1.

We have reviewed your response to our prior comments 1, 4 through 7, and note your conclusion that you operate in the business of Proprietary Casino Games rather than two separate reportable business segments. From your response we note that for internal purposes, you track revenues by (1) each of your proprietary casino games and (2) the amount of sale/reimbursement of products, and that from a cost perspective you internally track the costs of ancillary products and the assembled components of the Bonus Jackpot System. We further note that you do not internally track the costs associated with the revenue of each of your proprietary casino games due to the overly burdensome nature and subjective allocation of doing so. We note you continue to disclose “gross profit” in your interim financial statements included in the June 30, 2010 Quarterly Report on Form 10-Q; however, it appears the presentation of this profitability measure is inappropriate. For example, your gross profit amount appears to be based on the costs of the goods sold pertaining to the ancillary products you sell and the manufactured cost of the Bonus Jackpot System, whereas the majority your revenues are from recurring (royalty) license fees that do not have any associated allocated costs. Furthermore, as it appears that your vast amount of expenses classified as SG&A costs included (directly or indirectly) in generating your recurring license revenues that  represent a substantive amount of total revenues, the presentation of a gross profit measure does not appear appropriate or meaningful.

 

 

2.

As such, beginning with the September 30, 2010 Quarterly Report on Form 10-Q (the “September 2010 Form 10-Q” to be filed), we believe the costs of goods sold related to your tangible products should be included as a separate line item within operating expenses appropriately labeled as “Costs of Ancillary Products & Assembled Components” and that the measure gross profit should be deleted from the financial statements.

Response

Beginning with the September 30, 2010 Quarterly Report on Form 10Q, the Company will eliminate the “Cost of Goods” and “Gross Profit” line items from the Statements of Operations.  Furthermore the expenses previously classified under the “Cost of Goods” line item will now be labeled “Costs of Ancillary Products and Assembled Components” and will be a separate line item under operating expenses.  This line item will be in addition to the previously reported line items of “Selling, general and administrative” and “Research and development”.

3.

In addition, beginning with the September 2010 Form 10-Q, please expand your MD&A – “Company Overview and Plan of Operations” to also include the first and third paragraphs of your response to prior comment 1 relating to the function of the Bonus Jackpot System and how you track revenues and costs. We believe this disclosure will provide additional information to an investor as to how you gather financial data for external financial reporting.

 

4.	Please expand the last paragraph under this heading to disclose the amortizable life of the client installation base and intellectual property acquired in the T&P gaming acquisition.

Revenue Recognition, page F7

5.

We have reviewed your expanded disclosures in response to our prior comment numbers 8 and 13. We believe further disclosure is necessary in this footnote, such as the entire paragraph under MD&A – Sources of Revenue on page 6. In addition please include disclosure as to whether or not your table game products contain software that may be sold separately, and thus separately valued and recognized, and also whether you offer post-contract customer support for your products. In this regard, we reiterate a portion of our prior comment 8 as follows. “If your products include any software when leasing or selling or any of your revenue arrangements include multiple deliverables, your revenue recognition policy should also specifically address the accounting treatment for these elements. Please refer to the guidance in ASC Topic 605 on Revenue Recognition and advise and revise accordingly.” We believe the second paragraph of your response to our prior comment 13 may address this concern and thus should be disclosed in the September 30, 2010 Form 10-Q.

(1)	The entire paragraph under MD&A – Sources of Revenue that was included in the June 30, 2010 Form 10-Q on page 6.

(2)	The following verbiage:

 

Note 15 Cash Flow Disclosures, page F13

6.

Reference is made to the April 1, 2010 sales transaction of common stock and warrants. Disclose the fair value amount, if any, assigned to the warrants in this stock insurance transaction. Expand the disclosure in Note 18 to disclose the significant provisions of the certain obligations that will result in the issuance of the $90,000 of common stock.