 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 that reflect the reporting entity’s own assumptions. The estimated fair values of cash equivalents, accounts receivable and accounts payable approximate their carrying amounts due to their short-term nature. The estimated fair value of our long-term debt approximates its carrying value based upon our expected borrowing rate for debt with similar remaining maturities and comparable risk. The Company currently has no financial instruments measured at estimated fair value on a recurring basis based on valuation reports provided by counterparties. Leases . We account for lease components (such as rent payments) separately from non-lease components (such as common-area maintenance costs, real estate and sales taxes and insurance costs). Operating and finance leases with terms greater than 12 months are recorded on the condensed consolidated balance sheets as right-of-use assets with corresponding lease liabilities. Lease expense is recognized on a straight-line basis using the discount rate implicit in each lease or our incremental borrowing rate at lease commencement date (Note 5 ). Revenue recognition. We account for our revenue in accordance with ASC Topic 606, Revenue from Contracts with Customers . (Note 3 ). Foreign currency translation. The functional currency for our subsidiary Progressive Games Partners ("PGP") is the Euro. Gains and losses from settlement of transactions involving foreign currency amounts are included in other income or expense in the consolidated statements of operations. Gains and losses resulting from translating assets and liabilities from the functional currency to U.S. dollars are included in accumulated other comprehensive income or (loss) in the consolidated statements of changes in stockholders’ deficit. Segment Information. We define operating segments as components of our enterprise for which separate financial information is reviewed regularly by the chief operating decision-makers to evaluate performance and to make operating decisions. We currently have two operating segments (land-based gaming ("GG Core") and online gaming ("GG Digital")) which are aggregated into one reporting segment. Employment agreement amendment. On June 15, 2022, the Company entered into amendment number 3 (the "Amendment") to the employment agreement, dated July 27, 2017 (and previously amended by amendments number 1 and number 2), between the Company and Todd P. Cravens, the Company’s President and Chief Executive Officer. The Amendment (i) extends the term of the agreement from July 27, 2022, to July 26, 2024 ; (ii) provides for a potential equity incentive grant of stock for calendar year 2022 and calendar year 2023, with (x) a grant of 20,000 shares if the Company achieves 80 % of its EBITDA Budget target (as defined by management and as adopted by the Board for the calendar year) for calendar year 2022, (y) a grant of 20,000 shares if the Company achieves 80 % of its EBITDA Budget target (as adopted by the Board for the calendar year) for calendar year 2023, and (z) an additional grant under the following performance goals for each of calendar year 2022 and 2023: a) 100 % of EBITDA Target – 20,000 shares, b) 110 % of EBITDA Target – 30,000 shares, and c) 115 % of EBITDA Target – 40,000 shares; and (iii) increases Mr. Cravens' annual compensation to $ 300,000 effective as of August 1, 2022. All “shares” above will vest one year from the date of grant. Should Mr. Cravens leave the Company or be terminated with good cause prior the vesting date he will forfeit any and all rights to the shares. Pursuant to the Amendment, the Board maintains reasonable, good faith discretion to make adjustments to the Company's EBITDA performance relating to the Company’s management incentive program, where appropriate in each year, to account for factors contributing positively and negatively to the Company's actual recorded EBITDA performance that could be considered (by the Board) unrelated to or not driven by the Company's performance. In addition, should there be a circumstance that may trigger a change of control, as defined in the Company's 2014 Equity Incentive Plan (as amended, the "2014 Equity Plan"), in either the 2022 or 2023 calendar years, if not already granted, the 20,000 shares from each of the 2022 and 2023 CEO executive Incentive from the 80 % EBITDA target, will be granted immediately. The Board retains discretion to be exercised reasonably and in good faith to accelerate the grant of remaining shares under the 2022 and 2023 equity incentives set forth in the Amendment. The balance of the employment agreement, as previously amended, remains in full force and effect. Government subsidies. On March 27, 2020, the U.S. government enacted the Coronavirus Aid, Relief and Economic Security Act ("CARES Act"), which among other things, provides employer payroll tax credits for qualified wages and options to defer payroll tax payments for a limited period. Based on our evaluation of the CARES Act, in certain circumstances, we qualify for certain employer payroll tax credits as well as the deferral of payroll tax payments in the future. The Company records government subsidies as offsets to the related operating expenses. During 2022, qualified payroll credits reduced general and administrative expenses by $ 574,979 on our condensed consolidated statements of operations. The Company recorded the payroll tax credit as a receivable in other current assets on the consolidated balance sheets as of December 31, 2022 and March 31, 2023 . Other significant accounting policies. Our significant accounting policies are described in our 2022 10-K. There have been no material changes to those policies. Financial Instruments – Credit Losses. In February 2020, the FASB issued ASU No. 2020-02, Financial Instruments – Credit Losses (Topic 326). ASU 2020-02 provides updated guidance on how an entity should measure credit losses on financial instruments. We do not believe the adoption of this guidance will have a material impact on our condensed consolidated financial statements or related disclosures. Reference Rate Reform. In March 2020, the FASB issued ASU No. 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting . In January 2021, the FASB issued ASU 2021-01 , Reference Rate Reform (Topic 848): Scope . The amendments were effective upon issuance and provide optional expedients and exceptions for applying GAAP to contracts, hedging relationships and other transactions affected by reference rate reform if certain criteria are met. We have completed our evaluation of significant contracts. Contracts reviewed will be modified to apply a new reference rate, primarily the Secured Overnight Financing Rate ("SOFR") where applicable. As a result, the guidance has not had, and is not expected to have, a material impact on our consolidated financial statements. |
REVENUE RECOGNITION
REVENUE RECOGNITION | 3 Months Ended |
Mar. 31, 2023 | |
Revenue from Contract with Customer [Abstract] | |
REVENUE RECOGNITION | NOTE 3. REVENUE RECOGNITION Revenue recognition. We generate revenue primarily from the licensing of our intellectual property. We recognize revenue under recurring fee license contracts monthly as we satisfy our performance obligation, which consists of granting the customer the right to use our intellectual property. Amounts billed are determined based on flat rates or usage rates stipulated in the customer contract. We also sell gaming systems with a perpetual right to use our intellectual property. Control transfers and we recognize revenue at a point in time when the gaming system is available for use by a customer, which is no earlier than the shipment of the products to the customer or an intermediary for the customer. Disaggregation of revenue The following table disaggregates our revenue by geographic location for the following listed periods. All of the royalty expense that is charged to a contra-revenue in our GG Digital operating segment has been allocated to the Europe, Middle East and Africa region in both periods presented. In prior filings, it was allocated to the Americas. Three Months 2023 2022 The Americas $ 4,471,631 $ 3,045,365 Europe, Middle East and Africa 2,950,903 2,873,234 Total revenue $ 7,422,534 $ 5,918,599 Contract liabilities. Amounts billed and cash received in advance of performance obligations fulfilled are recorded as contract liabilities and recognized as revenue when performance obligations are fulfilled. Contract Assets. The Company’s contract assets consist solely of unbilled receivables which are recorded when the Company recognizes revenue in advance of billings. Unbilled receivables totaled $ 1,105,851 and $ 771,293 as of March 31, 2023 and December 31, 2022 , respectively, and are included in the accounts receivable balance in the accompanying condensed consolidated balance sheets. |
GOODWILL AND OTHER INTANGIBLE A
GOODWILL AND OTHER INTANGIBLE ASSETS | 3 Months Ended |
Mar. 31, 2023 | |
Goodwill and Intangible Assets Disclosure [Abstract] | |
GOODWILL AND OTHER INTANGIBLE ASSETS | NOTE 4. GOODWILL AND OTHER INTANGIBLE ASSETS Goodwill. A goodwill balance of $ 1,091,000 was created as a result of a transaction completed in October 2011 with Prime Table Games, LLC (“PTG”). Other intangible assets, net. Other intangible assets, net consisted of the following at: March 31, December 31, 2023 2022 Patents $ 13,507,799 $ 13,507,997 Customer relationships 14,040,856 14,040,856 Trademarks 2,880,967 2,880,967 Intellectual property 2,000,000 2,000,000 Non-compete agreements 660,000 660,000 Software 1,251,412 968,362 Other intangible assets, gross 34,341,034 34,058,182 Less: accumulated amortization ( 20,630,402 ) ( 20,152,071 ) Other intangible assets, net $ 13,710,632 $ 13,906,111 For the three months ended March 31, 2023 and 2022, amortization expense related to other intangible assets was $ 478,331 and $ 653,330 , respectively. |
LEASES
LEASES | 3 Months Ended |
Mar. 31, 2023 | |
Leases [Abstract] | |
LEASES | NOTE 5. LEASES Lessee We have operating leases for our corporate office, two satellite facilities in the state of Washington and for certain equipment. We account for lease components (such as rent payments) separately from the non-lease components (such as common-area maintenance costs, real estate and sales taxes and insurance costs). The discount rate represents the interest rate implicit in each lease or our incremental borrowing rate at lease commencement date. As of March 31, 2023, no renewal option periods were included in any estimated minimum lease term as the options were not deemed reasonably certain to be exercised. Our leases have remaining lease terms ranging from 9 months to 48 months . Supplemental balance sheet information related to leases is as follows: As of March 31, 2023 Amount Classification Operating leases: Operating lease right-of-use lease assets $ 943,691 Operating lease current liabilities $ 250,569 Current portion of operating lease liabilities Operating lease long-term liabilities 767,619 Long-term operating lease liabilities Total operating lease liabilities $ 1,018,188 Weighted-average remaining lease term: Operating leases 3.70 Weighted-average discount rate: Operating leases 4.4 % The components of lease expense are as follows: Three Months Ended March 31, 2023 Amount Classification Operating lease cost $ 72,071 Selling, general and administrative expense Supplemental cash flow information related to leases is as follows: Three Months Ended March 31, 2023 Amount Classification Cash paid for amounts included in the Operating cash flows from operating leases $ 72,081 Net income Right-of-use assets obtained in exchange Operating leases $ — Supplemental cash flow information As of March 31, 2023, future maturities of our operating lease liabilities are as follows: Amount For the remaining nine months ending December 31, 2023 $ 218,796 Years ending December 31, 2024 $ 288,892 2025 294,507 2026 302,011 2027 2,985 Total minimum lease payments 1,107,191 Less: imputed interest ( 89,003 ) Total operating lease liability 1,018,188 Less: current portion ( 250,569 ) Long-term portion $ 767,619 |
LONG-TERM LIABILITIES
LONG-TERM LIABILITIES | 3 Months Ended |
Mar. 31, 2023 | |
Debt Disclosure [Abstract] | |
LONG-TERM LIABILITIES | NOTE 6. LONG-TERM LIABILITIES Long-term liabilities consisted of the following at: March 31, December 31, 2023 2022 Fortress credit agreement $ 58,626,929 $ 59,400,000 Insurance notes payable 213,744 340,084 Long-term debt and liabilities, gross 58,840,673 59,740,084 Less: Unamortized debt issuance costs ( 5,468,891 ) ( 5,839,228 ) Long-term debt and liabilities, net of debt issuance costs 53,371,782 53,900,856 Less: Current portion of long-term debt ( 813,744 ) ( 940,084 ) Long-term debt and liabilities, net $ 52,558,038 $ 52,960,772 Fortress Credit Agreement. On November 15, 2021, the Company entered into a senior secured term loan agreement with Fortress Credit Corp. (“Fortress Credit Agreement”) in the amount of $ 60.0 million . The proceeds of the loan were used to (i) pay approximately $ 39.5 million to Triangulum as full payment of the settlement amount due under the previously filed settlement agreement between Galaxy Gaming and Triangulum, as set forth above; (ii) repay approximately $ 11.1 million due and owing to NSB under the MSPLP and under the Amended and Restated Credit Agreement, dated as of May 13, 2021, made between Galaxy Gaming and Zions Bancorporation, N.A. dba Nevada State Bank, a Nevada state banking corporation, and (iii) approximately $ 4.1 million was used to pay fees and expenses. The remaining approximately $ 5.3 million was added to the Company’s cash on hand and used for corporate and operating purposes. The Fortress Credit Agreement bears interest at a rate equal to, at the Company’s option, either (a) LIBOR (or a successor rate, determined in accordance with the Fortress Credit Agreement) plus 7.75 % , subject to a reduction to 7.50 % upon the achievement of a net leverage target or (b) a base rate determined by reference to the greatest of (i) the federal funds rate plus 0.50 % , (ii) the prime rate as determined by reference to The Wall Street Journal’s “Prime Rate” and (iii) the one-month adjusted LIBOR rate plus 1.00 % , plus 6.75 % , subject to a reduction to 6.50 % upon the achievement of a net leverage target. The Fortress Credit Agreement has a final maturity of November 13, 2026 . The obligations under the Fortress Credit Agreement are guaranteed by the Company’s subsidiaries and are secured by substantially all of the assets of the Company and its subsidiaries. The Fortress Credit agreement requires, among other things, principal payments of $ 150,000 per quarter and includes an annual sweep of 50 % of excess cash flow commencing in 2023 based on results for the prior fiscal year. The Fortress Credit Agreement contains affirmative and negative financial covenants (as defined in the Fortress Credit Agreement) and other restrictions customary for borrowings of this nature. The Company was required to maintain a Total Net Leverage Ratio of no more than 6.00 x for the quarter ended March 31, 2023. As of March 31, 2023, the Company was in compliance with the covenants in the Fortress Credit Agreement. In connection with entering into the Fortress Credit Agreement, the Company also issued warrants to purchase a total of up to 778,320 shares of the Company’s common stock to certain affiliates of Fortress at a price per share of $ 0.01 (the “Warrants”). The Warrants are exercisable at any time, subject to certain restrictions. In response to ASU No. 2020-04, Reference Rate Reform (Topic 848) , on the earlier of (i) the date that all Available Tenors of the LIBOR rate have either permanently or indefinitely ceased to be provided by the LIBOR Rate's administrator ("IBA") and (ii) the Early Option Effective Date, if the then-current Benchmark is the LIBOR Rate, the Benchmark Replacement will replace LIBOR under the Fortress Credit Agreement. The Benchmark Replacement is (a) the sum of: (i) Term SOFR and (ii) 0.11448 % for an Available Tenor of one-month's duration, 0.26161 % for an Available Tenor of three-months duration, and 0.42826 % for an Available Tenor of six months duration, or (b) the sum of: (i) Daily Simple SOFR and (ii) the spread adjustment selected or recommended by the Relevant Governmental Body for the replacement of the tenor of USD LIBOR with a SOFR-based rate having approximately the same length as the interest payment period. As of March 31, 2023, future maturities of our long-term liabilities are as follows: Total Years ended December 31, 2023 $ 663,744 2024 600,000 2025 600,000 2026 56,976,929 Long-term liabilities, gross $ 58,840,673 |
COMMITMENTS AND CONTINGENCIES
COMMITMENTS AND CONTINGENCIES | 3 Months Ended |
Mar. 31, 2023 | |
Commitments and Contingencies Disclosure [Abstract] | |
COMMITMENTS AND CONTINGENCIES | NOTE 7. COMMITMENTS AND CONTINGENCIES Concentration of risk. We are exposed to risks associated with clients who represent a significant portion of total revenues. For the three months ended March 31, 2023 and 2022, respectively, we had the following client concentrations: Location Three Months Ended March 31, 2023 Three Months Ended March 31, 2022 Accounts Accounts Client A Europe 23.5 % 31.0 % $ 1,206,125 $ — Client B North America 16.0 % 1.7 % $ 1,268,250 $ 132,500 Client C North America 6.5 % 8.5 % $ 862,303 $ 138,338 Legal proceedings. In the ordinary course of conducting our business, we are, from time to time, involved in various legal proceedings, administrative proceedings, regulatory government investigations and other matters, including those in which we are a plaintiff or defendant, that are complex in nature and have outcomes that are difficult to predict. There are no current or threatened legal proceedings. Intellectual property agreements. From time to time, the Company purchases intellectual property from third-parties and the Company, in turn, utilizes that intellectual property in certain games sold to clients. In these purchase agreements, the Company may agree to pay the seller of the intellectual property a fee, if and when, the Company receives revenue from games containing the intellectual property. |
INCOME TAXES
INCOME TAXES | 3 Months Ended |
Mar. 31, 2023 | |
Income Tax Disclosure [Abstract] | |
INCOME TAXES | NOTE 8. INCOME TAXES Our forecasted annual effective tax rate (“AETR”) at March 31, 2023 was 4.8 %, as compared to 6.66 % at March 31, 2022. This decrease was primarily due to changes in foreign rate differential, adjustments in foreign derived intangible income and a change in valuation allowance as a result of changes in estimates of current-year ordinary income considered in determining the forecasted AETR. For the three months ended March 31, 2023 and 2022, our effective tax rate (“ETR”) was 4.8 % and 143.35 %, respectively. The decrease in the ETR for the three months ended March 31, 2023 is a result of favorable discrete items related to excess tax benefits from stock-based compensation in the prior quarter that were not present in the current quarter. |
SIGNIFICANT ACCOUNTING POLICI_2
SIGNIFICANT ACCOUNTING POLICIES (Policies) | 3 Months Ended |
Mar. 31, 2023 | |
Accounting Policies [Abstract] | |
Basis of presentation | Basis of presentation. The accompanying condensed financial statements have been prepared in accordance with generally accepted accounting principles in the United States of America (“U.S. GAAP”) and the rules of the SEC. In the opinion of management, the accompanying unaudited interim condensed financial statements contain all necessary adjustments (including all those of a recurring nature and those necessary in order for the financial statements to be not misleading) and all disclosures to present fairly our financial position and the results of our operations and cash flows for the periods presented. These unaudited interim condensed financial statements should be read in conjunction with the financial statements and the related notes as of and for the year ended December 31, 2022 included in our 2022 Form 10-K ("2022 10-K"). The operating results for interim periods are not necessarily indicative of results that may be expected for any other interim period or for the full year. |
Use of estimates and assumptions | Use of estimates and assumptions. We are required to make estimates, judgments and assumptions that we believe are reasonable based on our historical experience, contract terms, observance of known trends in our Company and the industry as a whole, and information available from other outside sources. Our estimates affect reported amounts for assets, liabilities, revenues, expenses and related disclosures. Actual results may differ from initial estimates. |
Consolidation | Consolidation. The financial statements are presented on a consolidated basis and include the results of the Company and its wholly owned subsidiaries. All intercompany transactions and balances have been eliminated in consolidation. |
Reclassifications | Reclassifications. Certain accounts and financial statement captions in the prior period have been reclassified to conform to the current period financial statement presentations and had no effect on net income (loss). |
Cash and cash equivalents | Cash and cash equivalents. Our cash and cash equivalents consist of bank deposits. These deposits are in insured banking institutions, which are insured up to $ 250,000 per account. To date, we have not experienced uninsured losses. In general, we invest amounts in excess of the insurance maximums in a money market fund that invests solely in US government and agency securities. |
Accounts receivable and allowance for doubtful accounts | Accounts receivable and allowance for doubtful accounts. Accounts receivable are stated at face value less an allowance for doubtful accounts. Accounts receivable are non-interest bearing. The Company reviews the accounts receivable on a quarterly basis to determine if any receivables will potentially be uncollectible. The allowance for doubtful accounts is estimated based on specific customer reviews, historical collection trends and current economic and business conditions. |
Goodwill | Goodwill. Goodwill (Note 4 ) is assessed for impairment at least annually or at other times during the year if events or circumstances indicate that it is more-likely-than-not that the fair value of a reporting asset is below the carrying amount. If found to be impaired, the carrying amount will be reduced, and an impairment loss will be recognized. |
Other intangible assets, net | Other intangible assets, net. The following intangible assets have finite lives and are being amortized using the straight-line method over their estimated economic lives as follows: Patents 4 - 20 years Customer relationships 9 - 22 years Trademarks 20 - 30 years Intellectual property 12 years Non-compete agreements 9 years Software 3 years Other intangible assets (Note 4 ) are analyzed for potential impairment at least annually or whenever events or changes in circumstances indicate the carrying value may not be recoverable and exceeds the fair value, which is the sum of the undiscounted cash flows expected to result from the use and eventual disposition of the intangible assets. No impairment was recorded for the three months ended March 31, 2023. Software relates primarily to assets where costs are capitalizable during the application development phase. External labor-related costs associated with product development are included in software. |
Fair value of financial instruments | Fair value of financial instruments. We estimate fair value for financial assets and liabilities in accordance with Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 820, Fair Value Measurement (“ASC 820”). ASC 820 defines fair value, provides guidance for measuring fair value, requires certain disclosures and discusses valuation techniques, such as the market approach (comparable market prices), the income approach (present value of future income or cash flow) and the cost approach (cost to replace the service capacity of an asset or replacement cost). ASC 820 utilizes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value into three broad levels: • 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 for the asset or liability, 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 that reflect the reporting entity’s own assumptions. The estimated fair values of cash equivalents, accounts receivable and accounts payable approximate their carrying amounts due to their short-term nature. The estimated fair value of our long-term debt approximates its carrying value based upon our expected borrowing rate for debt with similar remaining maturities and comparable risk. The Company currently has no financial instruments measured at estimated fair value on a recurring basis based on valuation reports provided by counterparties. |
Leases | Leases . We account for lease components (such as rent payments) separately from non-lease components (such as common-area maintenance costs, real estate and sales taxes and insurance costs). Operating and finance leases with terms greater than 12 months are recorded on the condensed consolidated balance sheets as right-of-use assets with corresponding lease liabilities. Lease expense is recognized on a straight-line basis using the discount rate implicit in each lease or our incremental borrowing rate at lease commencement date (Note 5 ). |
Revenue Recognition | Revenue recognition. We account for our revenue in accordance with ASC Topic 606, Revenue from Contracts with Customers . (Note 3 ). |
Foreign currency translation | Foreign currency translation. The functional currency for our subsidiary Progressive Games Partners ("PGP") is the Euro. Gains and losses from settlement of transactions involving foreign currency amounts are included in other income or expense in the consolidated statements of operations. Gains and losses resulting from translating assets and liabilities from the functional currency to U.S. dollars are included in accumulated other comprehensive income or (loss) in the consolidated statements of changes in stockholders’ deficit. |
Segment Information | Segment Information. We define operating segments as components of our enterprise for which separate financial information is reviewed regularly by the chief operating decision-makers to evaluate performance and to make operating decisions. We currently have two operating segments (land-based gaming ("GG Core") and online gaming ("GG Digital")) which are aggregated into one reporting segment. |
Employment agreement amendment | Employment agreement amendment. On June 15, 2022, the Company entered into amendment number 3 (the "Amendment") to the employment agreement, dated July 27, 2017 (and previously amended by amendments number 1 and number 2), between the Company and Todd P. Cravens, the Company’s President and Chief Executive Officer. The Amendment (i) extends the term of the agreement from July 27, 2022, to July 26, 2024 ; (ii) provides for a potential equity incentive grant of stock for calendar year 2022 and calendar year 2023, with (x) a grant of 20,000 shares if the Company achieves 80 % of its EBITDA Budget target (as defined by management and as adopted by the Board for the calendar year) for calendar year 2022, (y) a grant of 20,000 shares if the Company achieves 80 % of its EBITDA Budget target (as adopted by the Board for the calendar year) for calendar year 2023, and (z) an additional grant under the following performance goals for each of calendar year 2022 and 2023: a) 100 % of EBITDA Target – 20,000 shares, b) 110 % of EBITDA Target – 30,000 shares, and c) 115 % of EBITDA Target – 40,000 shares; and (iii) increases Mr. Cravens' annual compensation to $ 300,000 effective as of August 1, 2022. All “shares” above will vest one year from the date of grant. Should Mr. Cravens leave the Company or be terminated with good cause prior the vesting date he will forfeit any and all rights to the shares. Pursuant to the Amendment, the Board maintains reasonable, good faith discretion to make adjustments to the Company's EBITDA performance relating to the Company’s management incentive program, where appropriate in each year, to account for factors contributing positively and negatively to the Company's actual recorded EBITDA performance that could be considered (by the Board) unrelated to or not driven by the Company's performance. In addition, should there be a circumstance that may trigger a change of control, as defined in the Company's 2014 Equity Incentive Plan (as amended, the "2014 Equity Plan"), in either the 2022 or 2023 calendar years, if not already granted, the 20,000 shares from each of the 2022 and 2023 CEO executive Incentive from the 80 % EBITDA target, will be granted immediately. The Board retains discretion to be exercised reasonably and in good faith to accelerate the grant of remaining shares under the 2022 and 2023 equity incentives set forth in the Amendment. The balance of the employment agreement, as previously amended, remains in full force and effect. |
Government subsidies | Government subsidies. On March 27, 2020, the U.S. government enacted the Coronavirus Aid, Relief and Economic Security Act ("CARES Act"), which among other things, provides employer payroll tax credits for qualified wages and options to defer payroll tax payments for a limited period. Based on our evaluation of the CARES Act, in certain circumstances, we qualify for certain employer payroll tax credits as well as the deferral of payroll tax payments in the future. The Company records government subsidies as offsets to the related operating expenses. During 2022, qualified payroll credits reduced general and administrative expenses by $ 574,979 on our condensed consolidated statements of operations. The Company recorded the payroll tax credit as a receivable in other current assets on the consolidated balance sheets as of December 31, 2022 and March 31, 2023 . |
Recently adopted accounting standards | Financial Instruments – Credit Losses. In February 2020, the FASB issued ASU No. 2020-02, Financial Instruments – Credit Losses (Topic 326). ASU 2020-02 provides updated guidance on how an entity should measure credit losses on financial instruments. We do not believe the adoption of this guidance will have a material impact on our condensed consolidated financial statements or related disclosures. Reference Rate Reform. In March 2020, the FASB issued ASU No. 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting . In January 2021, the FASB issued ASU 2021-01 , Reference Rate Reform (Topic 848): Scope . The amendments were effective upon issuance and provide optional expedients and exceptions for applying GAAP to contracts, hedging relationships and other transactions affected by reference rate reform if certain criteria are met. We have completed our evaluation of significant contracts. Contracts reviewed will be modified to apply a new reference rate, primarily the Secured Overnight Financing Rate ("SOFR") where applicable. As a result, the guidance has not had, and is not expected to have, a material impact on our consolidated financial statements. |
SIGNIFICANT ACCOUNTING POLICI_3
SIGNIFICANT ACCOUNTING POLICIES (Tables) | 3 Months Ended |
Mar. 31, 2023 | |
Accounting Policies [Abstract] | |
Finite Lived Intangible Assets Estimated Economic Lives | The following intangible assets have finite lives and are being amortized using the straight-line method over their estimated economic lives as follows: Patents 4 - 20 years Customer relationships 9 - 22 years Trademarks 20 - 30 years Intellectual property 12 years Non-compete agreements 9 years Software 3 years |
REVENUE RECOGNITION (Tables)
REVENUE RECOGNITION (Tables) | 3 Months Ended |
Mar. 31, 2023 | |
Revenue from Contract with Customer [Abstract] | |
Summary of Disaggregation of Revenue by Geographic Location | The following table disaggregates our revenue by geographic location for the following listed periods. All of the royalty expense that is charged to a contra-revenue in our GG Digital operating segment has been allocated to the Europe, Middle East and Africa region in both periods presented. In prior filings, it was allocated to the Americas. Three Months 2023 2022 The Americas $ 4,471,631 $ 3,045,365 Europe, Middle East and Africa 2,950,903 2,873,234 Total revenue $ 7,422,534 $ 5,918,599 |
GOODWILL AND OTHER INTANGIBLE_2
GOODWILL AND OTHER INTANGIBLE ASSETS (Tables) | 3 Months Ended |
Mar. 31, 2023 | |
Goodwill and Intangible Assets Disclosure [Abstract] | |
Schedule of Other Intangible Assets, Net | Other intangible assets, net consisted of the following at: March 31, December 31, 2023 2022 Patents $ 13,507,799 $ 13,507,997 Customer relationships 14,040,856 14,040,856 Trademarks 2,880,967 2,880,967 Intellectual property 2,000,000 2,000,000 Non-compete agreements 660,000 660,000 Software 1,251,412 968,362 Other intangible assets, gross 34,341,034 34,058,182 Less: accumulated amortization ( 20,630,402 ) ( 20,152,071 ) Other intangible assets, net $ 13,710,632 $ 13,906,111 |
LEASES (Tables)
LEASES (Tables) | 3 Months Ended |
Mar. 31, 2023 | |
Leases [Abstract] | |
Schedule of Supplemental Balance Sheet Information Related to Leases | Supplemental balance sheet information related to leases is as follows: As of March 31, 2023 Amount Classification Operating leases: Operating lease right-of-use lease assets $ 943,691 Operating lease current liabilities $ 250,569 Current portion of operating lease liabilities Operating lease long-term liabilities 767,619 Long-term operating lease liabilities Total operating lease liabilities $ 1,018,188 Weighted-average remaining lease term: Operating leases 3.70 Weighted-average discount rate: Operating leases 4.4 % |
Schedule of Components of Lease Expense | The components of lease expense are as follows: Three Months Ended March 31, 2023 Amount Classification Operating lease cost $ 72,071 Selling, general and administrative expense |
Schedule of Supplemental Cash Flow Information Related to Leases | Supplemental cash flow information related to leases is as follows: Three Months Ended March 31, 2023 Amount Classification Cash paid for amounts included in the Operating cash flows from operating leases $ 72,081 Net income Right-of-use assets obtained in exchange Operating leases $ — Supplemental cash flow information |
Schedule of Future Maturities of Operating Lease Liabilities | As of March 31, 2023, future maturities of our operating lease liabilities are as follows: Amount For the remaining nine months ending December 31, 2023 $ 218,796 Years ending December 31, 2024 $ 288,892 2025 294,507 2026 302,011 2027 2,985 Total minimum lease payments 1,107,191 Less: imputed interest ( 89,003 ) Total operating lease liability 1,018,188 Less: current portion ( 250,569 ) Long-term portion $ 767,619 |
LONG-TERM LIABILITIES (Tables)
LONG-TERM LIABILITIES (Tables) | 3 Months Ended |
Mar. 31, 2023 | |
Debt Disclosure [Abstract] | |
Schedule of Long-term Liabilities | Long-term liabilities consisted of the following at: March 31, December 31, 2023 2022 Fortress credit agreement $ 58,626,929 $ 59,400,000 Insurance notes payable 213,744 340,084 Long-term debt and liabilities, gross 58,840,673 59,740,084 Less: Unamortized debt issuance costs ( 5,468,891 ) ( 5,839,228 ) Long-term debt and liabilities, net of debt issuance costs 53,371,782 53,900,856 Less: Current portion of long-term debt ( 813,744 ) ( 940,084 ) Long-term debt and liabilities, net $ 52,558,038 $ 52,960,772 |
Schedule of Future Maturities of Long-term Liabilities | As of March 31, 2023, future maturities of our long-term liabilities are as follows: Total Years ended December 31, 2023 $ 663,744 2024 600,000 2025 600,000 2026 56,976,929 Long-term liabilities, gross $ 58,840,673 |
COMMITMENTS AND CONTINGENCIES (
COMMITMENTS AND CONTINGENCIES (Tables) | 3 Months Ended |
Mar. 31, 2023 | |
Commitments and Contingencies Disclosure [Abstract] | |
Schedule of Client Revenue Concentrations | For the three months ended March 31, 2023 and 2022, respectively, we had the following client concentrations: Location Three Months Ended March 31, 2023 Three Months Ended March 31, 2022 Accounts Accounts Client A Europe 23.5 % 31.0 % $ 1,206,125 $ — Client B North America 16.0 % 1.7 % $ 1,268,250 $ 132,500 Client C North America 6.5 % 8.5 % $ 862,303 $ 138,338 |
SIGNIFICANT ACCOUNTING POLICI_4
SIGNIFICANT ACCOUNTING POLICIES (Details Narrative) | 3 Months Ended | 12 Months Ended | |
Jun. 15, 2022 USD ($) shares | Mar. 31, 2023 USD ($) Segment | Dec. 31, 2022 USD ($) | |
Significant Accounting Policies [Line Items] | |||
Impairment of intangible assets | $ | $ 0 | ||
Number of operating segment | Segment | 2 | ||
Number of reporting segment | Segment | 1 | ||
General and Administrative Expenses | |||
Significant Accounting Policies [Line Items] | |||
Reduction in qualified payroll tax credits | $ | $ 574,979 | ||
Todd P. Cravens | Amendment Number 3, Employment Agreement | |||
Significant Accounting Policies [Line Items] | |||
Extended term of agreement description | extends the term of the agreement from July 27, 2022, to July 26, 2024 | ||
Annual compensation | $ | $ 300,000 | ||
EBITDA Budget Target | Calendar Year 2022 | Todd P. Cravens | Amendment Number 3, Employment Agreement | |||
Significant Accounting Policies [Line Items] | |||
Stock options granted | 20,000 | ||
EBITDA, percentage | 80% | ||
EBITDA Budget Target | Calendar Year 2023 | Todd P. Cravens | Amendment Number 3, Employment Agreement | |||
Significant Accounting Policies [Line Items] | |||
Stock options granted | 20,000 | ||
EBITDA, percentage | 80% | ||
100% of EBITDA Target | Calendar Year 2023 and 2022 | Todd P. Cravens | Amendment Number 3, Employment Agreement | |||
Significant Accounting Policies [Line Items] | |||
Stock options granted | 20,000 | ||
EBITDA, percentage | 100% | ||
110% of EBITDA Target | Calendar Year 2023 and 2022 | Todd P. Cravens | Amendment Number 3, Employment Agreement | |||
Significant Accounting Policies [Line Items] | |||
Stock options granted | 30,000 | ||
EBITDA, percentage | 110% | ||
115% of EBITDA Target | Calendar Year 2023 and 2022 | Todd P. Cravens | Amendment Number 3, Employment Agreement | |||
Significant Accounting Policies [Line Items] | |||
Stock options granted | 40,000 | ||
EBITDA, percentage | 115% | ||
2014 Equity Incentive Plan | EBITDA Budget Target | CEO | Amendment Number 3, Employment Agreement | |||
Significant Accounting Policies [Line Items] | |||
Stock options granted | 20,000 | ||
EBITDA, percentage | 80% | ||
Maximum | |||
Significant Accounting Policies [Line Items] | |||
Cash, FDIC Insured Amount | $ | $ 250,000 |
SIGNIFICANT ACCOUNTING POLICI_5
SIGNIFICANT ACCOUNTING POLICIES - Finite Lived Intangible Assets Estimated Economic Lives (Details) | 3 Months Ended |
Mar. 31, 2023 | |
Patents | Minimum | |
Finite Lived Intangible Assets [Line Items] | |
Finite lived intangible assets useful life | 4 years |
Patents | Maximum | |
Finite Lived Intangible Assets [Line Items] | |
Finite lived intangible assets useful life | 20 years |
Customer Relationships | Minimum | |
Finite Lived Intangible Assets [Line Items] | |
Finite lived intangible assets useful life | 9 years |
Customer Relationships | Maximum | |
Finite Lived Intangible Assets [Line Items] | |
Finite lived intangible assets useful life | 22 years |
Trademarks | Minimum | |
Finite Lived Intangible Assets [Line Items] | |
Finite lived intangible assets useful life | 20 years |
Trademarks | Maximum | |
Finite Lived Intangible Assets [Line Items] | |
Finite lived intangible assets useful life | 30 years |
Intellectual Property | |
Finite Lived Intangible Assets [Line Items] | |
Finite lived intangible assets useful life | 12 years |
Non-compete Agreements | |
Finite Lived Intangible Assets [Line Items] | |
Finite lived intangible assets useful life | 9 years |
Software | |
Finite Lived Intangible Assets [Line Items] | |
Finite lived intangible assets useful life | 3 years |
REVENUE RECOGNITION - Summary o
REVENUE RECOGNITION - Summary of Disaggregation of Revenue by Geographic Location (Details) - USD ($) | 3 Months Ended | |
Mar. 31, 2023 | Mar. 31, 2022 | |
Disaggregation Of Revenue [Line Items] | ||
Total revenue | $ 7,422,534 | $ 5,918,599 |
The Americas | ||
Disaggregation Of Revenue [Line Items] | ||
Total revenue | 4,471,631 | 3,045,365 |
Europe, Middle East and Africa | ||
Disaggregation Of Revenue [Line Items] | ||
Total revenue | $ 2,950,903 | $ 2,873,234 |
REVENUE RECOGNITION (Details Na
REVENUE RECOGNITION (Details Narrative) - USD ($) | Mar. 31, 2023 | Dec. 31, 2022 |
Accounts Receivable | ||
Disaggregation Of Revenue [Line Items] | ||
Unbilled receivables | $ 1,105,851 | $ 771,293 |
GOODWILL AND OTHER INTANGIBLE_3
GOODWILL AND OTHER INTANGIBLE ASSETS (Details Narrative) - USD ($) | 1 Months Ended | 3 Months Ended | |
Oct. 31, 2011 | Mar. 31, 2023 | Mar. 31, 2022 | |
Goodwill and Intangible Assets Disclosure [Abstract] | |||
Goodwill resulted from transaction | $ 1,091,000 | ||
Amortization expense | $ 478,331 | $ 653,330 |
GOODWILL AND OTHER INTANGIBLE_4
GOODWILL AND OTHER INTANGIBLE ASSETS - Schedule of Other Intangible Assets, Net (Details) - USD ($) | Mar. 31, 2023 | Dec. 31, 2022 |
Finite Lived Intangible Assets [Line Items] | ||
Other intangible assets, gross | $ 34,341,034 | $ 34,058,182 |
Less: accumulated amortization | (20,630,402) | (20,152,071) |
Other intangible assets, net | 13,710,632 | 13,906,111 |
Patents | ||
Finite Lived Intangible Assets [Line Items] | ||
Other intangible assets, gross | 13,507,799 | 13,507,997 |
Customer Relationships | ||
Finite Lived Intangible Assets [Line Items] | ||
Other intangible assets, gross | 14,040,856 | 14,040,856 |
Trademarks | ||
Finite Lived Intangible Assets [Line Items] | ||
Other intangible assets, gross | 2,880,967 | 2,880,967 |
Intellectual Property | ||
Finite Lived Intangible Assets [Line Items] | ||
Other intangible assets, gross | 2,000,000 | 2,000,000 |
Non-compete Agreements | ||
Finite Lived Intangible Assets [Line Items] | ||
Other intangible assets, gross | 660,000 | 660,000 |
Software | ||
Finite Lived Intangible Assets [Line Items] | ||
Other intangible assets, gross | $ 1,251,412 | $ 968,362 |
LEASES (Details Narrative)
LEASES (Details Narrative) | 3 Months Ended |
Mar. 31, 2023 Satellite | |
Minimum | |
Lessee Lease Description [Line Items] | |
Operating leases and finance leases remaining lease term | 9 months |
Maximum | |
Lessee Lease Description [Line Items] | |
Operating leases and finance leases remaining lease term | 48 months |
Washington | |
Lessee Lease Description [Line Items] | |
Operating leases, number of leased assets | 2 |
LEASES - Schedule of Supplement
LEASES - Schedule of Supplemental Balance Sheet Information Related to Leases (Details) - USD ($) | Mar. 31, 2023 | Dec. 31, 2022 |
Operating leases: | ||
Operating lease right-of-use lease assets | $ 943,691 | $ 1,002,749 |
Operating lease current liabilities | 250,569 | 248,317 |
Operating lease long-term liabilities | 767,619 | $ 830,289 |
Total operating lease liabilities | $ 1,018,188 | |
Weighted-average remaining lease term: | ||
Operating leases | 3 years 8 months 12 days | |
Weighted-average discount rate: | ||
Operating leases | 4.40% |
LEASES - Schedule of Components
LEASES - Schedule of Components of Lease Expense (Details) | 3 Months Ended |
Mar. 31, 2023 USD ($) | |
Selling, General and Administrative Expense | |
Lessee Lease Description [Line Items] | |
Operating lease cost | $ 72,071 |
LEASES - Schedule of Suppleme_2
LEASES - Schedule of Supplemental Cash Flow Information Related to Leases (Details) | 3 Months Ended |
Mar. 31, 2023 USD ($) | |
Net Income | |
Cash paid for amounts included in the measurement of lease liabilities: | |
Operating cash flows from operating leases | $ 72,081 |
LEASES - Schedule of Future Mat
LEASES - Schedule of Future Maturities of Operating Lease Liabilities (Details) - USD ($) | Mar. 31, 2023 | Dec. 31, 2022 |
Operating Lease [Abstract] | ||
For the remaining nine months ending December 31, 2023 | $ 218,796 | |
2024 | 288,892 | |
2025 | 294,507 | |
2026 | 302,011 | |
2027 | 2,985 | |
Total minimum lease payments | 1,107,191 | |
Less: imputed interest | (89,003) | |
Total operating lease liabilities | 1,018,188 | |
Less: current portion | (250,569) | $ (248,317) |
Long-term portion | $ 767,619 | $ 830,289 |
LONG-TERM LIABILITIES - Schedul
LONG-TERM LIABILITIES - Schedule of Long-term Liabilities (Details) - USD ($) | Mar. 31, 2023 | Dec. 31, 2022 |
Debt Instrument [Line Items] | ||
Long-term debt and liabilities, gross | $ 58,840,673 | $ 59,740,084 |
Less: Unamortized debt issuance costs | (5,468,891) | (5,839,228) |
Long-term debt and liabilities, net of debt issuance costs | 53,371,782 | 53,900,856 |
Less: Current portion of long-term debt | (813,744) | (940,084) |
Long-term debt and liabilities, net | 52,558,038 | 52,960,772 |
Fortress Credit Corp. | ||
Debt Instrument [Line Items] | ||
Long-term debt and liabilities, gross | 58,626,929 | 59,400,000 |
Insurance Notes Payable | ||
Debt Instrument [Line Items] | ||
Long-term debt and liabilities, gross | $ 213,744 | $ 340,084 |
LONG-TERM LIABILITIES (Details
LONG-TERM LIABILITIES (Details Narrative) - USD ($) | 3 Months Ended | |
Nov. 15, 2021 | Mar. 31, 2023 | |
Debt Instrument [Line Items] | ||
Payment of fees and expenses | $ 6,829 | |
One-month SOFR | ||
Debt Instrument [Line Items] | ||
Debt instrument, applicable margin rate | 0.11448% | |
Three-month SOFR | ||
Debt Instrument [Line Items] | ||
Debt instrument, applicable margin rate | 0.26161% | |
Six-month SOFR | ||
Debt Instrument [Line Items] | ||
Debt instrument, applicable margin rate | 0.42826% | |
Senior Secured Term Loan | Fortress Credit Corp. | ||
Debt Instrument [Line Items] | ||
Borrowing capacity | $ 60,000,000 | |
Payment of fees and expenses | 4,100,000 | |
Cash on hand | $ 5,300,000 | |
Maturity date | Nov. 13, 2026 | |
Debt instrument, interest rate terms | The Fortress Credit Agreement bears interest at a rate equal to, at the Company’s option, either (a) LIBOR (or a successor rate, determined in accordance with the Fortress Credit Agreement) plus 7.75%, subject to a reduction to 7.50% upon the achievement of a net leverage target or (b) a base rate determined by reference to the greatest of (i) the federal funds rate plus 0.50%, (ii) the prime rate as determined by reference to The Wall Street Journal’s “Prime Rate” and (iii) the one-month adjusted LIBOR rate plus 1.00%, plus 6.75%, subject to a reduction to 6.50% upon the achievement of a net leverage target. | |
Amortization payments per quarter | $ 150,000 | |
Percentage of excess cash flow on annual sweep | 50% | |
Repayments of debt | $ 11,100,000 | |
Senior Secured Term Loan | Fortress Credit Corp. | Triangulum | ||
Debt Instrument [Line Items] | ||
Payment as settlement of previously disclosed litigation | $ 39,500,000 | |
Senior Secured Term Loan | Fortress Credit Corp. | Warrants | ||
Debt Instrument [Line Items] | ||
Warrants issued to purchase shares | 778,320 | |
Warrants issued price per share | $ 0.01 | |
Senior Secured Term Loan | Fortress Credit Corp. | Maximum | ||
Debt Instrument [Line Items] | ||
Total net leverage ratio | 6% | |
Senior Secured Term Loan | Fortress Credit Corp. | LIBOR | ||
Debt Instrument [Line Items] | ||
Debt instrument, applicable margin rate | 7.75% | |
Senior Secured Term Loan | Fortress Credit Corp. | LIBOR | Achievement of Net Leverage Target | ||
Debt Instrument [Line Items] | ||
Debt instrument, applicable margin rate | 7.50% | |
Senior Secured Term Loan | Fortress Credit Corp. | Federal Funds Rate | ||
Debt Instrument [Line Items] | ||
Debt instrument, applicable margin rate | 0.50% | |
Senior Secured Term Loan | Fortress Credit Corp. | One-month Adjusted LIBOR | Minimum | ||
Debt Instrument [Line Items] | ||
Debt instrument, applicable margin rate | 1% | |
Senior Secured Term Loan | Fortress Credit Corp. | One-month Adjusted LIBOR | Maximum | ||
Debt Instrument [Line Items] | ||
Debt instrument, applicable margin rate | 6.75% | |
Senior Secured Term Loan | Fortress Credit Corp. | One-month Adjusted LIBOR | Maximum | Achievement of Net Leverage Target | ||
Debt Instrument [Line Items] | ||
Debt instrument, applicable margin rate | 6.50% |
LONG-TERM LIABILITIES - Sched_2
LONG-TERM LIABILITIES - Schedule of Future Maturities of Long-term Liabilities (Details) - USD ($) | Mar. 31, 2023 | Dec. 31, 2022 |
Debt Instrument [Line Items] | ||
Long-term liabilities, gross | $ 58,840,673 | $ 59,740,084 |
Promissory Note | ||
Debt Instrument [Line Items] | ||
2023 | 663,744 | |
2024 | 600,000 | |
2025 | 600,000 | |
2026 | 56,976,929 | |
Long-term liabilities, gross | $ 58,840,673 |
COMMITMENTS AND CONTINGENCIES -
COMMITMENTS AND CONTINGENCIES - Schedule of Client Revenue Concentrations (Details) - Customer Concentration Risk - Revenue - USD ($) | 3 Months Ended | ||
Mar. 31, 2023 | Mar. 31, 2022 | Dec. 31, 2022 | |
Europe | Client A | |||
Product Information [Line Items] | |||
Concentration Risk | 23.50% | 31% | |
Accounts Receivable | $ 1,206,125 | ||
North America | Client B | |||
Product Information [Line Items] | |||
Concentration Risk | 16% | 1.70% | |
Accounts Receivable | $ 1,268,250 | $ 132,500 | |
North America | Client C | |||
Product Information [Line Items] | |||
Concentration Risk | 6.50% | 8.50% | |
Accounts Receivable | $ 862,303 | $ 138,338 |
INCOME TAXES (Details Narrative
INCOME TAXES (Details Narrative) | 3 Months Ended | |
Mar. 31, 2023 | Mar. 31, 2022 | |
Income Tax Contingency [Line Items] | ||
Effective tax rate | 4.80% | 6.66% |
Plan | ||
Income Tax Contingency [Line Items] | ||
Effective tax rate | 4.80% | 143.35% |