UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-K
(Mark One)
|X| ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2015
|_| TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from
to
Commission file number 333-120120-01
SHOAL GAMES LTD.
(Exact name of registrant as specified in its charter)
ANGUILLA, B.W.I.
(State or other jurisdiction of incorporation
or organization)
98-0206369
(I.R.S. Employer Identification No.)
Hansa Bank Building, Ground Floor, Landsome Road
AI 2640, The Valley, Anguilla, B.W.I
(Address of principal executive offices)
(264) 461-2646
(Registrant’s telephone number, including area code)
Securities registered under Section 12(b) of the Exchange Act:
None
(Title of Each Class & Name of each exchange on which registered)
Securities registered under section 12(g) of the Exchange Act:
COMMON STOCK, NO PAR VALUE PER SHARE
(Title of class)
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the
Securities Act.
No
Yes
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section
15(d) of the Act.
No
Yes
Indicate by check mark whether the registrant (1) has 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 the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days.
No
Yes
Indicate by check mark whether the registrant has submitted electronically and posted on its
corporate Web site, if any, every Interactive Data File required to be submitted and posted
No
pursuant to Rule 405 of Regulation S-T during the preceding 12 months. Yes
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K
is not contained herein, and will not be contained, to the best of registrant’s knowledge, in
definitive proxy or information statements incorporated by reference in Part III of this Form 10-
K or any amendment to this Form 10-K.
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a
non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated
filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer
Non-accelerated filer
Accelerated filer
Smaller reporting company
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of
the Act).
No
Yes
State issuer’s revenues for its most recent fiscal year.
$111,610
State the aggregate market value of the voting and non-voting common equity held by non-
affiliates computed by reference to the price at which the common equity was last sold, or the
average bid and asked price and asked price of such common equity, as of the last business day
of the registrant’s most recently completed second fiscal quarter.
Our common stock is currently quoted on the Over the Counter Markets – The Venture
Marketplace ("OTCQB") operated by OTC Markets Group Inc. (http://www.otcmarkets.com/)
under the symbol “SGLDF” and on the TSX Venture Exchange in Canada under the
symbol “SGW”. The closing share price as of March 16, 2016, being US$0.50 per share under
the symbol SGLDF on the OTC Markets Group Inc. and CAD$0.69 under symbol SGW on the
TSX Venture Exchange : $28,098,852.
APPLICABLE ONLY TO CORPORATE REGISTRANTS
Indicate the number of shares outstanding of the registrant’s common stock, no par value per
share, was 56,197,703 as of March 16, 2016.
DOCUMENTS INCORPORATED BY REFERENCE
The merger of Bingo.com, Inc. with Shoal Games Ltd., which was approved by the Securities
Exchange Commission on March 8, 2005, and is effective on April 7, 2005, is described in the
prospectus filed under Rule 424(b) of the Securities Act and the Form S-4, which were filed on
March 9, 2005, and March 4, 2005, respectively. The Company filed Form SB2 on September
18, 2007, for the registration of shares originally issued in the private placement. In addition, the
Company filed a TSX Venture Exchange Listing Application for the TSX-V listing on June 29,
2015.
Page 1
TABLE OF CONTENTS
PART I .......................................................................................................................................... 3
ITEM 1. BUSINESS ................................................................................................................ 3
ITEM 2. PROPERTIES. .......................................................................................................... 8
ITEM 3. LEGAL PROCEEDINGS. ........................................................................................ 8
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS. ............ 9
PART II ....................................................................................................................................... 10
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED
STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES. 10
ITEM 6. SELECTED FINANCIAL DATA .......................................................................... 12
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS. ............................................................. 13
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA. ...................... 19
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE. .......................................................... 45
ITEM 9A. CONTROLS AND PROCEDURES ................................................................... 45
ITEM 9B. OTHER INFORMATION .................................................................................... 46
PART III ..................................................................................................................................... 47
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE
GOVERNANCE .................................................................................................................... 47
ITEM 11. EXECUTIVE COMPENSATION ....................................................................... 50
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT AND RELATED STOCKHOLDERS MATTERS .................................. 53
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND
DIRECTOR INDEPENDENCE ............................................................................................ 56
ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES ..................................... 56
PART IV ..................................................................................................................................... 56
ITEM 15. EXHIBITS ............................................................................................................ 56
SIGNATURES ....................................................................................................................... 57
CERTIFICATIONS ............................................................................................................... 58
CERTIFICATION PURSUANT TO 18 U.S.C. §1350, AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 ............................................ 60
EXHIBIT LIST ...................................................................................................................... 62
Page 2
PART I
This Annual Report on Form 10-K contains forward-looking statements that involve risks and
uncertainties. All statements contained herein that are not statements of historical fact
constitute “forward-looking statements” within the meaning of the Private Securities Litigation
Reform Act of 1995. Discussions containing forward-looking statements may be found in the
material set forth under “Business,” and “Management's Discussion and Analysis or Plan of
Operation,” as well as in this Annual Report generally. We generally use words such as
“believes,” “intends,” “expects,” “anticipates,” “plans,” and similar expressions to identify
forward-looking statements. Although we believe that the expectations reflected in the forward-
looking statements are reasonable, we cannot guarantee future results, level of activity,
performance or achievements. These forward-looking statements are subject to risks,
uncertainties and other factors, some of which are beyond our control, which could cause actual
results to differ materially from this forecast or anticipated in such forward-looking statements.
You should not place undue reliance on these forward-looking statements, which reflect our
view only as of the date of this report. We undertake no obligation to update these statements or
publicly release the result of any revisions to these statements to reflect events or circumstances
after the date of this report or to reflect the occurrence of unanticipated events.
ITEM 1. BUSINESS
INTRODUCTION
Shoal Games Ltd. (the "Company") owns and markets a non-gambling social bingo game called
Trophy Bingo. Trophy Bingo is an innovative free-to-play mobile game live in the Apple, Google
and Amazon App Stores. Trophy Bingo brings unique gameplay and industry leading monetization
techniques to the bingo category which is both high growth and high value. The game is free to
download and supports in-app purchases and in-game advertising for players who want to engage
with the premium features contained in the game. In-game purchases are transactions made from
within a mobile game that are processed by the platform provider (Apple iOS; Google Android;
Amazon Android). The worldwide full launch and marketing of Trophy Bingo commenced in the
third quarter of 2015 when the latest version of Trophy Bingo was released world-wide in the Apple
App Store and Google Play Store on all supported mobile phones and tablet devices.
The Company generates its main source of revenue from players making in-app purchases in Trophy
Bingo via the Google Play Store, the Apple App Store and the Amazon Store. An additional source of
revenue comes from serving advertising to our user demographic inside the Trophy Bingo game.
Through relationships we have with advertising aggregators and providers, companies pay to have
their products and services promoted in our App, or previously, on our web site and in some cases
produced residual revenues as their customers continue to play or use their services.
Prior to December 31, 2014 the Company provided a variety of Internet games plus other forms of
entertainment, including an online community, chat rooms, and more. This portion of the business
was sold to Unibet, plc on December 31, 2014 and can be viewed at www.bingo.com.
We conducted a beta test launch of Trophy Bingo in May 2013, followed by a global soft launch of
the enhanced game on Android in August, 2014 and on iOS in September 2014. Trophy Bingo was
released worldwide in the Google Play Store on August 12, 2015, in the Apple App Store on
September 3, 2015, and in the Amazon Appstore on November 30, 2015.
References in this document to “the Company,” “we,” “us,” and “our” refer to Shoal Games Ltd. and
our subsidiaries, which are described below.
Our executive offices are located at Hansa Bank Building, Ground Floor, Landsome Road, The
Valley, AI 2640, The Valley, Anguilla, B.W.I. Our telephone number is (264) 461-2646.
Page 3
History and Corporate Structure
The Company was originally incorporated in the State of Florida on January 12, 1987.
Effective January 22, 1999, the Company acquired the use of the second level domain name
bingo.com and embarked on our business strategy to become a leading online provider of bingo based
games and entertainment.
Effective April 7, 2005, the shares of Bingo.com, Ltd. by way of a merger between Bingo.com, Inc.
and Bingo.com, Ltd., began trading under the new ticker symbol “BNGOF”.
On January 22, 2015, Bingo.com, Ltd. filed Articles of Amendment with the Anguilla Registrar of
Companies changing its name to “Shoal Games Ltd.”. Effective at the open of markets on January
27, 2015, the Common Shares commenced trading under the new trading symbol “SGLDF” on the
OTC-QB.
On June 29, 2015, the Company filed a TSX Venture Exchange Listing Application for the TSX-V
listing and commenced trading on July 2, 2015, under the symbol “SGW”.
We conduct our business through the Anguilla incorporated entity and through our wholly-owned
subsidiaries English Bay Office Management Limited (“English Bay”), Shoal Games (UK) plc
(“Shoal UK”), Coral Reef Marketing Inc. (“Coral Reef”) and Shoal Media Inc.
English Bay was incorporated under the laws of British Columbia, Canada, on February 10, 1998, as
559262 B.C. Ltd. and changed its name to Bingo.com (Canada) Enterprises Inc. on February 11,
1999. It subsequently changed its name to English Bay Office Management Limited on September 8,
2003.
On August 15, 2002, we acquired 99% of the share capital of Shoal UK. Shoal UK was incorporated
under the laws of England and Wales on August 18, 2000, as CellStop plc. and changed its name to
Bingo.com (UK) plc. on August 5, 2002. During the year ended December 31, 2015, the Company
changed the name of the company to Shoal Games (UK) plc.
On January 21, 2008, Coral Reef Marketing Inc., was incorporated under the laws of Anguilla, British
West Indies.
On January 1, 2013, we acquired 100% of the share capital of Shoal Media Inc., an Anguillian
Company.
We also maintain a number of inactive wholly-owned subsidiaries. These are:
- Bingo.com (Antigua), Inc., (“Bingo.com (Antigua”)
incorporated as an Antigua
International Business Corporation on April 7, 1999, as Star Communications Ltd. and
changed its name to Bingo.com. (Antigua), Inc. on April 21, 1999;
- Bingo.com (Wyoming), Inc., incorporated in the State of Wyoming on July 14, 1999;
- Bingo.com Acquisition Corp., incorporated in the State of Delaware on January 9, 2001.
All three of the inactive subsidiaries were incorporated to facilitate the implementation of business
plans that we have since modified and refocused and, consequently, there is no activity in these
entities.
Our common shares are currently quoted on the Over the Counter Markets - The Venture Marketplace
("OTCQB") operated by OTC Markets Group Inc. under the symbol “SGLDF” and on the TSX
Venture Exchange in Canada under the symbol “SGW”. We have not been subject to any
bankruptcy, receivership or other similar proceedings.
Development of the Business
Our current business strategy is to manage and grow our business with minimal overhead, focusing
on our major asset, the social bingo game Trophy Bingo.
Page 4
Bingo.com Domain Name
On January 18, 1999, we purchased the exclusive right to use the domain name bingo.com from a
then unrelated company, Bingo, Inc., an Anguilla corporation, for (i) a $200,000 cash payment, (ii)
500,000 shares of our common stock (at a value of $2.00 per share) and (iii) an agreement to pay, on
an ongoing basis, the Domain Name Purchase price amounting to 4% of our annual gross revenues,
with a total minimum guaranteed Domain Name Purchase payment of $1,100,000 in the first three
years of the 99 year period ending December 31, 2098. The value of the bingo.com domain name was
based on factors such as the ability for us to create a brand for our website based on the name, the
ease of Internet search ability of the domain name, and the ability of visitors to our website to
remember and associate the name with our website and business. We negotiated the terms of the
domain name acquisition at arms' length, and we believe the consideration we paid for the domain
name was reasonable.
During the year ended December 31, 2002, the agreement was amended so that the remaining
Domain Name Purchase payments to the vendor were made monthly, based on 4% of the preceding
month’s gross revenue.
In the latter half of fiscal 2010, the Company engaged an independent valuation company, to value
the remaining 4% Domain Name Purchase payments. The Company reviewed the independent
valuation and after considering this and other external variables, the Company and Bingo, Inc., the
holder of the 4% Domain Name Purchase payments, agreed that the value of the 4% Domain Name
Purchase payments to be $900,000. During the year ended December 31, 2010, the Company
purchased the remaining Domain Name Purchase payments for $900,000 from Bingo, Inc., with the
issuance of 6,000,000 common shares of Bingo.com, Ltd., at a value of $0.15 per share.
Effective December 31, 2014, the Company sold the Bingo.com domain name to Unibet Group plc
for $8 million. The Company received cash consideration of $2,000,000 and the redemption of the
15,000,000 common shares of the Company at a price of $0.40 per share, which were held by Unibet.
The 15,000,000 common shares held by Unibet Group plc. have been returned to the Company’s
treasury and subsequently canceled.
Shoal Games Domain Names
We own the domain names Shoalgames.com, Shoalgames.net, Shoalmedia.com, Shoalmedia.net,
Trophybingo.com, Trophybingo.net, and Trophybingo.ca. On January 22, 2015, the Company
changed its name from Bingo.com, Ltd. to Shoal Games Ltd. and on January 27, 2015 commenced
trading on the OTCQB exchange with the symbol SGLDF. On July 2, 2015, the Company
additionally commenced trading on the TSX Venture Exchanged with the symbol “SGW”.
BUSINESS OVERVIEW
Our objective is to become a leading social bingo game provider. We intend to leverage the
worldwide popularity of bingo with the growth of social games to make Trophy Bingo a top grossing
title.
We are in the business of owning and marketing Trophy Bingo, an innovative, non-gambling social
bingo game, currently live in the Google Play Store, the Apple App Store and the Amazon Appstore.
Trophy Bingo is an innovative free-to-play mobile game live in the Apple, Google and Amazon App
Stores. Trophy Bingo brings unique gameplay and industry leading monetization techniques to the
bingo category which is both high growth and high value. The game is free to download and supports
in-app purchases and in-game advertising for players who want to engage with the premium features
contained in the game.
Gaming Revenue Business
During the quarter ended June 30, 2005, Bingo.com, N.V., a subsidiary of Bingo.com, Ltd.,
commenced gaming for cash whereby players purchase bingo cards and wager on other soft games
such as video poker, hi-lo, and slots with the target audience being the United States and the games
played in US dollars.
Page 5
On September 30, 2006, the United States Senate passed the Unlawful Internet Gambling
Enforcement Act 2006 (“UIGEA”), which was signed into law by President Bush, on October 13,
2006. The legislation aimed to prohibit the funding of illegal online gambling to United States
citizens and residents. Effective October 12, 2006, in response to the UIGEA we sold our United
States player database and related assets to an unrelated company. The asset disposition included the
registered online gaming players, the gaming servers, and the complete database of real money
players.
During the quarter ended June 30, 2007, we launched our United Kingdom focused website, with
games targeted to the United Kingdom audience and the games played in British pounds sterling.
During the quarter ended June 30, 2010, we migrated to the Unibet’s Partner Program as a network
operator of their multi-language and multi-currency bingo and casino systems.
Effective December 31, 2014, we sold the domain name, www.bingo.com and its online gambling
community to Unibet Group plc. and changed our name from Bingo.com, Ltd. to Shoal Games ltd.
The Company’s focus is now on its social bingo game, Trophy Bingo.
Advertising Revenue Business
We have in the past used the appeal of the bingo.com domain name to sell advertising on the free
section of our website, which, initially, was our primary revenue source. During the quarter ended
June 30, 2005, we commenced offering traditional bingo and other pay-for-play games to our players,
which replaced advertising as our main source of revenue.
Upon selling the pay-for-play games to Unibet on December 31, 2014, residual revenues from the
advertising revenue from the bingo.com website accounted for approximately 11% of our revenue
from continuing operations for the year ended December 31, 2015.
Social Bingo Business
The Company is now developing a social bingo game called Trophy Bingo on Apple’s iOS, Google’s
Android and Amazon Android systems primarily on smartphones and tablets. Trophy Bingo was soft
launched in August 2014 and launched worldwide in the third quarter of fiscal 2015. Revenue will be
generated in the game via in-app purchases for players who find themselves in need of extra bingos or
want to engage with the premium power plays contained in the game. Trophy Bingo also offers
companies the ability to provide advertising to players in a non-intrusive manner on a pay per view
basis to the Company.
The Niche
We continue to work towards positioning ourselves as a leading social bingo game provider. We
believe the size of the worldwide social bingo community and the entertainment offered by Trophy
Bingo provide us with an opportunity to build a large loyal base of daily visitors from around the
world.
We believe that social bingo games are valuable entertainment in today’s mobile-first environment
and that mobile bingo games are a compelling entertainment medium for a mass user audience.
BUSINESS STRATEGY
Our objective is to become a leading social bingo game publisher with Trophy Bingo. We are
pursuing this objective through the following strategies:
Revenue streams
In year ended December 31, 2015, we earned revenue from the social bingo segment from Trophy
Bingo, whereby players make in-app purchases to earn in-game currency which they can then spend
on extra bingos or on the premium power plays contained within the game. In addition, Trophy Bingo
generates in revenue using a free-to-play strategy where players can choose to watch advertising.
In 2015 we generated 89% of revenue from our social bingo game.
Page 6
Social Bingo Plans
The Company has a host of new features currently in development that are intended for release in the
Trophy Bingo game. The Company intends to complete the software development presently
underway before expanding our marketing efforts beyond the current maintenance level. One of the
features in development is a viral social referral system. Trophy Bingo will contain many social
features that are designed to increase the number of players downloading the App which, in turn,
decreases our per player acquisition costs. When marketing does commence, and as the player
volume increases, the viral aspects of the game will play an increasingly important role, as they will
significantly increase the number of players in Trophy Bingo at no incremental cost to the Company.
Marketing Strategy
Our goal is for Trophy Bingo to become one of the most recognized and most visited social bingo
games on the Internet, in the Google Play Store, in the Apple App Store and in the Amazon App
Store. We intend to continue building a social community consisting of a dedicated and loyal player
base that will support our ability to generate both advertising and in-app purchase revenues.
OPERATIONS
Employees
As of December 31, 2015, we had one full-time employee, not including temporary personnel,
consultants, and independent contractors. Since 2006 it has been, and continues to be, the Company’s
objective to control its costs by retaining consultants, as needed, to provide special expertise in
developing internal strategic, marketing, accounting and technical services, while outsourcing our
development requirements. None of our employees or consultants are represented by a labor union,
and we believe that our relationship with our employees and consultants is good.
We are substantially dependent upon the continued services and performance of J. M. Williams, Chief
Executive Officer and T. M. Williams, Executive Chairman. The loss of the services of these key
individuals would have a material adverse effect on our business, financial condition and results of
operations. We do not carry any key man life insurance on any individuals.
Seasonality
We do not believe that seasonality has an effect on our traffic volumes or our revenue realization.
Competition
Mobile bingo is a relatively new industry that has been overlooked, underestimated and generally
misunderstood by the large players in the social gaming industry. Bingo has been seen as an “old
ladies game” not worthy of a concentrated marketing and development effort. The biggest successes
in the mobile bingo industry have been the niche companies that understand the bingo market and not
the larger companies that are, typically, from a video game or gaming background. Larger operators
have acquired the companies behind the leading social bingo games. Caesars Interactive
Entertainment acquired Buffalo Studios, the makers of Bingo Blitz, in 2012 for $53 million. More
recently in 2014, GSN Games purchased Bash Gaming, the makers of Bingo Bash, for $160 million.
The Company views these acquisitions as additional confirmation that the social bingo marketplace is
valuable and will support another market entrant.
Costs and Effects of Compliance with Environmental Laws
Our company is in the business of marketing Trophy Bingo, a form of entertainment focused on the
game of bingo. To the best of our knowledge, no federal, state or local environmental laws are
applicable to our business.
BRITISH COLUMBIA SECURITIES COMMISSION
Effective September 15, 2008, the British Columbia Securities Commission (“BCSC”) issued rule 51-
509 Issuers Quoted in the U.S. Over-the-Counter Markets. Rule 51 - 509 requires all Over-the-
Counter Companies that have connections to British Columbia (BC) to comply with BC securities
law and certain public disclosure requirements. The Company is deemed to have connection to BC
Page 7
due to the fact that administration and a director are located in BC. The Company has complied with
rule 51-509 and registered and filed the necessary documents on SEDAR. The Company is deemed,
due to the fact that there are less than 50% of the Company’s shareholders located in BC, to be a
foreign reporting issuer in accordance with NI 71-102 “Continuous Disclosure and Other Exemptions
Relating to Foreign Issuers”. Therefore the Company is only required to file what it files with the
Securities and Exchange Commission on SEDAR.
FINANCIAL INFORMATION ABOUT GEOGRAPHIC AREAS
The equipment of the Company to operate the operations of the Company is located in Anguilla,
United Kingdom, USA and Canada. The revenue from in-app purchases is worldwide, with the
majority from Europe and the USA.
AVAILABLE INFORMATION
The Company makes available through the Corporate Shoal Games section of its internet website at
http://investor.shoalgames.com its annual report on Form 10-K, quarterly reports on Form 10-Q,
current reports on Form 8-K, Press Releases and amendments to those reports filed or furnished
pursuant to Section 13(a) or 15(d) of the Exchange Act, as soon as reasonably practicable after
electronically filing such material with the Securities and Exchange Commission.
You may read and copy any reports, statements or other information that we file with the Securities
and Exchange Commission at the Securities and Exchange Commission’s Public Reference Room at
100 F Street, N.E., Washington D.C. 20549. You can request copies of these documents, upon
payment of a duplicating fee, by writing to the Securities and Exchange Commission. Please call the
Securities and Exchange Commission at 1-800-SEC-0330 for further information on the operation of
the Public Reference Room.
We file our reports with the Securities and Exchange Commission electronically through the
Securities and Exchange Commission’s Electronic Data Gathering, Analysis and Retrieval
(“EDGAR”) system. The Securities and Exchange Commission maintains an Internet site that
contains reports, proxy and information statements, and other information regarding companies that
file electronically with the Securities and Exchange Commission through EDGAR. The address of
this Internet site is http://www.sec.gov.
In addition, we file our reports on SEDAR, in accordance with rule 51-509 Issuers Quoted in the U.S.
Over-the-Counter Markets as required by the British Columbia Securities Commission.
ITEM 2. PROPERTIES.
Since 2005 our executive office is located in The Valley, Anguilla, British West Indies. We
commenced the present lease agreement on April 1, 2010, for a period of one year. Unless 3 month’s
notice is given it automatically renews for a future 3 months until notice is given. To date no notice
has been given. The monthly rental is $250.
Our primary administrative facility is located in leased space in Vancouver, British Columbia.
During the year ended December 31, 2011, the lease was amended and extended in April 2014. The
lease expires April 30, 2017. This facility comprises approximately 463 square feet. The monthly
rental is approximately $1,216.
We operate a sales and marketing office in London, United Kingdom.
We believe that these facilities will be adequate to meet our requirements for the near future and that
suitable additional space will be available if needed. Other than described above, neither we, nor any
of our subsidiaries presently own or lease any other property or real estate.
ITEM 3. LEGAL PROCEEDINGS.
We are not currently a party to any legal proceedings and were not a party to any other legal
proceeding, during the fiscal year ended December 31, 2015. We are currently not aware of any legal
proceedings proposed to be initiated against us. However, from time-to-time, we may become subject
to claims and litigation generally associated with any business venture.
Page 8
ITEM 4 SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
We held our Annual Meeting of Stockholders in Anguilla on September 23, 2015, all matters were
unanimously approved. There were no submissions of matters to a vote of security holders during the
third and fourth quarter of 2015.
Page 9
PART II
ITEM
STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES.
5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED
Our common stock is currently quoted on the TSX Venture Exchange in Canada under the
symbol “SGW” and on the Over the Counter Markets – The Venture Marketplace ("OTCQB")
operated by OTC Markets Group Inc. under the symbol “SGLDF”.
On March 19, 1997, our common stock was approved for trading on the National Association of
Securities Dealers OTC Bulletin Board (the “OTCBB”) under the symbol “PGLB”. In January 1999,
when we changed our name to Bingo.com, Inc., our OTCBB symbol was changed to “BIGG”. On
July 26, 1999, we changed our trading symbol from “BIGG” to “BIGR”. On April 7, 2005,
Bingo.com, Inc. completed a merger with its wholly- owned subsidiary Bingo.com, Ltd. The principal
reason for Bingo.com, Inc.’s merger with its subsidiary Bingo.com, Ltd. was to facilitate Bingo.com,
Inc.’s reincorporation under the International Business Companies Act of Anguilla, B.W.I. Effective
April 7, 2005, the shares of Bingo.com, Ltd. began trading under the new ticker symbol “BNGOF”.
In 2011, we transferred to the Over the Counter Markets - The Venture Marketplace ("OTCQB")
operated by OTC Markets Group Inc., whilst continuing our ticker symbol “BNGOF”. The bid
quotations set forth below, reflect inter-dealer prices, without retail mark-up, mark-down or
commission and may not reflect actual transactions. During the year ended December 31, 2015, the
Company changed its name to Shoal Games Ltd. and changed our trading symbol from “BNGOF” to
“SGLDF”. Effective July 2, 2015, the Company additionally commenced trading on the TSX Venture
Exchange in Canada under the symbol “SGW”.
Quarter Ended
December 31, 2015
September 30, 2015
June 30, 2015
March 31, 2015
December 31, 2014
September 30, 2014
June 30, 2014
March 31, 2014
Prices as per Yahoo! TM Finance
1.
High (1)
$0.75
$0.75
$0.53
$1.00
$0.80
$0.80
$0.54
$0.45
Low (1)
$0.36
$0.20
$0.19
$0.40
$0.601
$0.301
$0.385
$0.36
On March 16, 2016, the last reported sale price of our common stock, as reported by the OTCQB,
was $0.50 per share.
As of March 16, 2016, we believe there are approximately 480 shareholders (including nominees and
brokers holding street accounts) of our shares of common stock.
Other than described above, our shares of common stock are not and have not been listed or quoted
on any other exchange or quotation system.
Dividend Policy
We have not declared or paid any cash dividends on our common stock since our inception. The
Board of Directors is presently reviewing the Companies dividend policy. Any future payment of
dividends will depend upon our results of operations, financial condition, cash requirements and other
factors deemed relevant by our Board of Directors.
Recent Sales of Unregistered Securities
On January 28, 2014, we closed an offer of 500,000 common shares at $0.40 per share to one
subscriber. These shares were issued under Regulation S. The subscriber who received shares under
Regulation S is not a U.S. Persons as defined in Rule 902(k) of Regulation S, and no sales efforts
were conducted in the U.S., in accordance with Rule 903(c). The subscriber to the offering under
Regulation S acknowledged that the securities purchased must come to rest outside the U.S., and the
Page 10
certificates will contain a legend restricting the sale of such securities until the Regulation S holding
period is satisfied.
On March 31 2014, we closed an offer of 1,250,000 common shares at $0.40 per share to one
subscriber. These shares were issued under Regulation S. The subscriber who received shares under
Regulation S is not a U.S. Persons as defined in Rule 902(k) of Regulation S, and no sales efforts
were conducted in the U.S., in accordance with Rule 903(c). The subscriber to the offering under
Regulation S acknowledged that the securities purchased must come to rest outside the U.S., and the
certificates will contain a legend restricting the sale of such securities until the Regulation S holding
period is satisfied.
On June 24, 2014, an option holder exercised his options for 55,000 shares of the Company at $0.17
per share.
On September 29, 2014, we closed an offer of 1,000,000 common shares at $0.70 per share to one
subscriber. These shares were issued under Regulation S. The subscriber who received shares under
Regulation S is not a U.S. Persons as defined in Rule 902(k) of Regulation S, and no sales efforts
were conducted in the U.S., in accordance with Rule 903(c). The subscriber to the offering under
Regulation S acknowledged that the securities purchased must come to rest outside the U.S., and the
certificates will contain a legend restricting the sale of such securities until the Regulation S holding
period is satisfied.
On September 30, 2015, option holders exercised their options for 515,000 shares of the Company at
$0.15 per share.
Subsequent to the year ended December 31, 2015, the Company commenced a CAD$2 million
private placement of 3,333,333 common shares at CAD$0.60 per share. The private placement
commenced on February 29, 2016 and will close on April 29, 2016.
Securities authorized for issuance under equity compensation plans.
We have reserved a total of 1,895,000 common shares for issuance under our 1999 stock option plan.
Pursuant to this plan we have nil stock purchase options (2014 - nil) outstanding at December 31,
2015. During the year ended December 31, 2015, there were nil options exercised and nil options
expired, issued under the 1999 plan.
We have reserved a total of 5,424,726 common shares for issuance pursuant to grants under the 2001
stock option plan. Pursuant to this plan we have nil stock purchase options (2014 - nil) outstanding as
at December 31, 2015. During the year ended December 31, 2015, there were nil options exercised
and nil options expired, issued under the 2001 plan.
We have reserved a total of 2,000,000 common shares for issuance under our 2005 stock option plan.
Pursuant to this plan we have nil stock purchase options (2014 - 520,000) outstanding at December
31, 2015. During the year ended December 31, 2015, there were 515,000 stock options issued under
the 2005 plan exercised, hand 5,000 stock options issued under the 2005 plan expired unexercised.
The 1999 and 2001 plans were approved in 2001 by our shareholders and the 2005 plan was approved
by our shareholders in 2005.
Page 11
Equity Compensation Plan Information
Number of securities to be
issued upon exercise of
outstanding options and
rights
(a)
0
Weighted average
exercise price of
outstanding options and
rights
(b)
0
Number of securities
remaining available
for future issuance
(c)
6,550,776
0
0
0
0
0
6,550,776
Plan category
Equity compensation
plans approved by
security holders
Equity compensation
plans not approved by
security holders
Total
As of the date of this report no further options have been awarded subsequent to the year ended
December 31, 2015.
ITEM 6. SELECTED FINANCIAL DATA.
Consolidated Statement of Operations Data for continuing operations:
Year Ended December 31,
2015
2014
2013
2012
2011
Revenue
Advertising revenue
Trophy Bingo revenue
Total revenue
$
12,196 $
99,414
111,610
22,655 $
9,815
32,470
Trophy Bingo amortization
Gross (loss) profit
482,012
(370,402)
482,013
(449,543)
25,133 $
1,256
26,389
-
26,389
44,693 $
-
44,693
-
44,693
66,705
-
66,705
-
66,705
Operating expenses
excluding interest and other
income (expenses)
Interest and other income
Income tax expense
Net loss from continuing
operations
Discontinued Operations
Gaming revenue
Cost of producing revenue
Gain from the sale of the
domain name
Selling and marketing
Net (loss) profit
Basic and diluted net loss
per share from continuing
operations
Weighted average common
shares outstanding
(2,612,194)
1,089
(480)
(2,221,663)
510
(848)
(780,754)
840
(1,666)
(594,897)
1,258
(1,008)
(1,030,299)
2,887
(3,692)
$
(2,981,987) $
(2,671,544) $
(755,191) $
(549,954) $
(964,399)
-
-
16,305
-
(2,965,682)
1,684,047
-
6,677,759
(628,029)
5,062,233
1,912,301
-
1,721,135
-
1,349,953
-
-
(1,942,885)
(785,766)
-
(1,217,416)
(46,235)
-
(1,074,570)
(689,016)
$
(0.05) $
(0.04) $
(0.01) $
(0.01) $
(0.02)
55,812,511
67,165,374
64,156,392
63,877,703
54,716,388
Page 12
Year Ended December 31,
2015
2014
2013
2012
2011
Consolidated Balance Sheet Data:
Cash
Total assets
Total liabilities
Total stockholders’ equity
Working capital
$
1,129,526
177,792
951,734
454,447
570,086 $
2,876,386 $
3,996,745
156,579
3,840,166
2,856,230
491,203 $
876,004 $
3,607,123
238,540
3,368,583
646,015
3,362,054
105,608
3,256,446
1,640,713
787,524
2,438,967
96,291
2,342,676
1,058,631
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS.
The information contained in this Management's Discussion and Analysis or Plan of Operation
contains "forward looking statements." Actual results may materially differ from those projected in
the forward looking statements as a result of certain risks and uncertainties set forth in this report.
Although management believes that the assumptions made and expectations reflected in the forward
looking statements are reasonable, there is no assurance that the underlying assumptions will, in fact,
prove to be correct or that actual future results will not be materially different from the expectations
expressed in this Annual Report. The following discussion should be read in conjunction with the
audited Consolidated Financial Statements and related Notes thereto included in Item 7 and with the
Special Note regarding forward-looking statements included in Part I.
OVERVIEW
From 1999 to 2014, we have been focused on providing online bingo games over the Internet to
players around the world. We began to experience revenue growth from the advertising contained in
these games in fiscal 2000. In early 2005 we expanded our entertainment offering to include bingo
games for money as well as soft games such as video poker, slots and hi-lo. In 2010, the Company
joined the Unibet Partner Program, and focused on marketing its offering to players around the world.
On December 31, 2014 we sold our internet gaming business and our www.bingo.com domain name
to Unibet Group plc.
In 2014, we earned revenue from our gaming segment, whereby the Company drove players to the
bingo.com website which under the Unibet Partner Program offered bingo and other games, such as
slots and casino, for money to our players. Effective December 31, 2014 this was discontinued.
In 2015 we earned 89% of our revenue from our social bingo game Trophy Bingo. The game is free
to download and supports in-app purchases and in-game advertising for players who want to engage
with the premium features contained in the game.
Since inception we have made a significant investment in the development of our website,
development of Trophy Bingo, purchase of domain names, branding, marketing, maintaining
operations and development of Trophy Bingo. As a result we have incurred significant losses since
inception, and as of December 31, 2015, had an accumulated deficit of $18,407,136.
Moving forward, we will continue to control operating costs and expansion costs with the objective to
operate profitably and efficiently.
The consolidated statement of operations data for the years ended December 31, 2015, and 2014, and
the consolidated balance sheet data as of December 31, 2015, and 2014, are derived from our audited
consolidated financial statements included in Item 7 of this report, which have been audited by
Davidson and Company LLP, independent auditors. The consolidated statement of operations data for
the years ended December 31, 2013, 2012, and 2011, and the consolidated balance sheet data as of
December 31, 2013, 2012, and 2011, are derived from audited consolidated financial statements not
included in this report. The historical results are not necessarily indicative of results to be expected in
any future period.
During the year ended December 31, 2010, Bingo.com joined the Unibet International Limited
(“Unibet”) Partner Program as a network operator of their multi-language and multi-currency bingo
Page 13
and casino system. This agreement continued until December 31, 2014 at which time the agreement
was terminated along with the sale of the domain name, www.bingo.com, and our cash gaming data
base of players to Unibet Group plc.
The Company is now focused in growing its social bingo game Trophy Bingo. During the second
quarter of 2013, the Company beta launched Trophy Bingo in selected jurisdictions. During the third
quarter of 2014, the Company soft launched Trophy Bingo. Trophy Bingo was released worldwide in
the Google Play Store on August 12, 2015, in the Apple App Store on September 3, 2015, and in the
Amazon Appstore on November 30, 2015.
CRITICAL ACCOUNTING POLICIES
The following discussion of critical accounting policies is intended to supplement the Summary of
Significant Accounting Policies presented as Note 2 to our audited consolidated financial statements
presented elsewhere in this report. Note 2 summarize the accounting policies and methods used in the
preparation of our consolidated financial statements. The policies discussed below were selected
because they require the more significant judgments and estimates in the preparation and presentation
of our financial statements. On an ongoing basis, management evaluates these judgments and
estimates, including whether there are any uncertainties as to compliance with the revenue
recognition criteria described below, and recoverability of long-lived assets, as well as the assessment
as to whether there are contingent assets and liabilities that should be recognized or disclosed for the
consolidated financial statements to fairly present the information required to be set forth therein. We
base our estimates on historical experience, as well as other events and assumptions that are believed
to be reasonable at the time. Actual results could differ from these estimates under different
conditions.
Revenue Recognition
Trophy Bingo revenues have been recognized from the sale of in-game purchases at the time of
purchase. The revenue from in-game advertising is recognized when advertising is served to the
player.
Advertising revenues, not generated in Trophy Bingo, have been recognized when collection of the
amounts are reasonably assured. Cash received in advance of the advertising campaigns are recorded
under unearned revenue.
Gaming revenues have been recognized on the basis of total dollars wagered, less commissions on all
games, less all winnings payable to players.
Software Development Costs
Software development costs incurred in the research and development of new software products and
enhancements to existing software products for external use are expensed as incurred until
technological feasibility has been established. After technological feasibility is established, any
software development costs are capitalized and amortized on a straight-line basis over the estimated
economic life of the related product. The Company performs an annual review of the estimated
economic life and the recoverability of such capitalized software costs. If a determination is made that
capitalized amounts are not recoverable based on the estimated cash flows to be generated from the
applicable software, any remaining capitalized amounts are written off. The Company capitalized
100% of its development costs of Trophy Bingo in 2013. Commencing January 1, 2014, the Company
commenced amortizing the capitalized software development costs over a period of 3 years and all
further development costs have been expensed. The Company performs an annual review of the
estimated economic life and the recoverability of such capitalized software costs, using a net
realizable value test.
Page 14
SOURCES OF REVENUE AND REVENUE RECOGNITION
We generate our revenue from the following:
- The sale of in-app purchases in Trophy Bingo in the Google play, Apple iOS and Amazon
App stores.
In-game advertising, whereby players watch advertising to gain in-game currency.
-
- The sale of advertising on our website. We recognize revenue on this basis based on the
amount paid to us upon the delivery and fulfillment of advertising, provided that the
collection of the resulting receivable is probable.
In 2014, we generated revenue from marketing our website to drive players to our website
which under the Unibet Partner Program provides Internet games for money. We
recognized revenue on this basis based on the total dollars wagered, including bonus
wagered, less commissions on all games less all winnings payable to players.
-
SUPPLEMENTARY FINANCIAL INFORMATION
Quarterly Results of Operations
The following tables present our unaudited consolidated quarterly results of operations for each of our
last eight quarters. This data has been derived from unaudited consolidated financial statements that
have been prepared on the same basis as the annual audited consolidated financial statements and, in
our opinion, include all normal recurring adjustments necessary for the fair presentation of such
information. These unaudited quarterly results should be read in conjunction with our audited
consolidated financial statements, included in Item 7 of this report.
Revenue
Advertising revenue
Trophy Bingo revenue
Total Revenue
Cost of sales
Trophy Bingo amortization
Gross loss
Three Months Ended
December 31,
2015
(Unaudited)
September 30
2015
(Unaudited)
June 30
2015
(Unaudited)
March 31
2015
(Unaudited)
$
2,906 $
82,629
85,535
120,503
(34,968)
1,216 $
9,914
11,130
3,788 $
2,465
6,253
4,286
4,406
8,692
120,503
(109,373)
120,503
(114,250)
120,503
(111,811)
Operating expenses and other
(income) / expenses
Loss from continuing operations
before income taxes
Income tax expense
Loss from continuing operations
Discontinued operations
Gain from the sale of the domain
name
Income/(loss) after tax
Basic and diluted net income (loss)
per share
Continuing operations
Discontinued operations
Weighted average common shares,
basic and diluted
$
$
$
783,451
649,238
552,262
626,154
(818,419)
(758,611)
(666,512)
(737,965)
480
(818,899) $
-
-
(758,611) $
(666,512) $
-
(737,965)
-
-
-
16,305
(818,899) $
(758,611) $
(666,512) $
(721,660)
(0.01) $
-
(0.01) $
-
(0.01) $
- $
(0.01)
0.00
56,197,703
55,682,703
55,682,703
55,682,703
Page 15
Three Months Ended
December 31,
2014
(Unaudited)
September 30
2014
(Unaudited)
June 30
2014
(Unaudited)
March 31
2014
(Unaudited)
Revenue
Advertising revenue
Trophy Bingo revenue
Total Revenue
Cost of sales
Trophy Bingo amortization
Gross loss
Operating expenses and other
(income) / expenses
Loss from continuing operations
before income taxes
Income tax expense
Loss from continuing operations
Discontinued operations
Gaming revenue
Gain from the sale of the domain
name
Selling and marketing
Income/(loss) after tax
Basic and diluted net income (loss)
per share
Continuing operations
Discontinued operations
Weighted average common shares,
basic and diluted
$
$
$
$
$
5,105 $
7,105
12,210
6,143 $
2,164
8,307
4,265 $
174
4,439
7,142
372
7,514
120,503
(108,293)
120,504
(112,197)
120,503
(116,064)
120,503
(112,989)
625,427
598,659
500,485
496,582
(733,720)
(710,856)
(616,549)
(609,571)
803
(734,523) $
45
-
(710,901) $
(616,549) $
-
(609,571)
339,050
6,677,759
377,294
-
426,746
-
540,957
-
(58,099)
6,224,187 $
(125,303)
(458,910) $
(160,549)
(350,352) $
(284,078)
(352,692)
(0.01) $
0.09 $
(0.01) $
(0.01) $
(0.01) $
(0.01) $
(0.01)
(0.01)
70,682,703
69,682,733
69,631,329
67,877,703
Our financial statements and related schedules are described under “Item 8. Financial Statements”.
RESULTS OF OPERATIONS
Years Ended December 31, 2015 and 2014
Revenue
Total revenue from continuing operations increased to $111,610 for the year ended December 31,
2015, an increase of 244% over revenue from continuing operations of $32,470 for the same period in
the prior year. Revenue from Trophy Bingo increased to $99,414 for the year ended December 31,
2015, over revenue from Trophy Bingo of $9,815 for the same period in the prior year. During the
year ended December 31, 2015, the Company launched featured complete Trophy Bingo in the
Google Play and Apple App Store in the third quarter of fiscal 2015 and in Amazon App Store in the
fourth quarter of 2015. Advertising Revenue decreased to $12,196 for the year ended December 31,
2015, a decrease of 46% over revenue of $22,655 for the same period in the prior year.
Gaming revenue from discontinued operations was $nil for the year ended December 31, 2015 over
gaming revenue of $1,684,047 for the same period in the prior year.
Selling and marketing expenses
Sales and marketing expenses from continuing operations were $549,534 for the year ended
December 31, 2015, an increase of 122% over expenses of $247,258 for the same period in the prior
year. This increase in sales and marketing expenses from continuing operations in 2015 was due to a
Page 16
larger marketing campaign to attract players to the new Trophy Bingo game. Selling and marketing
expenses from continuing operations principally include publishing services and user acquisition
costs to acquire players.
Sales and marketing expenses from discontinued operations were $nil for the year ended December
31, 2015, over expenses of $628,029 for the year ended December 31, 2014.
We expect to continue to incur sales and marketing expenses to increase traffic and bring new players
to the Trophy Bingo game. There can be no assurances that these expenditures will result in increased
traffic or significant additional revenue.
General and administrative expenses
General and administrative expenses consist primarily of premises costs for our office, legal and
professional fees, and other general corporate and office expenses. General and administrative
expenses increased to $356,647 for the year ended December 31, 2015, an increase of 68% over costs
of $212,649 for the previous year. General and administrative expenses have increased in comparison
to the prior year due to expenses incurred in listing the Company on the TSX Venture Exchange.
These expenses included legal fees, exchange fees and transfer agent fees.
We expect to continue to incur general and administrative expenses to support the business, and there
can be no assurances that we will be able to generate sufficient revenue to cover these expenses.
Salaries, wages, consultants and benefits
Salaries, wages, consultants and benefits expenses decreased to $429,072 during the year ended
December 31, 2015, a decrease of 18% over costs of $520,287 for the previous year. Due to the
decline in continued and discontinued operations revenue for the year ended December 31, 2015,
there was a decline in revenue share commissions paid to certain staff. In addition, certain of the
Company’s salaries, wages, consultants and benefits expenses are incurred in Canadian Dollars. The
decline in the Canadian dollar in relation to the United States dollar has led to a decline in salaries,
wages, consultants and benefits expenses for the year ended December 31, 2015.
Depreciation and amortization
Equipment is depreciated using the declining balance method over the useful lives of the assets,
ranging from three to five years. Depreciation decreased to $3,467 during the year ended December
31, 2015, over depreciation of $3,470 during the prior year. This decrease in depreciation and
amortization compared to fiscal 2014, is due to the aging of the Company’s equipment and the
disposal of obsolete equipment.
Trophy Bingo development and amortization
Commencing January 1, 2014, the Company ceased to capitalize the development costs of Trophy
Bingo and commenced amortizing the capitalized development costs over the life of the game. The
Company expensed $1,230,216 in Trophy Bingo development costs during the year ended December
31, 2015, an increase of 4% over $1,181,382 of Trophy Bingo development costs in the prior year. In
addition, the Company amortized $482,012 (2014 - $482,013) of the capitalized development costs
during the year ended December 31, 2015.
Other income and expenses
During the year ended December 31, 2015, the Company has a foreign exchange loss of $33,758
compared to foreign exchange gains of $44,617 in the prior year. These losses are due to the
exchange rate movements of the US Dollar compared to the Pound Sterling and the Canadian Dollar.
During the year ended December 31, 2015, we received interest income of $1,089, an increase of
114% compared to interest income of $510 in the prior year. The interest income is received from
bank term deposits from investing our cash. The increase in interest income is due to the funds
received in the sale of Bingo.com URL and Cash Bingo business in the year ended December 31,
2014.
Page 17
Income taxes
The Company incurred income tax expense of $480 during the year ended December 31, 2015, in
relation to profits earned in its subsidiaries in different jurisdictions compared to income tax expense
of $848 in the prior year. During the year ended December 31, 2005, the Bingo.com, Inc. merged
with its subsidiary Bingo.com, Ltd. in Anguilla, British West Indies. Anguilla is a zero tax
jurisdiction.
Sale of domain name
Effective December 31, 2014, the Company sold its URL www.bingo.com and its online gambling
business to Unibet Group plc (“Unibet”) for total consideration of $8,000,000. The Company
received cash consideration of $2,000,000 and redemption of the 15,000,000 common shares of the
Company, which were held by Unibet. The 15,000,000 common shares held by Unibet have been
returned to the Company’s treasury and cancelled. The Company recorded a gain from the sale of
$6,677,759 for the year ended December 31, 2014 and $16,305 for the year ended December 31,
2015.
Net loss and loss per share
The net loss after taxation from continuing operations for the twelve months ended December 31,
2015, amounted to ($2,981,987), a loss of ($0.05) per share, compared to a net loss from continuing
operations of ($2,671,544) or a loss of ($0.04) per share in the twelve months ending December 31,
2014.
The net loss after taxation for the twelve months ended December 31, 2015, amounted to
($2,965,682), a loss of ($0.05) per share, compared to a net gain of $5,062,233 or $0.07 per share in
the twelve months ending December 31, 2014. The decrease in net income is due to the sale of the
domain name in the year ended December 31, 2014 and expenses incurred in listing the Company on
the TSX Venture exchange.
LIQUIDITY AND CAPITAL RESOURCES
We had cash of $570,086 and working capital of $454,447 at December 31, 2015. This compares to
cash of $2,876,386 and working capital of $2,856,230 at December 31, 2014.
During the year ended December 31, 2015, 515,000 stock options at $0.15 per share was exercised
raising $77,250.
During the year ended December 31, 2015, we used cash of $2,383,038 in operating activities
compared to using cash of $902,497 in the prior year.
Net cash generated by financing activities was $77,250 in the year ended December 31, 2015, which
compares to cash generated by financing activity of $1,409,350 in fiscal 2014. This cash generated by
financing activity is due to the cash raised from option holders exercising their options during the
year ended December 31, 2015 compared to three private placements placed in the year ended
December 31, 2014.
Cash of $512 used in investing activities in fiscal 2015, compared to cash provided by investing
activities of $1,878,330 in the prior year. This decrease in cash provided by investing activities is due
to sale of the domain name in fiscal 2014.
Our future capital requirements will depend on a number of factors, including costs associated with
marketing of our Web portal, the further development of Trophy Bingo, the cost of marketing and
player acquisition costs for Trophy Bingo, and the success and acceptance of Trophy Bingo.
Off Balance Sheet Arrangements
We did not have any Off Balance sheet arrangements for the year ended December 31, 2015 and
2014.
Page 18
AUDIT COMMITTEE
Our audit committee consists of four directors and reports to the Board of Directors. The audit
committee meets regularly throughout the year and met with the independent auditors on March 16,
2016, and approved the financials statements for the year ended December 31, 2015.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
Page 19
SHOAL GAMES LTD. and subsidiaries
Consolidated Financial Statements
Years ended December 31, 2015 and 2014
Report of Independent Registered Public Accounting Firm
for the years ended December 31, 2015 and 2014
Consolidated Financial Statements
Balance Sheets
Statements of Operations
Statements of Stockholders’ Equity
Statements of Cash Flows
Notes to Consolidated Financial Statements
21
22
23
24
25
26
Page 20
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Shareholders and Directors of
Shoal Games Ltd.
We have audited the accompanying consolidated financial statements of Shoal Games Ltd. (the
“Company”), which comprise the consolidated balance sheets of Shoal Games Ltd. as of December
31, 2015 and 2014, and the related consolidated statements of operations, changes in stockholders’
equity, and cash flows for the years ended December 31, 2015 and December 31, 2014. These
consolidated financial statements are the responsibility of the Company’s management. Our
responsibility is to express an opinion on these consolidated financial statements based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting
Oversight Board (United States). Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the consolidated financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and
disclosures in the consolidated financial statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as evaluating the overall
consolidated financial statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the consolidated financial statements referred to above present fairly, in all material
respects, the financial position of Shoal Games Ltd. as of December 31, 2015 and 2014, and the
results of its operations and its cash flows for the years ended December 31, 2015 and 2014 in
conformity with accounting principles generally accepted in the United States of America.
The accompanying consolidated financial statements have been prepared assuming that Shoal Games
Ltd. will continue as a going concern. As discussed in Note 1 to the consolidated financial statements,
Shoal Games Ltd. has suffered recurring losses from operations. This matter, along with the other
matters set forth in Note 1, indicate the existence of material uncertainties that raise substantial doubt
about its ability to continue as a going concern. Management's plans in regard to these matters are
also described in Note 1. The consolidated financial statements do not include any adjustments that
might result from the outcome of this uncertainty.
Vancouver, Canada
March 16, 2016
“DAVIDSON & COMPANY LLP”
Chartered Professional Accountants
Page 21
SHOAL GAMES LTD. and subsidiaries
Consolidated Balance Sheets
As at December 31,
Assets
Current assets:
Cash
Accounts receivable, less allowance for doubtful accounts
$nil (2014 - $nil) (Note 3)
Prepaid expenses
Total Current Assets
Equipment, net (Note 4)
Other assets (Note 5)
Security deposits
2015
2014
$
570,086
$
2,876,386
44,948
17,205
632,239
122,056
14,367
3,012,809
6,314
9,269
482,013
964,025
8,960
10,642
Deferred tax asset, less valuation allowance of $17,898
(2014 - $17,907) (Note 9)
-
-
Total Assets
$
1,129,526
$
3,996,745
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable
Accrued liabilities
Accounts payable and accrued liabilities - related party (Note 10)
Total Current Liabilities
$
$
74,200
71,026
32,566
177,792
35,013
72,898
48,668
156,579
Commitments (Note 8)
Stockholders’ equity (Note 7):
Common stock, no par value, unlimited shares authorized,
56,197,703 shares issued and outstanding
(December 31, 2014 - 55,682,703)
Accumulated deficit
Accumulated other comprehensive income:
Foreign currency translation adjustment
Total Stockholders’ Equity
19,334,290
(18,407,136)
19,257,040
(15,441,454)
24,580
951,734
24,580
3,840,166
Total Liabilities and Stockholders’ Equity
$
1,129,526
$
3,996,745
See accompanying notes to consolidated financial statements.
Page 22
SHOAL GAMES LTD. and subsidiaries
CONSOLIDATED STATEMENTS OF OPERATIONS
Years ended December 31,
Advertising revenue
Trophy Bingo revenue
Total revenue
Cost of sales:
Trophy Bingo amortization (Note 5)
Total cost of sales
Gross loss
Operating expenses:
Depreciation and amortization (Note 4)
Directors fees
General and administrative
Salaries, wages, consultants and benefits
Selling and marketing
Trophy Bingo development (Note 5)
Total operating expenses
$
$
2015
12,196
99,414
111,610
482,012
482,012
(370,402)
3,467
9,500
356,647
429,072
549,534
1,230,216
2,578,436
2014
22,655
9,815
32,470
482,013
482,013
(449,543)
3,470
12,000
212,649
520,287
247,258
1,181,382
2,177,046
Loss before other income (expense) and income taxes
(2,948,838)
(2,626,589)
Other income (expense):
Foreign exchange loss
Interest and other income
Loss from continuing operations before income taxes
Income tax expense (Note 9)
(33,758)
1,089
(2,981,507)
(480)
(44,617)
510
(2,670,696)
(848)
Loss from continuing operations
$
(2,981,987)
$
(2,671,544)
Discontinued operations: (Note 6)
Gaming revenue
Gain from the sale of the domain name (Note 6)
Gain from the sale of the Cash Bingo business
Selling and marketing
Income after tax
Other comprehensive income (loss)
Comprehensive income (loss)
Basic and diluted profit (loss) per common share (Note 2)
Continuing operations
Discontinued operations
Weighted average common shares outstanding, basic
(Note 2)
Weighted average common shares outstanding, diluted
(Note 2)
See accompanying notes to consolidated financial statements.
-
-
16,305
-
16,305
-
(2,965,682)
(0.05)
0.00
55,812,511
55,812,511
$
$
$
$
$
$
1,684,047
6,677,759
-
(628,029)
5,062,233
-
5,062,233
(0.04)
0.11
69,564,552
69,584,417
Page 23
SHOAL GAMES LTD. and subsidiaries
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
Years ended December 31, 2015 and 2014
Common stock
Shares
Amount
Accumulated
Deficit
Accumulated Other
Comprehensive
income
Foreign currency
translation
adjustment
Balance, December 31, 2013
67,877,703
$20,097,690
$(16,753,687)
$ 24,580
Private placement
500,000
200,000
Private placement
1,250,000
500,000
Exercise of stock options
55,000
9,350
Private placement
1,000,000
700,000
-
-
-
-
-
-
Redemption of shares (Note 6)
(15,000,000)
(2,250,000)
(3,750,000)
Net income
Balance, December 31, 2014
-
55,682,703
-
$19,257,040
5,062,233
$(15,441,454)
-
$ 24,580
Total
Stockholders’
Equity
$3,368,583
200,000
500,000
9,350
700,000
(6,000,000)
5,062,233
$3,840,166
Exercise of stock options
515,000
77,250
-
-
77,250
Net loss
Balance, December 31, 2015
-
56,197,703
-
$19,334,290
(2,965,682)
$(18,407,136)
-
$ 24,580
(2,965,682)
$951,734
See accompanying notes to consolidated financial statements.
Page 24
SHOAL GAMES LTD. and subsidiaries
Consolidated Statements of Cash Flows
Years ended December 31,
Cash flows from operating activities:
Net (loss) income
Adjustments to reconcile net (loss) income to net cash used in
operating activities:
Depreciation and amortization
Trophy Bingo amortization
Gain from the sale of the domain name
Changes in operating assets and liabilities:
Accounts receivable
Prepaid expenses
Other assets
Accounts payable and accrued liabilities
Net cash used in operating activities
Cash flows from investing activities:
Acquisition of equipment
Proceeds on disposal of domain name, net of transaction costs
Software development
Net cash (used in) provided by investing activities
Cash flows from financing activities:
Exercise of stock options
Private placement
Net cash provided by financing activities
Change in cash
Cash, beginning of year
Cash, end of year
Supplementary information:
Interest paid
Income taxes paid
Non-cash financing activity
Non-cash investing activity – acquisition and redemption of 15,000,000
common shares on the disposal of the domain name rights through common
stock and deficit (Note 6)
See accompanying notes to consolidated financial statements.
2015
2014
$
(2,965,682)
$
5,062,233
3,467
482,012
(16,305)
77,108
(2,838)
1,682
37,518
(2,383,038)
(512)
-
-
(512)
77,250
-
77,250
(2,306,300)
2,876,386
570,086
-
480
-
-
$
$
$
$
$
$
$
$
$
$
3,470
482,013
(6,677,759)
159,201
97,728
877
(30,260)
(902,497)
(4,969)
1,935,000
(51,701)
1,878,330
9,350
1,400,000
1,409,350
2,385,183
491,203
2,876,386
-
848
-
6,000,000
Page 25
SHOAL GAMES LTD. and subsidiaries
Notes to Consolidated Financial Statements
Years ended December 31, 2015 and 2014
1. Introduction:
Nature of business
Shoal Games Ltd. (the “Company”) was incorporated on January 12, 1987, under the laws of
the State of Florida as Progressive General Lumber Corp. On January 22, 1999, the Company
changed its name to Bingo.com, Inc. On April 7, 2005, Bingo.com, Inc. completed a merger
with its wholly- owned subsidiary Bingo.com, Ltd. The surviving corporation of the merger is
Bingo.com, Ltd. which is domiciled in Anguilla, British West Indies. Effective Thursday, April
7, 2005, the shares of Bingo.com, Ltd. began trading under the new ticker symbol “BNGOF”.
During the year ended December 31, 2015, the Company changed its name to Shoal Games
Ltd. and changed its ticker symbol to “SGLDF”. Effective July 2, 2015, the Company
additionally listed on the TSX Venture Exchange under the symbol “SGW”.
Effective December 31, 2014, the Company sold its Internet portal, www.bingo.com and
focused on the continued development and marketing of its social bingo game, Trophy Bingo.
During the year ended December 31, 2015, the Company was in the business of owning and
marketing a non-gambling social bingo game called Trophy Bingo. Trophy Bingo is a free-to-
play mobile game live in the Apple, Google and Amazon App Stores. The game is free to
download and supports in-app purchases and in-game advertising for players who want to
engage with the premium features contained in the game. In-game purchases are transactions
made from within a mobile game that are processed by the platform provider (Apple iOS;
Google Android; Amazon Android). The worldwide full launch and marketing of Trophy
Bingo commenced in the third quarter of 2015 when the latest version of Trophy Bingo was
released world-wide in the Apple App Store and Google Play Store on all supported mobile
phones and tablet devices.
Continuing operations
These consolidated financial statements have been prepared on the going concern basis, which
presumes the realization of assets and the settlement of liabilities in the normal course of
operations. The application of the going concern basis is dependent upon the Company
achieving profitable operations to generate sufficient cash flows to fund continued operations,
or, in the absence of adequate cash flows from operations, obtaining additional financing. The
Company has reported losses from operations for the year ended December 31, 2015 and 2014,
and has an accumulated deficit of $18,407,136 as at December 31, 2015. This raises
substantial doubt about the Company’s ability to continue as a going concern.
In view of the matters described in the preceding paragraph, recoverability of a major portion
of the recorded asset amounts and settlement of the liability amounts shown in the
accompanying balance sheets is dependent upon continued operations of the Company, which
in turn is dependent upon the Company's ability to succeed in its future operations. The
financial statements do not include any adjustments relating to the recoverability and
Page 26
SHOAL GAMES LTD. and subsidiaries
Notes to Consolidated Financial Statements
Years ended December 31, 2015 and 2014
1. Introduction (Continued):
classification of recorded asset amounts or amounts and classification of liabilities that might be
necessary should the Company be unable to continue in existence.
Management continues to review operations in order to identify additional strategies designed
to generate cash flow, improve the Company’s financial position, and enable the timely
discharge of the Company’s obligations. If management is unable to identify sources of
additional cash flow in the short term, it may be required to further reduce or limit operations.
2. Summary of significant accounting policies:
(a) Basis of presentation:
These consolidated financial statements have been prepared in accordance with accounting
principles generally accepted in the United States of America (“US GAAP”) applicable to
annual financial information and with the rules and regulations of the United States
Securities and Exchange Commission. The financial statements include the accounts of the
Company’s wholly-owned subsidiaries, English Bay Office Management Limited
(registered in British Columbia, Canada) subsequent to the year ended December 31, 2015,
this was renamed Shoal Media (Canada) Inc., Coral Reef Marketing Inc. (registered in
Anguilla), Shoal Media Inc. (registered in Anguilla), Bingo.com (Antigua) Inc., Bingo.com
(Wyoming) Inc., Bingo Acquisition Corp, and the 99% owned subsidiary, Shoal Games
(UK) plc. (registered in the United Kingdom). All inter-company balances and transactions
have been eliminated in the consolidated financial statements.
(b) Use of estimates:
The preparation of consolidated financial statements in conformity with US GAAP,
requires management to make estimates and assumptions that affect the reported amounts
of assets and liabilities and the disclosure of contingent assets and liabilities at the date of
the financial statements and recognized revenues and expenses for the reporting periods.
Significant areas requiring the use of estimates include the valuation of long-lived assets,
the collectibility of accounts receivable and the valuation of deferred tax assets. Actual
results may differ significantly from these estimates.
(c) Revenue recognition:
Trophy Bingo revenues have been recognized from the sale of in-game purchases at the
time of purchase. The revenue from in-game advertising is recognized when advertising is
served to the player.
Advertising revenues, not generated in Trophy Bingo, have been recognized when
collection of the amounts are reasonably assured. Cash received in advance of the
advertising campaigns are recorded under unearned revenue.
Gaming revenues have been recognized on the basis of total dollars wagered, less
commissions on all games, less all winnings payable to players.
Page 27
SHOAL GAMES LTD. and subsidiaries
Notes to Consolidated Financial Statements
Years ended December 31, 2015 and 2014
2. Summary of significant accounting policies (Continued):
(d) Foreign currency:
The consolidated financial statements are presented in United States dollars, the functional
currency of the Company and its subsidiaries. The Company accounts for foreign currency
transactions and translation of foreign currency financial statements under Statement ASC
830, Foreign Currency Matters. Transaction amounts denominated in foreign currencies are
translated at exchange rates prevailing at the transaction dates. Carrying values of monetary
assets and liabilities are adjusted at each balance sheet date to reflect the exchange rate at
that date. Non-monetary assets and liabilities are translated at the exchange rate on the
original transaction date.
Gains and losses from restatement of foreign currency monetary and non-monetary assets
and liabilities are included in net income. Revenues and expenses are translated at the rates
of exchange prevailing on the dates such items are recognized in earnings.
(e) Accounts receivable:
Trade and other accounts receivable are reported at face value less any provisions for
uncollectible accounts considered necessary. Accounts receivable includes receivables from
payment processors and trade receivables from customers. The Company estimates doubtful
accounts on an item-by-item basis and includes over-aged accounts as part of allowance for
doubtful accounts, which are generally ones that are ninety-days overdue. Bad debt
expense, for the year ended December 31, 2015, was $nil (2014 - $nil).
(f) Equipment:
Equipment is recorded at cost less accumulated depreciation. Depreciation is provided for
annually on the declining balance method over the following periods :
Equipment and computers
Furniture and fixtures
3 years
5 years
Expenditures for maintenance and repairs are charged to expenses as incurred. Major
improvements are capitalized. Gains and losses on disposition of equipment are included in
income or expenses as realized.
(g) Software Development Costs:
Software development costs incurred in the research and development of new software
products and enhancements to existing software products for external use are expensed as
incurred once technological feasibility has been established. After technological feasibility
is established, any software development costs are capitalized and amortized at the greater
of the straight-line basis over the estimated economic life of the related product or the ratio
that current gross revenues for a product bear to the total of current and anticipated future
gross revenues for the related product. Commencing January 1, 2014, the Company
obtained technological feasibility and is amortizing the capitalized software development
Page 28
SHOAL GAMES LTD. and subsidiaries
Notes to Consolidated Financial Statements
Years ended December 31, 2015 and 2014
2. Summary of significant accounting policies (Continued):
(g) Software Development Costs: (Continued)
costs over a period of 3 years. The Company performs an annual review of the estimated
economic life and the recoverability of such capitalized software costs, using a net
realizable value test.
If a determination is made that capitalized amounts are not recoverable based on the
estimated cash flows to be generated from the applicable software, any remaining
capitalized amounts are written off. Although the Company believes that its approach to
estimates and judgments as described herein is reasonable, actual results could differ and
the Company may be exposed to increases or decreases in revenue that could be material.
Total software development costs for the development of Trophy Bingo were $3,857,636 as
at December 31, 2015 (December 31, 2014 - $2,627,420).
(h) Advertising:
The Company expenses the cost of advertising in the period in which the advertising space
or airtime is used. Advertising costs from continuing operations charged to selling and
marketing expenses in 2015 totaled $549,534 (2014 - $247,258) and advertising costs from
discontinued operations charged to selling and marketing expenses in 2015 totaled $nil
(2014 - $628,029).
(i) Stock-based compensation:
The Company recognizes all stock-based compensation as an expense in the financial
statements and that such cost be measured at the fair value of the award.
(j) Impairment of long-lived assets and long-lived assets to be disposed of:
The Company accounts for long-lived assets in accordance with the provisions of ASC 360,
Property, Plant and Equipment and ASC 350, Intangibles–Goodwill and Others. During the
years presented, the only long-lived assets reported on the Company’s consolidated balance
sheet are equipment, other assets, security deposits, and domain name rights. These
provisions require that long-lived assets and certain identifiable recorded intangibles be
reviewed for impairment whenever events or changes in circumstances indicate that the
carrying amount of an asset may not be recoverable. Recoverability of assets to be held and
used is measured by a comparison of the carrying amount of an asset to future net cash
flows expected to be generated by the asset.
If such assets are considered to be impaired, the impairment to be recognized is measured
by the amount by which the carrying amount of the assets exceeds the fair value of the
assets. Assets to be disposed of are reported at the lower of the carrying amount and the
fair value less costs to sell.
Page 29
SHOAL GAMES LTD. and subsidiaries
Notes to Consolidated Financial Statements
Years ended December 31, 2015 and 2014
2. Summary of significant accounting policies (Continued):
(k) Income taxes:
The Company follows the asset and liability method of accounting for income taxes. Under
this method, current income taxes are recognized for the estimated income taxes payable for
the current period. Deferred income taxes are provided based on the estimated future tax
effects of temporary differences between financial statement carrying amounts of assets and
liabilities and their respective tax bases, as well as the benefit of losses available to be
carried forward to future years for tax purposes.
Deferred tax assets and liabilities are measured using the enacted tax rates that are expected
to apply to taxable income in the years in which those temporary differences are expected to
be recovered and settled. The effect on deferred tax assets and liabilities of a change in tax
rates is recognized in operations in the period that includes the enactment date. A valuation
allowance is recorded for deferred tax assets when it is not more likely than not that such
future tax assets will be realized.
(l) Net (loss) income per share:
ASC 260, “Earnings Per Share”, requires presentation of basic earnings per share (“Basic
EPS”) and diluted earnings per share (“Diluted EPS”). Basic earnings (loss) per share is
computed by dividing earnings (loss) available to common stockholders by the weighted
average number of common shares outstanding during the period. Diluted earnings per
share reflects the potential dilution, using the treasury stock method, that could occur if
outstanding options or warrants were exercised and converted into common stock. In
computing diluted earnings per share, the treasury stock method assumes that outstanding
options and warrants are exercised and the proceeds are used to purchase common stock at
the average market price during the period.
Options and warrants will have a dilutive effect under the treasury stock method only when
the average market price of the common stock during the period exceeds the exercise price
of the options and warrants. In periods where losses are reported, the weighted average
number of common shares outstanding excludes common stock equivalents because their
inclusion would be anti-dilutive. A total of nil (2014 - nil) stock options were excluded as at
December 31, 2015.
Page 30
SHOAL GAMES LTD. and subsidiaries
Notes to Consolidated Financial Statements
Years ended December 31, 2015 and 2014
2. Summary of significant accounting policies (Continued):
(l) Net (loss) income per share: (Continued)
The earnings per share data for the year ended December 31, 2015 and 2014 are
summarized as follows:
Loss for the year from continuing operations
Income (loss) for the year from discontinued
operations
Basic weighted average number of common
shares outstanding
Effect of dilutive securities
Stock Options
Diluted weighted average number of common
shares outstanding
Basic and diluted (loss) earnings per common
share outstanding
Continuing operations
Discontinued operations
$
$
$
$
2015
(2,981,987) $
2014
(2,671,544)
16,305 $
7,733,777
55,812,511
69,564,552
-
19,865
55,812,511
69,584,417
(0.05) $
0.00 $
(0.04)
0.11
(m) Domain name and intangible assets:
The Company has capitalized the cost of the purchase of the domain name Bingo.com and
was amortizing the cost over five years from the date of commencement of operations. In
2002, the Company suspended the amortization of the domain name cost in accordance
with ASC 350, where companies are no longer required to amortize indefinite life assets but
instead test the indefinite intangible asset for impairment at least annually. The capitalized
amount is based on the net present value of the minimum payments permitted under the
terms of the purchase agreement. The domain name is tested for impairment by comparing
the future cash flows of the domain name with its carrying value. The Company determined
that as a result of level 3 unobservable inputs in accordance with ASC 820, Fair Value
Measurements and Disclosures, that the fair value of the domain name exceeded the
carrying value and therefore no impairment existed for the years presented.
(n) New accounting pronouncements and changes in accounting policies:
In April 2014, the Financial Accounting Standards Board ("FASB”) issued ASU No. 2014-
08, Presentation of Financial Statements (Topic 205) and Property, Plant, and Equipment
(Topic 360): Reporting Discontinued Operations and Disclosures of Disposals of
Components of an Entity (ASU 2014-08), Under this revised guidance, only disposals
representing a strategic shift in operations, such as a disposal of a major geographic area, a
major line of business or a major equity method investment, will be presented as
discontinued operations. ASU 2014-08 is effective prospectively for the Company in our
first quarter of fiscal 2015, with early adoption permitted. The Company adopted the
guidance effective January 1, 2015 and it did not have a material impact on its consolidated
financial statements.
Page 31
SHOAL GAMES LTD. and subsidiaries
Notes to Consolidated Financial Statements
Years ended December 31, 2015 and 2014
2. Summary of significant accounting policies (Continued):
(n) New accounting pronouncements and changes in accounting policies: (Continued)
In May 2014, the FASB issued Accounting Standards Update (“ASU”) No. 2014-09,
Revenue from Contracts with Customers. This was updated by ASU No. 2015-14. This
guidance provides a single, comprehensive revenue recognition model for all contracts with
customers. The revenue guidance contains principles that an entity will apply to determine
the measurement of revenue and timing of when it is recognized. The underlying principle
is that an entity will recognize revenue to depict the transfer of goods or services to
customers at an amount that the entity expects to be entitled to in exchange for those goods
or services. The standard was amended to be effective for the first interim period within
annual reporting periods beginning after December 15, 2017 for public entities. The
Company does not expect the adoption of this guidance to have a material impact on the
Company’s financial position or results of operations.
In June 2014, the FASB issued ASU No. 2014-12, Compensation-Stock Compensation.
This guidance requires that a performance target that affects vesting, and that could be
achieved after the requisite service period, be treated as a performance condition. As such,
the performance target should not be reflected in estimating the grant date fair value of the
award. This update further clarifies that compensation cost should be recognized in the
period in which it becomes probable that the performance target will be achieved and
should represent the compensation cost attributable to the periods for which the requisite
service has already been rendered. The new standard is effective for fiscal years, and
interim periods within those fiscal years, beginning after December 15, 2015 and can be
applied either prospectively or retrospectively to all awards outstanding as of the beginning
of the earliest annual period presented as an adjustment to opening retained earnings. Early
adoption is permitted. The Company does not expect the adoption of this guidance to have a
material impact on the Company’s financial position or results of operations.
In August 2014, the FASB issued ASU No. 2014-15, Presentation of Financial Statements -
Going Concern (Subtopic 205-40): Disclosure of Uncertainties about an Entity's Ability to
Continue as a Going Concern ("ASU 2014-15"). ASU 2014-15 provides guidance about
management's responsibility to evaluate whether there is substantial doubt about an entity's
ability to continue as a going concern and sets rules for how this information should be
disclosed in the financial statements. ASU 2014-15 is effective for annual periods ending
after December 15, 2016 and interim periods thereafter. Early adoption is permitted. The
Company is evaluating the effect of ASU 2014-15 on our consolidated financial condition
and results of operations.
In November 2014, the FASB issued ASU No. 2014-16, Determining Whether the Host
Contract in a Hybrid Financial Instrument Issued in the Form of a Share Is More Akin to
Debt or to Equity. This standard requires an entity to “determine the nature of the host
contract by considering all stated and implied substantive terms and features of the hybrid
financial instrument, weighing each term and feature on the basis of the relevant facts and
Page 32
SHOAL GAMES LTD. and subsidiaries
Notes to Consolidated Financial Statements
Years ended December 31, 2015 and 2014
2. Summary of significant accounting policies (Continued):
(n) New accounting pronouncements and changes in accounting policies: (Continued)
circumstances which the hybrid financial instrument was issued or acquired and the
potential outcome of the hybrid financial instrument. ASU 2014-16 is effective for annual
periods ending after December 15, 2015 and interim periods thereafter. Early adoption is
permitted. The Company is evaluating the effect of ASU 2014-16 on our consolidated
financial condition and results of operations.
In January 2015, the FASB issued ASU 2015-01, which eliminates from GAAP the concept
of extraordinary items. If an event or transaction meets the criteria for extraordinary
classification, it is segregated from the results of ordinary operations and is shown as a
separate item in the income statement, net of tax. ASU 2015-01 is effective for annual
periods, and interim periods within those annual periods, beginning after December 15,
2015. Early adoption is permitted. The Company does not expect adoption of this guidance
will have a material effect on its consolidated financial statements.
In February 2015, the FASB issued ASU 2015-02, which provides guidance for reporting
entities that are required to evaluate whether they should consolidate certain legal entities.
In accordance with ASU 2015-02, all legal entities are subject to reevaluation under the
revised consolidation model. ASU 2015-02 is effective for public business entities for
annual periods, and interim periods within those annual periods, beginning after December
15, 2015. Early adoption is permitted. The Company does not anticipate that the adoption of
this standard will have a material impact on its consolidated financial statements.
On April 1, 2015, the FASB voted to defer the effective date of ASU No. 2014-09, which
outlines a single comprehensive model for entities to use in accounting for revenues arising
from contracts with customers and notes that lease contracts with customers are a scope
exception. Public business entities may elect to adopt the amendments as of the original
effective date; however, if the proposed deferral is approved, adoption is required for
annual reporting periods beginning after December 15, 2017. We are currently assessing the
impact of the guidance on our consolidated financial statements.
On April 17, 2015, the FASB issued ASU No. 2015-03, Simplifying the Presentation of
Debt Issuance Costs , which requires debt issuance costs to be presented in the balance
sheet as a direct deduction from the associated debt liability. Currently, debt issuance costs
are recorded as an asset and amortization of these deferred financing costs is recorded in
interest expense. Under the new standard, debt issuance costs will continue to be amortized
over the life of the debt instrument and amortization will continue to be recorded in interest
expense. The new standard is effective for the Company on January 1, 2016 and will be
applied on a retrospective basis. The Company does not anticipate that the adoption of this
standard will have a material impact on its consolidated financial statements.
The FASB has issued ASU 2015-05, Intangibles - Goodwill and Other - Internal-Use
Software (Subtopic 350-40): Customer’s Accounting for Fees Paid in a Cloud Computing
Page 33
SHOAL GAMES LTD. and subsidiaries
Notes to Consolidated Financial Statements
Years ended December 31, 2015 and 2014
2. Summary of significant accounting policies (Continued):
(n) New accounting pronouncements and changes in accounting policies: (Continued)
Arrangement. The amendments in ASU 2015-05 provide guidance to customers about
whether a cloud computing arrangement includes a software license. If a cloud computing
arrangement includes a software license, then the customer should account for the software
license element of the arrangement consistent with the acquisition of other software
licenses. If a cloud computing arrangement does not include a software license, the
customer should account for the arrangement as a service contract. The amendments do not
change the accounting for a customer’s accounting for service contracts. As a result of the
amendments, all software licenses within the scope of Subtopic 350-40 will be accounted
for consistent with other licenses of intangible assets. ASU 2015-05 is effective for public
entities for annual periods, including interim periods within those annual periods, beginning
after December 15, 2015. The Company does not anticipate that ASU 2015-05 will have a
significant impact on its consolidated financial statements.
In September 2015, the FASB issued ASU 2015-16, Simplifying the Accounting for
Measurement-Period Adjustments guidance to simplify the accounting for adjustments in a
business combination. An acquirer should recognize adjustments to provisional amounts
with a corresponding adjustment of goodwill, as well as the effect on earnings of changes in
depreciation, amortization or other income effects, in the reporting period in which the
adjustments are identified as if the accounting had been completed at the acquisition date.
Disclosure is required, by line item, of the amount recorded in current period earnings that
would have been recorded in previous reporting periods. This guidance is effective for
fiscal years and interim periods beginning after December 15, 2015, and requires
prospective application. Early adoption is permitted. The Company does not expect this
guidance to have a significant impact on its consolidated financial statements.
In November 2015, the FASB issued ASU 2015-17, Income Taxes (Topic 740): Balance
Sheet Classification of Deferred Taxes , which requires deferred income tax liabilities and
assets to be classified as noncurrent on the balance sheet rather than being separated into
current and noncurrent. The guidance is effective for public entities for annual periods
beginning after December 15, 2016, and interim periods within those annual periods with
early adoption being permitted. The Company is still assessing the potential impact of ASU
2015-17 on its consolidated financial statements.
In January 2016, the FASB issued ASU 2016-01, Financial Instruments—Overall (Subtopic
825-10): Recognition and Measurement of Financial Assets and Financial Liabilities (“ASU
2016-01”), which requires that equity investments, except for those accounted for under the
equity method or those that result in consolidation of the investee, be measured at fair
value, with subsequent changes in fair value recognized in net income. However, an entity
may choose to measure equity investments that do not have readily determinable fair values
at cost minus impairment, if any, plus or minus changes resulting from observable price
Page 34
SHOAL GAMES LTD. and subsidiaries
Notes to Consolidated Financial Statements
Years ended December 31, 2015 and 2014
2. Summary of significant accounting policies (Continued):
(n) New accounting pronouncements and changes in accounting policies: (Continued)
changes in orderly transactions for the identical or a similar investment of the same issuer.
ASU 2016-01 also impacts the presentation and disclosure requirements for financial
instruments. ASU 2016-01 is effective for public business entities for annual periods, and
interim periods within those annual periods, beginning after December 15, 2017. Early
adoption is permitted only for certain provisions. The Company does not expect that the
adoption of ASU 2016-01 will have a material effect on its consolidated financial
statements.
In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842), which requires
lessees to recognize most leases on the balance sheet. This ASU requires lessees to
recognize a right-of-use asset and lease liability for all leases with terms of more than 12
months. Lessees are permitted to make an accounting policy election to not recognize the
asset and liability for leases with a term of twelve months or less. The ASU does not
significantly change the lessees’ recognition, measurement and presentation of expenses
and cash flows from the previous accounting standard. Lessors’ accounting under the ASC
is largely unchanged from the previous accounting standard. In addition, the ASU expands
the disclosure requirements of lease arrangements. Lessees and lessors will use a modified
retrospective transition approach, which includes a number of practical expedients. The
provisions of this guidance are effective for annual periods beginning after December 15,
2018, and interim periods within those years, with early adoption permitted. Management is
evaluating the requirements of this guidance and has not yet determined the impact of the
adoption on the Company’s financial position or results of operations.
There have been no other recent accounting standards, or changes in accounting standards,
during the year ended December 31, 2015, as compared to the recent accounting standards
described in the Annual Report, that are of material significance, or have potential material
significance, to us.
(o) Financial instruments:
(i) Fair values:
The fair value of accounts receivable, accounts payable, accrued liabilities and accounts
payable and accrued liabilities - related party approximate their financial statement carrying
amounts due to the short-term maturities of these instruments. Cash is carried at fair value
using a level 1 fair value measurement.
In general, fair values determined by Level 1 inputs utilize quoted prices (unadjusted) in
active markets for identical assets or liabilities. Fair values determined by Level 2 inputs
utilize data points that are observable such as quoted prices, interest rates and yield curves.
Fair values determined by Level 3 inputs are unobservable data points for the asset or
liability, and included situations where there is little, if any, market activity for the asset.
The Company’s cash was measured using Level 1 inputs.
Page 35
SHOAL GAMES LTD. and subsidiaries
Notes to Consolidated Financial Statements
Years ended December 31, 2015 and 2014
2. Summary of significant accounting policies (Continued):
(o) Financial instruments: (Continued)
(ii) Foreign currency risk:
The Company operates internationally, which gives rise to the risk that cash flows may be
adversely impacted by exchange rate fluctuations. The Company has not entered into any
forward exchange contracts or other derivative instrument to hedge against foreign
exchange risk.
3. Accounts Receivable:
The accounts receivable as at December 31, 2015, is summarized as follows:
Accounts receivable
Provision for doubtful accounts
Net accounts receivable
4. Equipment:
2015
Equipment and computers
Furniture and fixtures
2014
Equipment and computers
Furniture and fixtures
$
$
2015
44,948
-
44,948
$
$
2014
122,056
-
122,056
Cost
105,853
7,088
112,941
Cost
105,341
7,088
112,429
$
$
$
$
Accumulated
depreciation
100,279
6,348
106,627
Accumulated
depreciation
96,995
6,165
103,160
$
$
$
$
Net book
Value
5,574
740
6,314
Net book
Value
8,346
923
9,269
$
$
$
$
Depreciation expense was $3,467 (2014 - $3,470) for the year ended December 31, 2015.
5. Other assets:
During the year ended December 31, 2012, the Company commenced development of a social
bingo game, Trophy Bingo. During the year ended December 31, 2014, the Company soft launched
Trophy Bingo. The Company ceased to capitalize the development costs and commenced the
amortization of the capitalized development costs over a period of three years.
December 31, 2015
Trophy Bingo capitalized
development expenses
Capitalized
Expenses
Accumulated
amortization
Net book
Value
$
1,446,038
$
964,025
$
482,013
Page 36
SHOAL GAMES LTD. and subsidiaries
Notes to Consolidated Financial Statements
Years ended December 31, 2015 and 2014
5. Other assets: (Continued)
December 31, 2014
Trophy Bingo capitalized
development expenses
Capitalized
Expenses
Accumulated
amortization
Net book
Value
$
1,446,038
$
482,013
$
964,025
During the year ended December 31, 2015, the Company expensed $1,230,216 (December 31,
2014 - $1,181,382) in development costs.
6. Discontinued operations
Effective December 31, 2014, the Company sold the www.bingo.com domain name to Unibet
Group plc. for cash consideration of $2,000,000 and redemption of the 15,000,000 common
shares of the Company, which were held by Unibet Group plc, at a price of $0.40 per share. The
15,000,000 common shares held by Unibet have been returned to the Company’s treasury and
were cancelled.
The Company recorded the following gain from the sale of domain name.
Sale of domain name
Domain name rights and intangible assets held for sale
Commission on sale
Gain from the sale of the domain name
$
$
Gain from sale of
domain name
8,000,000
(1,257,241)
(65,000)
6,677,759
In addition, the Company disposed its cash bingo business to Unibet Group plc. The Company
recognized the gain on the sale of the cash bingo business of $16,305 during the year ended
December 31, 2015.
The effect of the discontinued operations were as follows:
Cash flows from operating activities:
Discontinued operations
Cash flows from investing activities:
Proceeds on disposal of domain name, net of
transaction costs
Non-cash financing activity
Non-cash investing activity – acquisition and
redemption of 15,000,000 common shares on the
disposal of the domain name rights through
common stock and deficit
2015
2014
$
16,305 $
(201,223)
-
-
1,935,000
6,000,000
$
16,305 $
7,733,777
Page 37
SHOAL GAMES LTD. and subsidiaries
Notes to Consolidated Financial Statements
Years ended December 31, 2015 and 2014
7. Stockholders’ equity:
The holders of common stock are entitled to one vote for each share held. There are no
restrictions that limit the Company’s ability to pay dividends on its common stock. The
Company has not declared any dividends since incorporation. The Company’s common stock
has no par value per common stock.
(a) Common stock issuances:
During the year ended December 31, 2015, the holders of 515,000 stock options exercised
their options for 515,000 shares for $77,250 at an exercise price of $0.15 per share.
During the year ended December 31, 2014, the Company repurchased 15,000,000 shares
previously issued to Unibet Group Inc. at $0.40 per share. (Note 9) These shares were
originally issued at $0.15 per share raising $2,250,000. Effective December 31, 2014, the
Company reduced stockholders equity by $2,250,000 and $3,750,000 reduced opening
deficit.
During the year ended December 31, 2014, the Company completed two separate private
placements of a combined 1,750,000 common shares at $0.40 per share. Total proceeds of
both offerings was $700,000.
During the year ended December 31, 2014, a holder of stock options exercised their options
for 55,000 shares for $9,350 at an exercise price of $0.17 per share.
During the year ended December 31, 2014, the Company completed a private placement of
1,000,000 common shares at $0.70 per share. Total proceeds of the offering was $700,000.
(b) Stock option plans:
(i) 1999 stock option plan:
The Company has reserved a total of 1,895,000 common shares for issuance under its 1999
stock option plan. The plan provides for the granting of non-qualified stock options to
directors, officers, eligible employees and contractors of the Company. The Board of
Directors determines the terms of the options granted, including the number of options
granted, the exercise price and their vesting schedule.
As at December 31, 2015, there were a total of nil stock options (2014 - nil) outstanding.
During the year ended December 31, 2015, there were nil options exercised (2014 - nil) and
nil options expired unexercised (2014 – nil).
(ii) 2001 stock option plan:
During the year ended December 31, 2001, the Company's Board of Directors adopted the
2001 stock option plan. The Company has reserved a total of 5,424,726 common shares for
issuance under the 2001 stock option plan. The plan provides for the granting of incentive
and non-qualified stock options to directors, officers, eligible employees and contractors of
the Company. The Board of Directors determines the terms of the options granted,
including the number of options granted, the exercise price and their vesting schedule.
Page 38
SHOAL GAMES LTD. and subsidiaries
Notes to Consolidated Financial Statements
Years ended December 31, 2015 and 2014
7. Stockholders’ equity: (Continued)
(b) Stock option plans: (Continued)
As at December 31, 2015, there were a total of 1,989,700 stock options (2014 - 1,989,700
stock options) issued, of which 1,989,700 (2014 - 1,989,700) had been exercised as at
December 31, 2015. During the year ended December 31, 2015, nil options were exercised
(2014 - 55,000) and nil (2014 - 550,000) stock options expired unexercised. Therefore as at
December 31, 2015, there were nil (2014 - nil) stock options outstanding.
During the year ended December 31, 2012, the expiry date on 75,000 options with an
expiry date of February 28, 2012 and an exercise price of $0.27 per share, was extended for
2 years. During the year ended December 31, 2014, these options expired unexercised.
(iii) 2005 stock option plan:
During the year ended December 31, 2005, the Company's Board of Directors adopted the
2005 stock option plan, which was approved by the shareholders at the Annual General
meeting. The Company has reserved a total of 2,000,000 common shares for issuance under
the 2005 stock option plan. The Plan is intended to provide incentive to employees,
directors, advisors and consultants of the Company to encourage proprietary interest in the
Company, to encourage such employees to remain in the employ of the Company or such
directors, advisors and consultants to remain in the service of the Company, and to attract
new employees, directors, advisors and consultants with outstanding qualifications. The
Board of Directors determines the terms of the options granted, including the number of
options granted, the exercise price and their vesting schedule.
As at December 31, 2015, there were a total of nil (2014 - 520,000) stock options
outstanding at exercise prices of $0.15 per share. During the year ended December 31,
2015, 515,000 (2014 – nil) stock options were exercised at exercise prices of $0.15 per
share raising $77,250. During the year ended December 31, 2015, 5,000 (2014 - 285,000)
stock options expired unexercised.
During the year ended December 31, 2012, the expiry date on 285,000 options with an
expiry date of February 28, 2012 and an exercise price of $0.27 per share, was extended for
a further 2 years. During the year ended December 31, 2014, these options expired
unexercised.
Page 39
SHOAL GAMES LTD. and subsidiaries
Notes to Consolidated Financial Statements
Years ended December 31, 2015 and 2014
7.
Stockholders’ equity: (Continued)
(b) Stock option plans: (Continued)
A summary of stock option activity for the stock option plans for the years ended December
31, 2015 and 2014 are as follows:
Outstanding, December 31, 2013
Granted
Exercised
Expired
Number of
options
1,410,000
-
(55,000)
(835,000)
$
Outstanding, December 31, 2014
520,000
$
Granted
Exercised
Expired
-
(515,000)
(5,000)
Outstanding, December 31, 2015
-
$
Weighted average
exercise price
0.19
-
0.17
0.21
0.15
-
0.15
0.15
-
The aggregate intrinsic value for options as of December 31, 2015 was $nil (2014 -
$286,000).
8. Commitments:
The Company leases office facilities in Vancouver, British Columbia, Canada, and The Valley,
Anguilla, British West Indies. These office facilities are leased under operating lease
agreements. The Canadian operating lease expires on April 30, 2017. The Anguillan operating
lease expired on April 1, 2011 but unless 3 month’s notice is given it automatically renews for a
future 3 months until notice is given.
Minimum lease payments under these operating leases are approximately as follows:
2016
2017
$
15,343
4,864
The Company paid rent expense totaling $22,347 for the year ended December 31, 2015 (2014
- $26,052).
The Company has a management consulting agreement with T.M. Williams (Row), Inc., an
Anguilla incorporated company, and Mr. T. M. Williams dated August 20, 2001, (the "T. M.
Williams Agreement"), amended February 28, 2002, in connection with the provision of
services to the Company by Mr. T. M. Williams.
The agreement was amended during the year ended December 31, 2010 to include a
consultancy payment of $11,666 per month payable in arrears. This contract is for the
provision of services by Mr. T. M. Williams as Executive Chairman of the Company. During
the year ended December 31, 2014, the agreement was amended to provide for a consultancy
payment equal to the sum of 6.5% of the total monthly Gross Win of the cash bingo business
Page 40
SHOAL GAMES LTD. and subsidiaries
Notes to Consolidated Financial Statements
Years ended December 31, 2015 and 2014
8. Commitments: (Continued)
and 2.5% of the monthly social bingo business with a minimum of $11,000 and a maximum of
$25,000 per month.
During the year ended December 31, 2014, the Company entered into an agreement with
Jayska Consulting Ltd. and Mr. J. M. Williams, Chief Executive Officer of the Company for
the provision of services of Mr. J. M. Williams as Chief Executive Officer of the Company.
The Consulting agreement provides for a consultancy payment of GBP£5,000 per month
payable in arrears. In addition, during the year ended December 31, 2014, the Company
entered into an agreement with LVA Media Inc. and Mr. J. M. Williams, for the provision of
services of Mr. J. M. Williams as Chief Executive Officer of the Company. The Consulting
agreement provides for a consultancy payment equaling the sum of 3% of the total monthly
Gross Win of the cash bingo business and 2.5% of the monthly social bingo business with a
minimum of $7,500 and a maximum of $25,000 per month.
9. Income taxes:
The Company is domiciled in the tax-free jurisdiction of Anguilla, British West Indies. The
computed benefit / expense differed from the amounts computed by applying the United States
of America federal income tax rate of 34 percent and various other rates for other jurisdictions
to the pretax income / losses from operations as a result of the following:
Computed “expected” tax benefit (expense)
Reduction in income taxes resulting from income
taxes in other tax jurisdictions
Other
Change in taxation rates in other jurisdictions
Change in exchange rates
Change in valuation allowance
2015
1,008,204
(1,007,419)
(84)
2,713
(3,885)
(9)
(480)
$
$
2014
(1,721,159)
1,721,775
(149)
2,786
(4,807)
706
(848)
$
$
The tax effects of temporary differences that give rise to significant portions of the deferred tax
assets and deferred tax liabilities at December 31, 2015 and 2014 are presented below:
Deferred tax assets:
Net operating loss carry forwards
Valuation Allowance
2015
17,898
(17,898)
-
$
$
$
$
2014
17,907
(17,907)
-
The valuation allowance for deferred tax assets as of December 31, 2015 and 2014, was
$17,898 and $17,907, respectively. The net change in the total valuation allowance was a
increase of $9 for the year ended December 31, 2015, and an increase of $706 for the year
ended December 31, 2014.
In assessing the realizability of deferred tax assets, management considers whether it is more
likely than not that some portion or all of the deferred tax assets will not be realized. The
Page 41
SHOAL GAMES LTD. and subsidiaries
Notes to Consolidated Financial Statements
Years ended December 31, 2015 and 2014
9. Income taxes: (Continued)
ultimate realization of deferred tax assets is dependent upon the generation of future taxable
income during the periods in which those differences become deductible.
Management considers the scheduled reversal of deferred tax liabilities, projected future taxable
income, and tax planning strategies in assessing the realizability of deferred tax assets.
10. Related party transactions:
The Company has a liability of $2,391 (2014 - $3,937) to a company owned by a current
director and officer of the Company for payment of services rendered of $132,000 (2014 -
$174,789) by the current director and officer of the Company.
The Company has a liability of $6,507 (2014 - $3,580) to a current director and officer of the
Company for expenses incurred.
The Company has a liability of $14,804 (2014 - $23,300) to a company owned by a current
director and officer of the Company for payment of services rendered of $91,734 (2014 -
$90,014) by the current director and officer of the Company.
The Company has a liability of $nil (2014 - $nil) to a company owned by a current director and
officer of the Company for payment of services rendered of $90,000 (2014 - $96,736) by the
current director and officer of the Company.
The Company has a liability of $831 (2014 - $3,313) to a company owned by a current director
of the Company for payment of services rendered of $3,948 (2014 - $11,163) by the current
director of the Company.
The Company has a liability to Bingo, Inc. for rental of the UK office of $nil (2014 - $nil), for
rental expense for the year ended December 31, 2015 of $nil (2014 - $1,045).
The Company has a liability of $6,500 (2014 - $10,000), to independent directors of the
Company for payment of services rendered. During the year ended December 31, 2015, the
Company paid $9,500 (2014 - $12,000) to the independent directors in director fees.
The Company has a liability of $1,533 (2014 - $4,538), to an officer of the Company for
payment of services rendered and expenses incurred of $62,719 (2014 - $71,601) by the officer
of the Company.
The related party transactions are in the normal course of operations and were measured at the
exchange amount, which is the amount of consideration established and agreed to by the related
party.
11. Segmented information:
The Company operates in two reportable business segments, firstly the sale of in-app purchases
on Trophy Bingo and secondly the business of marketing games and entertainment based on the
game of bingo through its Internet portal, bingo.com, supported mainly by the revenue
generated from the deposits received for the games for money and selling advertising on the
Page 42
SHOAL GAMES LTD. and subsidiaries
Notes to Consolidated Financial Statements
Years ended December 31, 2015 and 2014
11. Segmented information: (Continued)
website. The revenue for the year ended December 31, 2015 and 2014, has been derived
primarily from the revenue generated from the deposits received for the games for money.
The Company had the following revenue by geographical region.
2015
2014
Revenue From Continuing Operations
Advertising revenue
Nordics
Other
Total advertising revenue
Trophy Bingo Revenue
Western Europe
Central, Eastern and Southern Europe
Nordics
North America
Other
Total gaming revenue
Total revenue from continuing operations
Western Europe
Central, Eastern and Southern Europe
Nordics
North America
Other
Total revenue
Gaming revenue from discontinued operations
Western Europe
Central, Eastern and Southern Europe
Nordics
Other
Total gaming revenue from discontinued
operations
Equipment
The Company’s equipment is located as follows:
Net Book Value
Anguilla
Canada
United Kingdom
United States of America
$
$
$
$
$
$
$
$
-
12,196
12,196
23,589
55
468
70,453
4,849
99,414
23,589
55
468
70,453
17,045
111,610
-
-
-
-
-
$
$
$
$
$
$
$
391
22,264
22,655
1,165
10
348
6,948
1,344
9,815
1,165
10
739
6,948
23,608
32,470
144,071
10,826
1,518,088
11,062
$
1,684,047
2015
2014
$
$
1,410
2,436
1,834
634
6,314
$
$
2,115
3,308
2,824
1,022
9,269
Page 43
SHOAL GAMES LTD. and subsidiaries
Notes to Consolidated Financial Statements
Years ended December 31, 2015 and 2014
12. Concentrations:
Major customers
During the year ended December 31, 2015 and 2014, the Company sold in-app purchases on its
social bingo site, Trophy Bingo. There was no single player who had purchased more than
10% of the Trophy Bingo revenue. The Company is reliant on the Google App, iOS App and
Amazon App Stores to provide a platform for Trophy Bingo to be played thereon.
During the year ended December 31, 2015 and 2014, the Company offered limited advertising.
The Company is reliant on one sales customer who provides the advertising revenue.
For the year ended December 31, 2014, there was no single player on the gaming site who had
wagered more than 10% of the total gaming revenue. The Company was reliant on Unibet to
provide contracted services pursuant to its Partner Program. These services include the supply
and operation of the games (i.e. Bingo and Slots); the development and maintenance of the
website, customer support to our players playing on our website www.bingo.com, processing
all deposits and collection of those funds and processing all withdrawal requests. The
Company has a receivable from Unibet of $nil as at December 31, 2015 (December 31, 2014 -
$112,552).
13. Concentrations of credit risk:
Financial instruments that potentially subject the Company to concentrations of credit risk
consist primarily of cash and accounts receivable. The Company places its cash with high
quality financial institutions and limits the amount of credit exposure with any one institution.
The Company currently maintains a substantial portion of its day-to-day operating cash
balances at financial institutions. At December 31, 2015, the Company had total cash balances
of $570,086 (2014 - $2,876,386) at financial institutions, where $303,983 (2014 - $2,526,185)
is in excess of federally insured limits.
The Company has concentrations of credit risk with respect to accounts receivable, the majority
of its accounts receivable are concentrated geographically in the United States amongst a small
number of customers.
As of December 31, 2015, the Company had three customers, totaling $40,818 who accounted
for greater than 10% of the total accounts receivable. As of December 31, 2014, the Company
had one customer, totaling $112,552 who accounted for greater than 10% of the total accounts
receivable.
The Company controls credit risk through monitoring procedures and receiving prepayments of
cash for services rendered. The Company performs credit evaluations of its customers but
generally does not require collateral to secure accounts receivable.
Page 44
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE.
On February 4, 2010, we engaged Davidson & Company LLP, as its independent registered
public accounting firm, to audit our financial statements. The decision to engage Davidson &
Company LLP was approved by our Board of Directors at a Board meeting called for such
purpose.
There have not been any changes in accountants for the years ended December 31, 2015 and
2014.
ITEM 9A. CONTROLS AND PROCEDURES
(a)
Management’s responsibility
Our management acknowledges its responsibility for establishing and maintaining adequate
internal control over financial reporting of the Company.
(b)
Evaluation of disclosure controls and procedures.
Our management, including the Chief Executive Officer and the Chief Financial Officer,
evaluated the disclosure controls and procedures of the Company within 90 days prior to the date
of this report, and found them to be operating efficiently and effectively to ensure that
information required to be disclosed by us under the general rules and regulations promulgated
under the Securities Exchange Act of 1934, is recorded, processed, summarized and reported,
within the time periods specified by rules and regulations of the SEC.
These disclosure controls and procedures include, without limitation, controls and procedures
designed to ensure that information required to be disclosed by us is accumulated and
communicated to our management, including our principal executive officer and principal
financial officer as appropriate to allow timely decisions regarding required disclosure. However
our management recognizes that any controls and procedures, no matter how well designed and
operated, can provide only reasonable assurance of achieving the desired control objectives, and
our management necessarily is required to apply its judgment in evaluating the cost-benefit
relationship of possible controls and procedures.
Our management is responsible for establishing and maintaining adequate internal control over
financial reporting. Our internal control system was designed to provide reasonable assurance to
the Company’s management and board of directors regarding the preparation and fair
presentation of published financial statements. All internal control systems, no matter how well
designed, have inherent limitations. Therefore, even those systems determined to be effective can
provide only reasonable assurance with respect to financial statement preparation and
presentation. Because of its inherent limitations, internal control over financial reporting may not
prevent or detect misstatements. Projections of any evaluation of effectiveness to future periods
are subject to the risk that controls may become inadequate because of changes in conditions, or
that the degree of compliance with the policies or procedures may deteriorate.
Our management evaluated of the effectiveness of the Company’s internal control over financial
reporting as defined in Exchange Act Rule 13a-15(f), based on the framework set forth in the
Internal Control—Integrated Framework (1992) issued by the by the Committee of Sponsoring
Organizations of the Treadway Commission (“COSO”). Based on our evaluation, we believe that,
as of December 31, 2015, the Company’s internal control over financial reporting is effective
under the COSO framework.
Page 45
(c)
Changes in internal controls.
There were no significant changes in our internal controls or other factors that could significantly
affect our internal controls during the year ended December 31, 2015, and to the date of filing this
annual report.
ITEM 9B - OTHER INFORMATION
None
Page 46
PART III
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS, AND CORPORATE
GOVERNANCE
DIRECTORS AND EXECUTIVE OFFICERS
Our directors and executive officers as at December 31, 2015, are as follows:
Age Position
Name
T. M. Williams 75
J. M. Williams
40
C. M. Devereux 52
79
G. Whitton
F. Curtis
51
H. W. Bromley 46
X* - Chairman of Committee
Executive Chairman
Chief Executive Officer
Director
Non Executive Director
Non Executive Director
Chief Financial Officer
Audit
Committee
X
X
X*
X
Governance
Committee
Compensation
Committee
X
X*
X
X
X
X*
T. M. Williams has served as President, Chief Executive Officer and Chairman from August 20,
2001 until June 16, 2011. Since June 16, 2011, Mr. Williams has served as the Executive
Chairman. Since 1984, Mr. Williams has served as a principal of T.M. Williams (ROW), Inc., a
private consulting firm, and from 1993 until 2008, was Adjunct Professor, Faculty of Commerce
and Business Administration at the University of British Columbia. From 1988 to 1991, he was
President and Chief Executive Officer of Distinctive Software, Inc. in Vancouver, BC, and, upon
the acquisition of that company by Electronic Arts Inc., North America's largest developer of
entertainment software, he became President and Chief Executive Officer of Electronic Arts
(Canada) Inc., where he continued until 1993. From 1995 to 2012, Mr. Williams was a director of
YM Biosciences, Inc., a biotechnology company, until its acquisition by Gilead Sciences, Inc. In
addition, he is a director of several other private corporations.
Mr. J. M. Williams has served as Vice President, Business Development and Marketing Director
from September 2001 until June 16, 2011. Mr. J.M. Williams has been a director since July 26,
2007. Since June 16, 2011, Mr. J. M. Williams has served as the President and Chief Executive
Officer. Prior to his employment with Shoal Games Ltd., he was a Business Analyst with Blue
Zone Inc. (a technology company) and RBC Dominion Securities. Mr. J. M. Williams has a
bachelor of Commerce degree from the University of Victoria and a Masters of Business
Administration degree, specializing in strategic marketing, from the University of Warwick. Mr.
J. M. Williams is the son of Mr. T. M. Williams, the Company’s Executive Chairman.
Mr. C. M. Devereux has served as Vice-President, Corporate Affairs from October 2001 until
March 31, 2011. Since July 26, 2007, Mr. Devereux has served as a director. Since July 2012,
Mr. Devereux has served as the Chief Strategy Officer for Roadhouse Interactive Limited, an
online games development company. From April 2011 to April 2012, Mr. Devereux was the
Chief Executive Officer of Greenscape Capital Group Inc., a publicly listed company specializing
in providing strategic capital and business advisory services to companies in the environmental
space. From May 2000 to September 2001, he was Vice-President, Corporate Affairs at Blue
Zone Inc., a technology company. From 1996 to 2000, he was President of Mill Reef Holdings, a
consultancy company. From 1992 to 1997, he practiced corporate / commercial law in private
practice. Mr. Devereux has a law degree from Osgoode Hall, Toronto, Canada.
Mr. G. Whitton is now retired, has served as a director since June 10, 2009. He was Chairman
and CEO of International Verifact Inc. (“IVI”) from 1987 to 2000 prior to its merger with
INGENICO of France. IVI was a publicly traded Canadian company which was a major supplier
Page 47
of point of sale terminals and related equipment for the banking, retail, and health care industries
in Canada and the USA. From 1979 to 1987 Mr. Whitton was the owner, President and Chairman
of Howarth & Smith Ltd., a large typography, printing and data management company which he
sold in 1987. From 1985 to 1987 he was also the President and CEO of Canadian
Telecommunications Group which was purchased by British Telecom in 1987. From 1973 to
1979 Mr. Whitton held senior operating positions with Canada Permanent Trust and CIBC. From
1962 to 1973 he was with IBM Canada holding various positions in sales, marketing and data
center operations. Mr. Whitton has a Bachelor of Arts degree from the Scottish College of
Commerce in 1960.
Ms F. Curtis has served as a director since June 10, 2009. She has served as Compliance Officer
and General Corporate Secretary for Counsel Limited, an Anguillian financial services
corporation, since 2006. Ms. Curtis has been working in the financial services industry since
1990. She started at the brokerage firm, Burns Fry, in Toronto (now Nesbitt Burns, Bank of
Montreal). She completed her Canadian Securities Course and became a licensed Securities
Broker in 1992. She was educated in England, and attended the University of Toronto, Canada for
her undergraduate degree. Ms. Curtis's MBA in Finance & International Affairs was granted by
the Rotman School of Business, University of Toronto.
Mr. H. W. Bromley has served as our Chief Financial Officer since July 2002. Mr. Bromley is
also the Chief Financial Officer for Roadhouse Interactive Limited (an online games development
company). From 2000 to 2001, Mr. Bromley was a Director and the Group Financial Officer for
Agroceres & Co. Ltd. From 1995 - 1999, he was an employee of Ernst & Young working in
South Africa and in the United States of America. Mr. Bromley has in addition worked for
CitiBank, Unilever PLC, Gerrard and CellStop Sytems Inc. Mr. Bromley is a Chartered
Accountant.
COMPOSITION OF OUR BOARD OF DIRECTORS
We currently have five directors. All directors currently hold office until the next annual meeting
of stockholders or until their successors have been elected and qualified. Our officers are
appointed annually by the Board of Directors and hold office until their successors are appointed
and qualified. Pursuant to the Company's by-laws, the number of directors shall be increased or
decreased from time-to-time by resolution of the Board of Directors or the shareholders. Mr. J.
M. Williams is the son of Mr. T. M. Williams. There are no other family relationships between
any of the officers and directors of the Company.
COMMITTEES OF OUR BOARD OF DIRECTORS
We currently have three committees of our Board of Directors.
- Audit Committee - This committee will review the financial statements of the Company
and propose to the board to approve the financial statements. The Committee meets
quarterly to review and approve the quarterly financial statements and to discuss the
affairs of the company with the auditors.
- Governance Committee - This committee reviews the ethics policy of the Company and
ensures compliance. It will make recommendations to the board for improvement in
Corporate Governance. In addition it will be this committee to whom a whistle blower
will report.
- Compensation Committee - This committee will propose the appointment and
remuneration of the Chief Executive Officer including salary, stock options, and bonuses.
Page 48
BOARD OF DIRECTORS MEETINGS
Our Board of Directors met, in person or by phone, five times during the last fiscal year and it
regularly approves all material actions required by consent resolutions.
CODE OF ETHICS
On December 21, 2006, the Board of Directors of Shoal Games Ltd. (the "Board") adopted a new
Code of Business Conduct and Ethics (the "Code"), which applies to the Company's directors,
officers and employees. The Code was adopted to further strengthen the Company's internal
compliance program. The Code addresses among other things, honesty and integrity, fair dealing,
conflicts of interest, compliance with laws, regulations and policies, including disclosure
requirements under the federal securities laws, and administration of the code. The code is
the Company's website at http://investor.shoalgames.com/ under Corporate
available at
Governance. A copy of our Code of Ethics is available upon request at no charge to any
shareholder.
DIRECTOR COMPENSATION
The Non Executive Directors receive a cash compensation for their services as members of the
Board of Directors based on a compensation per meeting. During the year ended December 31,
2015, the Non Executive Directors collectively received compensation of $9,500 (Fiscal 2014 -
$12,000). The Executive directors currently do not receive cash compensation for their services
as members of the Board of Directors. In addition, both the Non Executive and the Executive
Directors are reimbursed for expenses in connection with attendance at Board of Directors
meetings and specific business meetings. Directors are eligible to participate in our stock option
plans. Option grants to directors are at the discretion of the Board of Directors acting upon the
recommendation of the Compensation committee.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires our directors and executive
officers, and persons who own more than ten percent of a registered class of the Company's
equity securities, to file with the Securities and Exchange Commission (the “SEC”) initial reports
of ownership and reports of changes in ownership of common stock and other equity securities of
the Company. Officers, directors and greater than ten percent stockholders are required by SEC
regulation to furnish us with copies of all Section 16(a) forms they file.
Our officers, directors and greater than ten percent beneficial owners filed in a timely manner in
accordance with Section 16(a) filing requirements.
Page 49
ITEM 11. EXECUTIVE COMPENSATION
The following table describes the compensation we paid to our Chief Executive Officer and
directors (the “Named Executive Officer”).
Long-term
Compensation
Restricted
Stock
Awards
Securities
Underlying
Options /
SARs (#)
SUMMARY COMPENSATION TABLE
Annual Compensation
Name and
Principal Position
Year
Fees
$
Bonus
$
Other Annual
Compensation
$
T.M. Williams -
Executive
Chairman (1)
J. M. Williams
CEO (2)
H. W. Bromley
CFO (3)
2015
2014
2013
2015
2014
2013
2015
2014
2013
132,000
174,789
140,000
181,734
186,749
139,421
62,719
71,601
62,530
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
$
-
-
-
-
-
-
-
-
-
All Other
Compensation
$
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(1) All of the compensation paid to the Named Executive Officer is paid to T.M. Williams (Row), Ltd. for
the services of Mr. T. M. Williams. See additional discussion in Employment Arrangements section of
Item 11 of this report.
(2) All of the compensation paid to the Named Executive Officer is paid to LVA Media Inc. for the services
of Mr. J. M. Williams as CEO of the Company and Jayska Consulting Ltd for the marketing services of
Mr. J. M. Williams. See additional discussion in Employment Arrangements section of Item 11 of this
report.
(3) All of the compensation paid to the Named Executive Officer is paid to Bromley Accounting Services
Ltd. for the services of Mr. H. W. Bromley.
OPTION GRANTS IN THE LAST FISCAL YEAR
During the fiscal year ended December 31, 2015 and 2014, no stock options were granted.
During the year ended December 31, 2015, 515,000 (2014 – 55,000) options were exercised.
During the year ended December 31, 2015, 5,000 options with an exercise price of $0.15 expired
unexercised.
During the year ended December 31, 2014, 350,000 executive officer options with an exercise
price of $0.27 and 300,000 executive officer options with an exercise price of $0.17 expired
unexercised.
STOCK OPTION PLANS
Our 1999 Stock Option Plan has a total of 1,895,000 shares of our common stock reserved for
issuance upon exercises of options under the plan. As at December 31, 2015, there were nil
options outstanding. Options to purchase 1,637,000 shares remained available for future grant
under the 1999 Stock Option Plan.
Our 2001 Stock Option Plan has a total of 5,424,726 shares of our common stock reserved for
issuance upon exercises of options under the plan. As at December 31, 2015, there were a total of
1,989,700 stock options with exercise prices ranging from $0.05 to $0.30 per share issued, of
which 1,989,700 options have been exercised in total as at December 31, 2015. As at December
Page 50
31, 2015, there were a total nil options outstanding. Options to purchase 3,435,026 shares
remained available for future grant under the 2001 Stock Option Plan as at December 31, 2015.
During the year ended December 31, 2005, the Company's Board of Directors adopted the 2005
stock option plan. The plan was approved by the shareholders at the Annual general meeting held
during the year ended December 31, 2005. The Company has reserved a total of 2,000,000
common shares for issuance under the 2005 stock option plan. As at December 31, 2015, there
were a total of 521,250 stock options with exercise prices ranging from $0.15 to $0.60 per share
issued, of which 521,250 options have been exercised in total as at December 31, 2015. As at
December 31, 2015, there were a total of nil stock options outstanding. Options to purchase
1,478,750 shares remained available for future grant under the 2005 Stock Option Plan as at
December 31, 2015.
Our Board of Directors administers the 1999 Stock Option Plan, the 2001 Stock Option Plan and
the 2005 Stock Option Plan (collectively, the “Stock Option Plans”). Our Board is authorized to
construe and interpret the provisions of the Stock Option Plans, to select employees, directors and
consultants to whom options will be granted, to determine the terms and conditions of options
and, with the consent of the grantee, to amend the terms of any outstanding options.
The 1999 stock option plan may be granted to employees and to such other persons who are not
employees as determined by the 1999 stock option plan administrator (the “Administrator”). In
determining the number of shares of our Common Stock subject to each option granted under the
1999 stock option plan, consideration is given to the present and potential contribution by such
person to the success of the Company. The exercise price is determined by the Administrator,
provided that the exercise price for any covered employee (as that term is defined for the
purposes of Section 162(m) (3) of the Internal Revenue Code of 1986 as amended (the “Code”),
may not be less than the fair market value per share of the Common Stock at the date of grant by
the Administrator. Each option is for a term not in excess of ten years except in the case of the
death of an optionee, in which case the option is exercisable for a maximum of twelve months
thereafter, or in the case of an optionee ceasing to be a participant under the 1999 stock option
plan for any reason other than cause or death, in which case the option is exercisable for a
maximum of 30 days thereafter. The 1999 stock option plan does not provide for the granting of
financial assistance, whether by way of a loan, guarantee or otherwise, by us in connection with
any purchase of shares of Common Stock from the Company.
The 2001 stock option plan provides for the granting to our employees of incentive stock options
and the granting to our employees, directors and consultants of non-qualified stock options.
During the year ended December 31, 2005, the Company adopted the 2005 Stock Option Plan.
The plan provides for the granting of stock options to the employees, directors, advisors and
consultants of the Corporation to encourage proprietary interest in the Corporation, to encourage
such employees to remain in the employ of the Corporation or such directors, advisors and
consultants to remain in the service of the Corporation, and to attract new employees, directors,
advisors and consultants with outstanding qualifications.
Our Board determines the terms and provisions of each option granted under the Stock Option
Plans, including the exercise price, vesting schedule, repurchase provisions, rights of first refusal
and form of payment. In the case of incentive options, the exercise price cannot be less than
100% (or 110%, in the case of incentive options granted to any grantee who owns stock
representing more than 10% of the combined voting power of the Company or any of our parent
or subsidiary corporations) of the fair market value of our common stock on the date the option is
granted. The exercise price of non-qualified stock options shall not be less than 85% of the fair
market value of our common stock. The exercise price of options intended to qualify as
performance-based compensation for purposes of Code Section 162(m) shall not be less than
Page 51
100% of the fair market value of the stock. The aggregate fair market value of the common stock
with respect to any incentive stock options that are exercisable for the first time by an eligible
employee in any calendar year may not exceed $100,000.
The term of options under the Stock Option Plans will be determined by our Board; however, the
term of an incentive stock option may not be for more than ten years (or five years in the case of
incentive stock options granted to any grantee who owns stock representing more than 10% of the
combined voting power of the Company or any of our parent or subsidiary corporations). Where
the award agreement permits the exercise of an option for a period of time following the
recipient's termination of service with us, disability or death, that option will terminate to the
extent not exercised or purchased on the last day of the specified period or the last day of the
original term of the option, whichever occurs first.
If a third party acquires the Company through the purchase of all or substantially all of our assets,
a merger or other business combination, except as otherwise provided in an individual award
agreement, all unexercised options will terminate unless assumed by the successor corporation.
EMPLOYMENT ARRANGEMENTS
We entered into a management consulting agreement with T.M. Williams (Row), Inc., an
Anguilla incorporated company and Mr. Williams dated August 20, 2001, (the "Williams
Agreement"), amended February 28, 2002, in connection with the provision of services by Mr.
Williams as President and Chief Executive Officer of the Company. During the year ended
December 31, 2010, the agreement was amended to include a consultancy payment of US$11,666
per month payable in arrears for providing Mr. Williams services as Executive Chairman.
The term of the amended Williams Agreement is for a period of one year, unless terminated
sooner by any of the parties under the terms and conditions contained in the amended Williams
Agreement. If the amended Williams Agreement is not terminated by any of the parties, the term
may be renewed for a further one year period at the option of T.M. Williams (Row), Ltd., on
substantially the same terms and conditions, by giving three months notice in writing to the
Company. The agreement was renewed for a further one year period on August 1, 2013. This
contract is for the provision of services by Mr. Williams as Executive Chairman.
During the year ended December 31, 2010, the agreement was amended to include a consultancy
payment of $11,666 per month payable in arrears. This contract is for the provision of services by
Mr. T. M. Williams as Executive Chairman of the Company. During the year ended December
31, 2013, the agreement was amended to provide for a consultancy payment equal to the sum of
6.5% of the total monthly Gross Win of the cash bingo business and 2.5% of the monthly social
bingo business with a minimum of $11,000 and a maximum of $25,000 per month.
During the year ended December 31, 2014, the Company entered into an agreement with Jayska
Consulting Ltd. and Mr. J. M. Williams, Chief Executive Officer of the Company for the
provision of services of Mr. J. M. Williams as Marketing director of the Company. The
Consulting agreement provides for a consultancy payment of GBP£5,000 per month payable in
arrears. In addition, during the year ended December 31, 2014, entered into an agreement with
LVA Media Inc. and Mr. J. M. Williams, for the provision of services of Mr. J. M. Williams as
Chief Executive Officer of Shoal Games Ltd. The Consulting agreement provides for a
consultancy payment equaling the sum of 3% of the total monthly Gross Win of the cash bingo
business and 2.5% of the monthly social bingo business with a minimum of $7,500 and a
maximum of $25,000 per month.
Page 52
During the year ended December 31, 2012, we entered into a management consulting agreement
with Bromley Accounting Services Limited for the services of Mr. H. W. Bromley as the Chief
Financial Officer.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS
PRINCIPAL STOCKHOLDERS
The following table sets forth certain information known to us with respect to beneficial
ownership of our common stock as of March 16, 2016, by:
-
-
-
-
each person known by us to beneficially own 5% or more of our outstanding common
stock;
each of our directors;
each of the Named Executive Officers; and
all of our directors and Named Executive Officers as a group.
In general, a person is deemed to be a “beneficial owner” of a security if that person has or shares
the power to vote or direct the voting of such security, or the power to dispose or direct the
disposition of such security. In computing the number of shares beneficially owned by a person
and the percentage ownership of that person, shares of common stock subject to options or
debentures held by that person that are currently exercisable or convertible or exercisable or
convertible within 60 days of March 16, 2016, are deemed outstanding.
Percentage of beneficial ownership is based upon 56,197,703 shares of common stock
outstanding at March 16, 2016. To our knowledge, except as set forth in the footnotes to this table
and subject to applicable community property laws, each person named in the table has sole
voting and investment power with respect to the shares set forth opposite such person’s name.
Page 53
Name and Address of Beneficial Owner
T. M. Williams
262 Smugglers Cove Road
Bowen Island, BC
V0N 1G0
Canada
J. M. Williams
Flat 16
Bridgewater square
London, EC2Y 8AG
United Kingdom
C. M. Devereux
10 – 3036 West 4th Avenue
Vancouver, BC,
V6K 1R4
Canada
G. Whitton
Little Harbour, Box 573
Anguilla, B.W. I.
F. Curtis
Ard Na Mara, Box 1127
Anguilla, B.W. I.
H. W. Bromley
3851 Edgemont Boulevard
North Vancouver BC, V7R 2P9
Canada
Number of Shares
Beneficially Owned
Percent of Class
18,580,551
(1)
33.06%
308,200
(2)
0.55%
154,500
(3)
0.28%
105,000
(4)
0.19%
50,000
(5)
0.09%
375,000
(6)
0.76%
All directors and Named Executive Officers
as a group (6 persons)
19,573,251
34.93%
Bingo, Inc.
P.O. Box 727, Landsome Road
The Valley,
Anguilla, B.W.I.
Pendinas Limited
Ballacarrick, Pooilvaaish Road
Castletown, IM9 4PJ
Isle of Man
3,596,831
(6)
6.40%
26,087,999
(7)
46.42%
(1) Includes 15,703,086 shares held directly by Mr. T. M. Williams. Mr. T. M. Williams is a potential beneficiary of
certain discretionary trusts that hold approximately 80% of the shares of a private holding company. If 80% of the
shares of common stock beneficially owned by the private holding company are included here, Mr. T. M.
William’s beneficial ownership increases by 2,857,465 shares, representing 33.06% of the Class.
(2) Includes, 308,200 shares held directly by Mr. J. M. Williams.
(3) Includes154,500 shares held directly by Mr. C. M. Devereux.
(4) Includes 105,000 shares held directly by Mr. G. Whitton.
(5) Includes 50,000 shares held directly by Ms. F. Curtis.
Page 54
(6) Includes, 375,000 shares held directly by Mr. H. W. Bromley.
(7) Includes 3,596,831 shares held directly by Bingo, Inc., a private holding company.
(8) Includes 26,087,999 shares held directly by Pendinas Ltd., a company wholly owned by Mr. G. R. Williams. Mr.
G. R. Williams is not related to Mr. T. M. Williams nor Mr. J. M. Williams.
Page 55
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS,
AND DIRECTOR INDEPENDENCE
The Company has a liability of $2,391 (2014 - $3,937) to a company owned by a current director
and officer of the Company for payment of services rendered of $132,000 (2014 - $174,789) by
the current director and officer of the Company.
The Company has a liability of $6,507 (2014 - $3,580) to a current director and officer of the
Company for expenses incurred.
The Company has a liability of $14,804 (2014 - $23,300) to a company owned by a current
director and officer of the Company for payment of services rendered of $91,734 (2014 -
$90,014) by the current director and officer of the Company.
The Company has a liability of $nil (2014 - $nil) to a company owned by a current director and
officer of the Company for payment of services rendered of $90,000 (2014 - $96,736) by the
current director and officer of the Company.
The Company has a liability of $831 (2014 - $3,313) to a company owned by a current director of
the Company for payment of services rendered of $3,948 (2014 - $11,163) by the current director
of the Company.
The Company has a liability to Bingo, Inc. for rental of the UK office of $nil (2014 - $nil), for
rental expense for the year ended December 31, 2015 of $nil (2014 - $1,045).
The Company has a liability of $6,500 (2014 - $10,000), to independent directors of the Company
for payment of services rendered. During the year ended December 31, 2015, the Company paid
$9,500 (2014 - $12,000) to the independent directors in director fees.
The Company has a liability of $1,533 (2014 - $4,538), to an officer of the Company for payment
of services rendered and expenses incurred of $62,719 (2014 - $71,601) by the officer of the
Company.
The related party transactions are in the normal course of operations and were measured at the
exchange amount, which is the amount of consideration established and agreed to by the related
party.
ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES
During the year ended December 31, 2015, the Company incurred fees of $51,000 (2014 -
$51,000) from the principal accountant during fiscal 2015 - Davidson & Company LLP, $51,000
of these fees related to audit fees (2014 - $51,000).
Our Audit Committee reviewed the audit and non-audit services rendered by Davidson &
Company LLP, during the periods set forth above and concluded that such services were
compatible with maintaining the auditors’ independence. All audit and non-audit services
performed by our independent accountants are pre-approved by our Audit Committee to assure
that such services do not impair the auditors’ independence from us.
ITEMS 15. EXHIBITS
PART IV
The exhibits required by Item 601 of Regulation S-K are listed in the accompanying Exhibit
Index at the end of this report. Each management contract or compensatory plan or arrangement
required to be filed as an exhibit to this Form 10-K has been identified.
Page 56
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
SHOAL GAMES LTD.
By:
/s/ J. M. Williams
J. M. Williams
Chief Executive Officer
Date: March 16, 2016
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed
below by the following persons on behalf of the registrant and in the capacities and on the dates
indicated.
Signature
Title
Date
By:
/s/ J. M. Williams
J. M. Williams
By:
/s/ H. W. Bromley
H. W. Bromley
Chief Executive Officer
March 16, 2016
Chief Financial Officer
(Principal Financial and
Principal Accounting Officer)
March 16, 2016
Page 57
EXHIBIT 31.1
CERTIFICATIONS
I, J. M. Williams, certify that:
1.
I have reviewed this annual report on Form 10-K of Shoal Games Ltd.;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact
or omit to state a material fact necessary to make the statements made, in light of the
circumstances under which such statements were made, not misleading with respect to the
period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in
this report, fairly present in all material respects the financial condition, results of operations
and cash flows of Shoal Games Ltd. as of, and for, the periods presented in this annual report;
4. Shoal Games Ltd.’s other certifying officer(s) and I are responsible for establishing and
maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e)
and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act
Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
(a) Designed such disclosure controls and procedures, or caused such disclosure controls
and procedures to be designed under our supervision, to ensure that material information
relating to Shoal Games Ltd., including its consolidated subsidiaries, is made known to
us by others within those entities, particularly during the period in which this report is
being prepared;
(b) Designed such internal control over financial reporting, or caused such internal control
over financial reporting to be designed under our supervision, to provide reasonable
assurance regarding the reliability of financial reporting and the preparation of financial
statements for external purposes in accordance with generally accepted accounting
principles;
(c) Evaluated the effectiveness of Shoal Games Ltd.’s disclosure controls and procedures
and presented in this report our conclusions about the effectiveness of the disclosure
controls and procedures, as of as of December 31, 2015, covered by this annual report
based on such evaluation; and
(d) Disclosed in this report any change Shoal Games Ltd.’s internal control over financial
reporting that occurred during Shoal Games Ltd.’s most recent fiscal quarter that has
materially affected, or is reasonably likely to materially affect, Shoal Games Ltd.’s
internal control over financial reporting; and
5. Shoal Games Ltd.’s other certifying officer(s) and I have disclosed, based on our most recent
evaluation of internal control over financial reporting, to Shoal Games Ltd.’s auditors and the
audit committee of Shoal Games Ltd.’s board of directors (or persons performing the
equivalent functions):
(a) All significant deficiencies and material weaknesses in the design or operation of
internal control over financial reporting which are reasonably likely to adversely affect
Shoal Games Ltd.’s ability to record, process, summarize and report financial
information; and
(b) Any fraud, whether or not material, that involves management or other employees who
have a significant role in the registrant's internal control over financial reporting.
Signed : /s/ J. M. Williams
J. M. Williams,
Chief Executive Officer,
(Principal Executive Officer)
Date : March 16, 2016
Page 58
I, H. W. Bromley, certify that:
1.
I have reviewed this annual report on Form 10-K of Shoal Games Ltd.;
EXHIBIT 31.2
CERTIFICATIONS
2. Based on my knowledge, this report does not contain any untrue statement of a material fact
or omit to state a material fact necessary to make the statements made, in light of the
circumstances under which such statements were made, not misleading with respect to the
period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in
this report, fairly present in all material respects the financial condition, results of operations
and cash flows of Shoal Games Ltd. as of, and for, the periods presented in this annual report;
4. Shoal Games Ltd.’s other certifying officer(s) and I are responsible for establishing and
maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e)
and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act
Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
(a) Designed such disclosure controls and procedures, or caused such disclosure controls
and procedures to be designed under our supervision, to ensure that material information
relating to Shoal Games Ltd., including its consolidated subsidiaries, is made known to
us by others within those entities, particularly during the period in which this report is
being prepared;
(b) Designed such internal control over financial reporting, or caused such internal control
over financial reporting to be designed under our supervision, to provide reasonable
assurance regarding the reliability of financial reporting and the preparation of financial
statements for external purposes in accordance with generally accepted accounting
principles;
(c) Evaluated the effectiveness of Shoal Games Ltd.’s disclosure controls and procedures
and presented in this report our conclusions about the effectiveness of the disclosure
controls and procedures, as of as of December 31, 2015, covered by this annual report
based on such evaluation; and
(d) Disclosed in this report any change Shoal Games Ltd.’s internal control over financial
reporting that occurred during Shoal Games Ltd.’s most recent fiscal quarter that has
materially affected, or is reasonably likely to materially affect, Shoal Games Ltd.’s
internal control over financial reporting; and
5. Shoal Games Ltd.’s other certifying officer(s) and I have disclosed, based on our most recent
evaluation of internal control over financial reporting, to Shoal Games Ltd.’s auditors and the
audit committee of Shoal Games Ltd.’s board of directors (or persons performing the
equivalent functions):
(a) All significant deficiencies and material weaknesses in the design or operation of
internal control over financial reporting which are reasonably likely to adversely affect
Shoal Games Ltd.’s ability to record, process, summarize and report financial
information; and
(b) Any fraud, whether or not material, that involves management or other employees who
have a significant role in the registrant's internal control over financial reporting.
Signed : /s/ H. W. Bromley
H.W. Bromley,
Chief Financial Officer
(Principal Accounting Officer)
Date : March 16, 2016
Page 59
EXHIBIT 32.1
CERTIFICATION PURSUANT TO
18 U.S.C. §1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Annual Report of Shoal Games Ltd. (the “Company”) on Form 10-K for
the period ended December 31, 2015, as filed with the Securities and Exchange Commission on
the date hereof (the “Report”), I, J. M. Williams, Chief Executive Officer of the Company,
certify, pursuant to 18 U.S.C. §1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley
Act of 2002, that:
a) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities
Exchange Act of 1934; and
b) The information contained in this Report fairly presents, in all material respects, the financial
condition and results of operations of the Company.
/s/ J. M. Williams
J. M. Williams
Chief Executive Officer
March 16, 2016
A signed original of this written statement required by Section 906 has been provided to Shoal
Games Ltd. and will be retained by the company and furnished to the Securities and Exchange
Commission or its staff upon request.
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EXHIBIT 32.2
CERTIFICATION PURSUANT TO
18 U.S.C. §1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Annual Report of Shoal Games Ltd. (the “Company”) on Form 10-K for
the period ended December 31, 2015, as filed with the Securities and Exchange Commission on
the date hereof (the “Report”), I, H. W. Bromley, Chief Financial Officer of the Company,
certify, pursuant to 18 U.S.C. §1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley
Act of 2002, that:
a. The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities
Exchange Act of 1934; and
b. The information contained in this Report fairly presents, in all material respects, the financial
condition and results of operations of the Company.
/s/ H. W. Bromley
H. W. Bromley
Chief Financial Officer
March 16, 2016
A signed original of this written statement required by Section 906 has been provided to Shoal
Games Ltd. and will be retained by the company and furnished to the Securities and Exchange
Commission or its staff upon request.
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EXHIBIT LIST
The following instruments are included as exhibits to this Report. Exhibits incorporated by
reference are so indicated.
Exhibit
Number
Description
4.4
4.5
10.2
10.24
10.29
10.32
10.33
10.36
10.37
10.38
10.39
10.40
10.41
31.1
31.2
32.1
32.2
Convertible Debenture between the Company and unrelated parties dated July 2, 2002. (b)
Common Stock Purchase Warrant between the Company and unrelated parties dated July 2,
2002. (b)
Asset Purchase Agreement by and between Bingo, Inc. and Progressive Lumber, Corp. dated
January 18, 1999. (a)
Amended Consulting Agreement dated February 28, 2002, between the Company, T.M.
Williams (Row), Ltd., and T.M. Williams. (c)
Amendment of Asset Purchase Agreement dated July 1, 2002. (d)
Code of Business Conduct and Ethics dated December 22, 2006. (e)
Amended Consulting Agreement dated June 16, 2010, between the Company, T.M. Williams
(Row), Ltd., and T.M. Williams. (f)
The Marketing Service Agreement between the Bingo.com, Ltd. wholly owned subsidiary,
Coral Reef Marketing Inc. and with Unibet International Limited dated March 19, 2010. (g)
Amended Consulting Agreement dated August 1, 2013, between the Company, T.M.
Williams (Row), Ltd., and T.M. Williams. (h)
Consulting Agreement dated January 1, 2014, between the Company, Jayska Consulting
Ltd., and J.M. Williams. (h)
Consulting Agreement dated January 1, 2014, between the Company, LVA Media Inc., and
J.M. Williams. (h)
Consulting Agreement dated October 1, 2013, between the Company, Devereux
Management Ltd., and C. M. Devereux. (h)
Consulting Agreement dated January 1, 2014, between the Company, Bromley Accounting
Services Limited, and H. W. Bromley. (h)
Certificate of Chief Executive Officer pursuant to the Securities Exchange Act Rules 13a-
15(e) and 15d -15(e) as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
dated March 16, 2016.
Certificate of Chief Financial Officer pursuant to the Securities Exchange Act Rules 13a-
15(e) and 15d -15(e) as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
dated March 16, 2016.
Certification from the Chief Executive Officer of Shoal Games Ltd. pursuant to 18 U.S.C.
Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 dated
March 16, 2016.
Certification from the Chief Financial Officer of Shoal Games Ltd. pursuant to 18 U.S.C.
Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 dated
March 16, 2016.
(a) Previously filed with the Registrant’s registration statement on Form 10 on June 9, 1999.
(b) Previously filed with the Company’s quarterly report on Form 10-Q for the period ended
September 30, 2002, on November 14, 2002.
(c) Previously filed with the Company’s quarterly report on Form 10-Q for the period ended June
30, 2002, on August 14, 2002.
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(d) Previously filed with the Company’s year end report on Form 10-K/A for the year ended
December 31, 2002, on May 8, 2003.
(e) Previously filed with the Company’s report on Form 8-K on December 26, 2006.
(f) Previously filed with the Company’s report on Form 8-K on June 17, 2010.
(g) Previously field with the Company’s report on Form 8-K/A on June 18, 2012.
(h) Previously filed with the Company’s report on Form 8-K on March 24, 2014.
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