Intangible asset - intellectual property

3 Months Ended

Mar. 31, 2013

Goodwill and Intangible Assets Disclosure [Abstract]

Intangible Assets Disclosure [Text Block]

Note 6: Intangible asset - intellectual property

On May 11, 2012, the Company entered into a Contribution and Sale Agreement (the “Sale Agreement”) with J&S Gaming, Inc. (“J&S”), and MGT Gaming, Inc. (“MGT Gaming”) for the acquisition of U.S. Patent #7,892,088, entitled “Gaming Device Having a Second Separate Bonusing Event” (“The Patent”). The Patent acquired was recorded at its estimated fair value of $1,913 at the date of closing in exchange for $200 cash and a four (4) year warrant to purchase 350,000 shares of the Company’s Common stock at an exercise price of $4.00 per share, subject to certain anti-dilution provisions (the “Warrants”). Due to certain anti-dilution provisions, the Warrants are recorded as a liability, and consequently “marked-to-market” to the fair value at the end of each reporting period. On May 17, 2013, as disclosed in a Current Report on Form 8-K, the Company obtained Waiver Agreements from Warrant holders, and the affected Warrants will be treated as equity in the quarter ending June 30, 2013.

The intellectual property is subject to amortization and will be expensed using the straight-line method, over the nine year remaining life of the patent. Amortization expense on intangible assets for the three months ended March 31, 2013 and 2012, was $52 and $nil, respectively. Amortization expense is expected to be approximately $204 for each of the next five fiscal years.