Table of Contents
 
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
 
FORM 10-Q
 
(Mark one)
 
☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934	
 
FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2016
 
OR
 
☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934	
 
FOR THE TRANSITION PERIOD FROM             TO             
 
Commission File Number: 001 — 32622
 
EVERI HOLDINGS INC.
(Exact name of registrant as specified in its charter)
 
DELAWARE	 	20-0723270	
(State or other jurisdiction of	 	(I.R.S. Employer Identification No.)	
incorporation or organization)	 	 	
 	 	 	
7250 S. TENAYA WAY, SUITE 100	 	 	
LAS VEGAS, NEVADA	 	89113	
(Address of principal executive offices)	 	(Zip Code)	
 
Registrant’s telephone number, including area code:
(800) 833-7110
 
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Sections 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. Yes ☒ No ☐
 
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 pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ☒ No ☐
 
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 ☐	 	Accelerated filer ☒	
 	 	 	
Non-accelerated filer ☐	 	Smaller reporting company ☐	
 
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒
 
As of August 1, 2016, there were 66,046,772 shares of the registrant’s $0.001 par value per share common stock outstanding.

 
Table of Contents
 
TABLE OF CONTENTS 
 
 	 	Page	
 	 	 	
PART I: FINANCIAL INFORMATION  	 	
 	 	 	
Item 1:  	Financial Statements	
3 	
 	 	 	
 	Unaudited Condensed Consolidated Statements of Loss and Comprehensive Loss for the three and six months ended June 30, 2016 and 2015	
3 	
 	 	 	
 	Unaudited Condensed Consolidated Balance Sheets as of June 30, 2016 and December 31, 2015	
4 	
 	 	 	
 	Unaudited Condensed Consolidated Statements of Cash Flows for the six months ended June 30, 2016 and 2015	
5 	
 	 	 	
 	Notes to Unaudited Condensed Consolidated Financial Statements	
7 	
 	 	 	
Item 2:  	Management’s Discussion and Analysis of Financial Condition and Results of Operations	
33 	
 	 	 	
Item 3:  	Quantitative and Qualitative Disclosures about Market Risk	
46 	
 	 	 	
Item 4:  	Controls and Procedures	
46 	
 	 	 	
PART II: OTHER INFORMATION  	 	
 	 	 	
Item 1:  	Legal Proceedings	
47 	
 	 	 	
Item 1A:  	Risk Factors	
47 	
 	 	 	
Item 2:  	Unregistered Sales of Equity Securities and Use of Proceeds	
47 	
 	 	 	
Item 3:  	Defaults Upon Senior Securities	
47 	
 	 	 	
Item 4:  	Mine Safety Disclosures	
47 	
 	 	 	
Item 5:  	Other Information	
47 	
 	 	 	
Item 6:  	Exhibits	
48 	
 	 	 	
Signatures  	
50 	

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PART I: FINANCIAL  INFORMATION
 
Item 1. Financial Statement  s.
 
EVERI HOLDINGS INC. AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOL  IDATED STATEMENTS OF LOSS AND COMPREHENSIVE LOSS
(In thousands, except loss per share amounts)

 

 	 	Three Months Ended
June 30,	 	Six Months Ended
June 30,	 	
 	 	2016	    	2015	    	2016	    	2015	 	
Revenues	 	 	 	 	 	 	 	 	 	 	 	 	 	
Games	 	$	
54,264	 	$	
54,868	 	$	
102,442	 	$	
109,913	 	
Payments	 	 	
159,736	 	 	
151,496	 	 	
317,327	 	 	
303,924	 	
Total revenues	 	 	
214,000	 	 	
206,364	 	 	
419,769	 	 	
413,837	 	
Costs and expenses	 	 	 	 	 	 	 	 	 	 	 	 	 	
Games cost of revenue (exclusive of depreciation and amortization)	 	 	
12,968	 	 	
12,246	 	 	
21,404	 	 	
24,324	 	
Payments cost of revenue (exclusive of depreciation and amortization)	 	 	
123,498	 	 	
114,976	 	 	
246,155	 	 	
229,921	 	
Operating expenses	 	 	
30,733	 	 	
26,847	 	 	
60,738	 	 	
42,688	 	
Research and development	 	 	
4,671	 	 	
4,470	 	 	
10,040	 	 	
9,906	 	
Depreciation	 	 	
12,470	 	 	
10,717	 	 	
24,805	 	 	
21,094	 	
Amortization	 	 	
23,600	 	 	
20,772	 	 	
46,783	 	 	
41,427	 	
Total costs and expenses	 	 	
207,940	 	 	
190,028	 	 	
409,925	 	 	
369,360	 	
Operating income	 	 	
6,060	 	 	
16,336	 	 	
9,844	 	 	
44,477	 	
Other expenses	 	 	 	 	 	 	 	 	 	 	 	 	 	
Interest expense, net of interest income	 	 	
24,742	 	 	
24,958	 	 	
49,734	 	 	
50,613	 	
Loss on extinguishment of debt	 	 	 —	 	 	
12,977	 	 	 —	 	 	
12,977	 	
Total other expenses	 	 	
24,742	 	 	
37,935	 	 	
49,734	 	 	
63,590	 	
Loss before income tax	 	 	
(18,682)	 	 	
(21,599)	 	 	
(39,890)	 	 	
(19,113)	 	
Income tax benefit	 	 	
(7,886)	 	 	
(8,858)	 	 	
(15,942)	 	 	
(6,841)	 	
Net loss	 	 	
(10,796)	 	 	
(12,741)	 	 	
(23,948)	 	 	
(12,272)	 	
Foreign currency translation	 	 	
(435)	 	 	
811	 	 	
(920)	 	 	
(62)	 	
Comprehensive loss	 	$	
(11,231)	 	$	
(11,930)	 	$	
(24,868)	 	$	
(12,334)	 	
Loss per share	 	 	 	 	 	 	 	 	 	 	 	 	 	
Basic	 	$	
(0.16)	 	$	
(0.19)	 	$	
(0.36)	 	$	
(0.19)	 	
Diluted	 	$	
(0.16)	 	$	
(0.19)	 	$	
(0.36)	 	$	
(0.19)	 	
Weighted average common shares outstanding	 	 	 	 	 	 	 	 	 	 	 	 	 	
Basic	 	 	
66,041	 	 	
65,844	 	 	
66,038	 	 	
65,734	 	
Diluted	 	 	
66,041	 	 	
65,844	 	 	
66,038	 	 	
65,734	 	
 
See notes to unaudited condensed consolidated financial statements.

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EVERI HOLDINGS INC. AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEET  S
(In thousands, except par value amounts)

 	 	At June 30,	 	At December 31,	 	
 	 	2016	    	2015	 	
ASSETS	 	    	 	    	 	 	 	
Current assets	 	 	 	 	 	 	 	
Cash and cash equivalents	 	$	
85,104	 	$	
102,030	 	
Settlement receivables	 	 	
26,873	 	 	
44,933	 	
Trade receivables, net of allowances for doubtful accounts of $4.1 million and $3.9 million at June 30, 2016 and December 31, 2015, respectively	 	 	
48,349	 	 	
52,382	 	
Other receivables	 	 	
3,413	 	 	
4,928	 	
Inventory	 	 	
25,993	 	 	
28,738	 	
Prepaid expenses and other assets	 	 	
19,196	 	 	
20,772	 	
Total current assets	 	 	
208,928	 	 	
253,783	 	
Non-current assets	 	 	 	 	 	 	 	
Property, equipment and leased assets, net	 	 	
102,943	 	 	
106,308	 	
Goodwill	 	 	
789,845	 	 	
789,803	 	
Other intangible assets, net	 	 	
357,819	 	 	
382,462	 	
Other receivables	 	 	
2,097	 	 	
6,655	 	
Other assets	 	 	
8,728	 	 	
11,374	 	
Total non-current assets	 	 	
1,261,432	 	 	
1,296,602	 	
Total assets	 	$	
1,470,360	 	$	
1,550,385	 	
 	 	 	 	 	 	 	 	
LIABILITIES AND STOCKHOLDERS’ EQUITY	 	 	 	 	 	 	 	
Current liabilities	 	 	 	 	 	 	 	
Settlement liabilities	 	$	
101,462	 	$	
139,819	 	
Accounts payable and accrued expenses	 	 	
115,658	 	 	
101,512	 	
Current portion of long-term debt	 	 	
10,000	 	 	
10,000	 	
Total current liabilities	 	 	
227,120	 	 	
251,331	 	
Non-current liabilities	 	 	 	 	 	 	 	
Deferred tax liability	 	 	
10,860	 	 	
27,644	 	
Long-term debt, less current portion	 	 	
1,113,545	 	 	
1,129,899	 	
Other accrued expenses and liabilities	 	 	
3,528	 	 	
4,091	 	
Total non-current liabilities	 	 	
1,127,933	 	 	
1,161,634	 	
Total liabilities	 	 	
1,355,053	 	 	
1,412,965	 	
 	 	 	 	 	 	 	 	
Commitments and contingencies (Note 13)	 	 	 	 	 	 	 	
 	 	 	 	 	 	 	 	
Stockholders’ equity	 	 	 	 	 	 	 	
Common stock, $0.001 par value, 500,000 shares authorized and 90,898 and 90,877 shares issued at June 30, 2016 and December 31, 2015, respectively	 	 	
91	 	 	
91	 	
Convertible preferred stock, $0.001 par value, 50,000 shares authorized and 0 shares outstanding at June 30, 2016 and December 31, 2015, respectively	 	 	 —	 	 	 —	 	
Additional paid-in capital	 	 	
260,788	 	 	
258,020	 	
Retained earnings	 	 	
31,232	 	 	
55,180	 	
Accumulated other comprehensive (loss) income	 	 	
(602)	 	 	
318	 	
Treasury stock, at cost, 24,853 and 24,849 shares at June 30, 2016 and December 31, 2015, respectively	 	 	
(176,202)	 	 	
(176,189)	 	
Total stockholders’ equity	 	 	
115,307	 	 	
137,420	 	
Total liabilities and stockholders’ equity	 	$	
1,470,360	 	$	
1,550,385	 	
 
See notes to unaudited condensed consolidated financial statements.

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EVERI HOLDINGS INC. AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLO  W
(In thousands)

 	 	 	 	 	 	 	
 	Six Months Ended June 30,	 	
 	2016	    	2015	 	
Cash flows from operating activities	    	 	    	 	 	 	
Net loss	$	
(23,948)	 	$	
(12,272)	 	
Adjustments to reconcile net loss to cash provided by operating activities:	 	 	 	 	 	 	
Depreciation and amortization	 	
71,588	 	 	
62,521	 	
Amortization of financing costs	 	
3,349	 	 	
3,730	 	
Loss on sale or disposal of assets	 	
1,688	 	 	
374	 	
Accretion of contract rights	 	
4,339	 	 	
4,092	 	
Provision for bad debts	 	
4,955	 	 	
4,370	 	
Write-down of assets	 	
4,289	 	 	 —	 	
Reserve for obsolescence	 	
667	 	 	
124	 	
Loss on early extinguishment of debt	 	 —	 	 	
12,977	 	
Stock-based compensation	 	
2,768	 	 	
3,954	 	
Other non-cash items	 	
(38)	 	 	
(20)	 	
Changes in operating assets and liabilities:	 	 	 	 	 	 	
Settlement receivables	 	
18,030	 	 	
19,544	 	
Trade and other receivables	 	
1,846	 	 	
(75)	 	
Inventory	 	
1,502	 	 	
3,637	 	
Prepaid and other assets	 	
2,617	 	 	
(18,396)	 	
Deferred income taxes	 	
(16,784)	 	 	
(7,525)	 	
Settlement liabilities	 	
(38,500)	 	 	
22,240	 	
Accounts payable and accrued expenses	 	
18,044	 	 	
27,116	 	
 	 	 	 	 	 	 	
Net cash provided by operating activities	 	
56,412	 	 	
126,391	 	
 	 	 	 	 	 	 	
Cash flows from investing activities	 	 	 	 	 	 	
Capital expenditures	 	
(46,509)	 	 	
(29,660)	 	
Acquisitions, net of cash acquired	 	 —	 	 	
(2,257)	 	
Proceeds from sale of fixed assets	 	
4,608	 	 	
29	 	
Placement fee agreements	 	
(11,187)	 	 	
(1,255)	 	
Repayments under development agreements	 	 —	 	 	
2,392	 	
Changes in restricted cash and cash equivalents	 	
54	 	 	
60	 	
 	 	 	 	 	 	 	
Net cash used in investing activities	 	
(53,034)	 	 	
(30,691)	 	
 	 	 	 	 	 	 	
Cash flows from financing activities	 	 	 	 	 	 	
Repayments of credit facility	 	
(19,400)	 	 	
(5,000)	 	
Repayments of secured notes	 	 —	 	 	
(350,000)	 	
Proceeds from issuance of secured notes	 	 —	 	 	
335,000	 	
Debt issuance costs	 	
(480)	 	 	
(1,154)	 	
Proceeds from exercise of stock options	 	 —	 	 	
1,673	 	
Purchase of treasury stock	 	
(13)	 	 	
(40)	 	
 	 	 	 	 	 	 	
Net cash used in financing activities	 	
(19,893)	 	 	
(19,521)	 	
 	 	 	 	 	 	 	
Effect of exchange rates on cash	 	
(411)	 	 	
(257)	 	
 	 	 	 	 	 	 	
Cash and cash equivalents	 	 	 	 	 	 	
Net (decrease) increase for the period	 	
(16,926)	 	 	
75,922	 	
Balance, beginning of the period	 	
102,030	 	 	
89,095	 	
Balance, end of the period	$	
85,104	 	$	
165,017	 	
 
See notes to unaudited condensed consolidated financial statements.

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 	Six Months Ended June 30,	 	
 	2016	    	2015	 	
Supplemental cash disclosures	 	 	 	 	 	 	
Cash paid for interest	$	
23,603	 	$	
25,107	 	
Cash paid for income tax	$	
622	 	$	
1,280	 	
Cash refunded for income tax	$	
83	 	$	
7,464	 	
 	 	 	 	 	 	 	
Supplemental non-cash disclosures	 	 	 	 	 	 	
Accrued and unpaid capital expenditures	$	
2,457	 	$	
5,091	 	
Issuance of warrant	$	 —	 	$	
2,246	 	
Transfer of leased gaming equipment to inventory	$	
3,879	 	$	
2,886	 	
 
See notes to unaudited condensed consolidated financial statements.

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EVERI HOLDINGS INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS 
 
1. BUSINESS
 
Everi Holdings Inc. (formerly known as Global Cash Access Holdings, Inc.) (“Everi Holdings”, “Holdings” or “Everi”) is a holding company, the assets of which are the issued and outstanding shares of capital stock of each of Everi Games Holding Inc. (formerly known as Multimedia Games Holding Company, Inc.) (“Everi Games Holding”), which owns all of the issued and outstanding shares of capital stock of Everi Games Inc. (formerly known as Multimedia Games, Inc.) (“Everi Games” or “Games”) and Everi Payments Inc. (formerly known as Global Cash Access, Inc.) (“Everi Payments” or “Payments”). Unless otherwise indicated, the terms the “Company,” “we,” “us” and “our” refer to Holdings together with its consolidated subsidiaries.
 
Everi is dedicated to providing video and mechanical reel gaming content and technology solutions, integrated gaming payments solutions and compliance and efficiency software. Everi Games provides: (a) comprehensive content, electronic gaming units and systems for Native American and commercial casinos, including the award winning TournEvent® slot tournament solution; and (b) the central determinant system for the video lottery terminals installed at racetracks in the State of New York. Everi Payments provides: (a) access to cash at gaming facilities via Automated Teller Machine, or ATM, cash withdrawals, credit card cash access transactions, point of sale debit card transactions, and check verification and warranty services; (b) fully integrated gaming industry kiosks that provide cash access and related services; (c) products and services that improve credit decision making, automate cashier operations and enhance patron marketing activities for gaming establishments; (d) compliance, audit and data solutions; and (e) online payment processing solutions for gaming operators in states that offer intrastate, Internet-based gaming and lottery activities.
 
2. BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
 
Basis of Presentation
 
Our unaudited condensed consolidated financial statements included herein have been prepared by us pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”). Some of the information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles in the United States have been condensed or omitted pursuant to such rules and regulations, although we believe the disclosures are adequate to make the information presented not misleading. In the opinion of management, all adjustments (which include normal recurring adjustments) necessary for a fair presentation of results for the interim periods have been made. The results for the three and six months ended June 30, 2016 are not necessarily indicative of results to be expected for the full fiscal year. The condensed financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2015.
 
There have been no changes to our basis of presentation and significant accounting policies since the most recent filing of our Annual Report on Form 10-K for the fiscal year ended December 31, 2015.
 
Fair Values of Financial Instruments
 
The fair value of a financial instrument represents the amount at which the instrument could be exchanged in a current transaction between willing parties, other than in a forced or liquidation sale. Fair value estimates are made at a specific point in time based upon relevant market information about the financial instrument.
 
The carrying amount of cash and cash equivalents, settlement receivables, trade receivables, other receivables, settlement liabilities, accounts payable and accrued expenses approximates fair value due to the short-term maturities of these instruments. The fair value of our borrowings are estimated based on various inputs to determine a market price, such as: market demand and supply, size of tranche, maturity and similar instruments trading in more active markets.

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 	    	Level   of	    	 	 	    	Outstanding	 	
June 30, 2016	 	Hierarchy	 	Fair   Value	 	Balance	 	
Term loan	 	1	 	$	
430,599	 	$	
470,600	 	
Senior secured notes	 	3	 	$	
306,525	 	$	
335,000	 	
Senior unsecured notes	 	1	 	$	
283,500	 	$	
350,000	 	
 	 	 	 	 	 	 	 	 	 	
December 31, 2015	 	 	 	 	 	 	 	 	 	
Term loan	 	1	 	$	
445,900	 	$	
490,000	 	
Senior secured notes	 	3	 	$	
314,900	 	$	
335,000	 	
Senior unsecured notes	 	1	 	$	
297,500	 	$	
350,000	 	
 
The senior secured notes were fair valued using a Level 3 input as there was no market activity or observable inputs as of June 30, 2016. The fair value of the senior secured notes was derived using the same rate as the term loan given that both were treated similarly.
 
Reclassification of Prior Year Balances
 
Reclassifications were made to the prior-period financial statements to conform to the current period presentation.
 
Recent Accounting Guidance
 
Recently Adopted Accounting Guidance
 
In April 2015, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2015-03, which provides guidance to simplify the presentation of debt issuance costs.  These amendments require that debt issuance costs related to a recognized debt liability be presented in the balance sheet as a direct deduction from the carrying amount of that debt liability, consistent with debt discounts. The recognition and measurement guidance for debt issuance costs are not affected by the amendments in this ASU. The pronouncement is effective for annual periods beginning after December 15, 2015, and interim periods within those fiscal years, and early adoption is permitted for financial statements that have not been previously issued. This guidance was further clarified in ASU No. 2015-15, which addressed the treatment of debt issuance costs related to line-of credit arrangements. It noted that as ASU No. 2015-03 did not provide guidance on debt issuance costs related to line-of credit arrangements, the SEC would not object to an entity deferring and presenting these specific debt issuance costs as an asset and subsequently amortizing the deferred debt issuance costs ratably over the term of the line-of-credit arrangement, regardless of whether there are any outstanding borrowings on the line-of-credit arrangement. We adopted the guidance in ASU Nos. 2015-03 and 2015-15 retrospectively to reclassify all debt issuance costs not associated with line-of-credit arrangements from the non-current portion of other assets to contra-liabilities included in long-term debt on our Condensed Consolidated Balance Sheets and related notes during the current period.
 
In January 2015, the FASB issued ASU No. 2015-01, which eliminates the requirement that an entity separately classify, present and disclose extraordinary events and transactions. The pronouncement is effective for annual periods ending after December 15, 2015. A reporting entity also may apply the amendments retrospectively to all prior periods presented in the financial statements. Early adoption is permitted provided that the guidance is applied from the beginning of the fiscal year of adoption. We adopted this guidance during the current period.  There was no impact on our financial statements, as we do not have any extraordinary items.
 
In June 2014, the FASB issued ASU No. 2014-12, which 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. The standard is effective for annual reporting periods beginning after December 15, 2015, with early adoption permitted. We adopted this guidance during the current period. There was no impact on our financial statements.

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Recent Accounting Guidance Not Yet Adopted
 
In June 2016, the FASB issued ASU No. 2016-13, which provides updated guidance on credit losses for financial assets measured at amortized cost basis and available-for sale debt securities. The new standard is effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal. This guidance will be applied using a modified retrospective approach for the cumulative-effect adjustment to retained earnings as of the beginning of the first reporting period in which the guidance is effective and using a prospective approach for debt securities for which an other-than-temporary impairment had been recognized before the effective date. Early adoption is permitted for fiscal years beginning after December 15, 2018. We are currently evaluating the impact of adopting this guidance on our Consolidated Financial Statements and disclosures included within Notes to the Consolidated Financial Statements.
 
In March 2016, the FASB issued ASU No. 2016-09, which simplifies several aspects of the accounting for share-based payment transactions, including the accounting for income taxes, statutory tax withholding requirements and classification on the statement of cash flows. The new standard is effective for fiscal years beginning after December 15, 2016, including interim periods within those fiscal years. This guidance will be applied either prospectively, retrospectively or using a modified retrospective transition method, depending on the area covered in this update. Early adoption is permitted. We are currently evaluating the impact of adopting this guidance on our Consolidated Financial Statements and disclosures included within Notes to the Consolidated Financial Statements.
 
In February 2016, the FASB issued ASU No. 2016-02, which provides guidance on the accounting treatment of leases.  The ASU establishes a right-of-use (“ROU”) model that requires a lessee to record a ROU asset and a lease liability on the balance sheet for all leases with terms longer than 12 months. Leases will be classified as either financing or operating, with classification affecting the pattern of expense recognition in the income statement. The new standard is effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years and early adoption is permitted. A modified retrospective transition approach is required for lessees for capital and operating leases existing at, or entered into after, the beginning of the earliest comparative period presented in the financial statements, with certain practical expedients available. We are currently evaluating the impact of adopting this guidance on our Consolidated Financial Statements and disclosures included within Notes to the Consolidated Financial Statements.
 
In July 2015, the FASB issued ASU No. 2015-11, which provides guidance on the measurement of inventory value.  The amendments require an entity to measure in scope inventory at the lower of cost and net realizable value. Net realizable value is the estimated selling prices in the ordinary course of business, less reasonably predictable costs of completion, disposal, and transportation. Subsequent measurement is unchanged for inventory measured using last-in, first-out (“LIFO”) or the retail inventory method. The amendments do not apply to inventory that is measured using LIFO or the retail inventory method. The amendments apply to all other inventory, which includes inventory that is measured using first-in, first-out (“FIFO”) or average cost. The pronouncement is effective for annual periods beginning after December 15, 2016, and interim periods within those fiscal years, and early adoption is permitted. We are currently evaluating the impact of adopting this guidance on our Consolidated Financial Statements and disclosures included within Notes to the Consolidated Financial Statements.
 
In August 2014, the FASB issued ASU No. 2014-15, which provides guidance on determining when and how reporting entities must disclose going-concern uncertainties in their financial statements. The pronouncement is effective for annual periods ending after December 15, 2016, and interim periods thereafter, and early adoption is permitted. We are currently evaluating the impact of adopting this guidance on our Consolidated Financial Statements and disclosures included within Notes to the Consolidated Financial Statements.
In May 2014, the FASB issued ASU No. 2014-09, which creates FASB Accounting Standards Codification (“ASC”) Topic 606, “Revenue from Contracts with Customers” and supersedes ASC Topic 605, “Revenue Recognition”. The guidance replaces industry-specific guidance and establishes a single five-step model to identify and recognize revenue. The core principle of the guidance is that an entity should recognize revenue upon transfer of control of promised goods or services to customers in an amount that reflects the consideration to which an entity expects to be entitled in exchange for those goods or services. Additionally, the guidance requires the entity to disclose further quantitative and qualitative information regarding the nature and amount of revenues arising from contracts with customers, as well as other information about the significant judgments and estimates used in recognizing revenues from contracts with customers. The guidance in ASU 2014-09 was further updated by ASU 2016-08 in March 2016, which provides clarification on the implementation of the

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principal vs agent considerations in ASU 2014-09.  In April 2016, the FASB issued ASU 2016-10, which provides clarification on the implementation of performance obligations and licensing in ASU 2014-09.  In May 2016, the FASB issued ASU 2016-11, which amends guidance provided in two SEC Staff Announcements at the March 3, 2016 Emerging Issues Task Force meeting over various topics relating to ASU 606. In May 2016, the FASB issued ASU 2016-12, which clarified various topics in ASU 606.  This guidance was originally effective for interim and annual reporting periods beginning after December 15, 2016. However, in August 2015, the FASB issued ASU No. 2015-14, which extended the effective date to interim and annual periods beginning after December 15, 2017. Early application is permitted only as of annual reporting periods beginning after December 15, 2015, including interim reporting periods within that reporting period. This guidance may be adopted retrospectively or under a modified retrospective method where the cumulative effect is recognized at the date of initial application. We are currently evaluating the impact of adopting this guidance on our Consolidated Financial Statements and disclosures included within our Notes to the Consolidated Financial Statements.  
 
3. BUSINESS COMBINATIONS
 
We account for business combinations in accordance with ASC 805, which requires that the identifiable assets acquired and liabilities assumed be recorded at their estimated fair values on the acquisition date separately from goodwill, which is the excess of the fair value of the purchase price over the fair values of these identifiable assets and liabilities. We include the results of operations of an acquired business as of the acquisition date. We had no material acquisitions for the three and six months ended June 30, 2016 and 2015.
4. ATM FUNDING AGREEMENTS
 
Contract Cash Solutions Agreement
 
Our Contract Cash Solutions Agreement with Wells Fargo Bank, N.A. (“Wells Fargo”) allows us to use funds owned by Wells Fargo to provide the currency needed for normal operating requirements for our ATMs. For the use of these funds, we pay Wells Fargo a cash usage fee on the average daily balance of funds utilized multiplied by a contractually defined cash usage rate. These cash usage fees, reflected as interest expense within the Condensed Consolidated Statements of Loss and Comprehensive Loss, were $0.7 million and $1.6 million for the three and six months ended June 30, 2016, respectively, and $0.5 million and $1.0 million for the three and six months ended June 30, 2015, respectively. We are exposed to interest rate risk to the extent that the applicable London Interbank Offered Rate (“LIBOR”) increases.
 
Under this agreement, all currency supplied by Wells Fargo remains the sole property of Wells Fargo at all times until it is dispensed, at which time Wells Fargo obtains an interest in the corresponding settlement receivable which is recorded on a net basis. As these funds are not our assets, supplied cash is not reflected on the Condensed Consolidated Balance Sheets. The outstanding balance of ATM cash utilized by us from Wells Fargo was $262.2 million and $364.5 million as of June 30, 2016 and December 31, 2015, respectively.
 
In June 2015, we amended the Contract Cash Solutions Agreement to decrease the maximum amount of cash to be provided to us from $500.0 million to $425.0 million and to extend the term of the agreement from November 30, 2015 to June 30, 2018. 
 
We are responsible for any losses of cash in the ATMs under this agreement and we self ‑insure for this risk. We incurred no material losses related to this self ‑insurance for the three and six months ended June 30, 2016 and 2015.
 
Site-Funded ATMs
 
We operate ATMs at certain customer gaming establishments where the gaming establishment provides the cash required for the ATM operational needs. We are required to reimburse the customer for the amount of cash dispensed from these Site-Funded ATMs. The Site-Funded ATM liability is included within settlement liabilities in the accompanying Condensed Consolidated Balance Sheets was $58.8 million and $84.9 million as of June 30, 2016 and December 31, 2015, respectively.

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5. TRADE RECEIVABLES
 
Trade receivables represent short-term credit granted to customers for which collateral is generally not required. The balance of trade receivables consists of outstanding balances owed to us by gaming establishments and casino patrons. The balance of trade receivables consisted of the following (in thousands):

.	At June 30,	 	At December 31,	 	
 	2016	    	2015	 	
 	 	 	 	 	 	 	
Trade receivables, net	 	 	 	 	 	 	
Games trade receivables	$	
39,021	 	$	
38,064	 	
Payments trade receivables	 	
9,328	 	 	
14,318	 	
Total trade receivables, net	$	
48,349	 	$	
52,382	 	
 
The allowance for doubtful accounts for trade receivables includes reserves related to check warranty receivables as well as a general allowance for non-warranty receivables. At least quarterly, we evaluate the collectability of the outstanding balances and establish a reserve for the face amount of the expected losses on our receivables. The expense associated with check warranty receivables is included within Payments cost of revenues (exclusive of depreciation and amortization) in the Condensed Consolidated Statements of Loss and Comprehensive Loss. The expense associated with non-warranty receivables is included within operating expenses in the Condensed Consolidated Statements of Loss and Comprehensive Loss. The outstanding balance of the check warranty and non-warranty reserves was $2.7 million and $1.4 million, respectively, as of June 30, 2016 and $3.0 million and $0.9 million, respectively, as of December 31, 2015.
 
6. OTHER RECEIVABLES
 
Other receivables include the balance of notes and loans receivable on our games and fully integrated kiosk products, and development agreements, which are generated from reimbursable amounts advanced to tribal customers generally used by the customer to build, expand or renovate its facility. In addition, we had a note receivable with Bee Cave Games, Inc. (“Bee Cave”), which was established prior to our acquisition of Everi Games Holding in December 2014 pursuant to a secured promissory note in the amount of $4.5 million, which bears interest at 7%. The note requires interest only payments for the first 24 months followed by repayments of principal and interest in 48 equal monthly installments. The note receivable was included in the current portion of other receivables within the Condensed Consolidated Balance Sheets at June 30, 2016. In association with the promissory note, the Company received a warrant to purchase the common stock of Bee Cave and recorded a discount to the note for the fair value of the warrant received. The warrant was included in the non-current portion of other assets within the Condensed Consolidation Balance Sheets.
 
On May 2, 2016, Bee Cave failed to pay its scheduled interest-only payment that was due related to its $4.5 million secured promissory note payable to Everi Games. On May 3, 2016, we issued a Notice of Default and Acceleration to Bee Cave. Under the terms of the promissory note, the maturity of Bee Cave's indebtedness to us under the promissory note for the outstanding principal and unpaid interest has been accelerated and is immediately due and payable. On May 5, 2016, the Company sent notice to Bee Cave of its intent to foreclose on the assets of Bee Cave in full settlement of its outstanding note obligation. The Company continues to evaluate the assets in connection with the foreclosure proceedings. During the three and six months ended June 30, 2016, we recorded a write-down of approximately $4.3 million related to the Bee Cave note receivable and warrant in operating expenses on the Condensed Consolidated Statements of Loss and Comprehensive Loss.

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Other receivables also include income taxes receivable and other miscellaneous receivables. The balance of other receivables consisted of the following (in thousands):

 

 
 	 	 	 	 	 	 	
 	At June 30,	 	At December 31,	 	
 	2016	   	2015	 	
Other receivables	 	 	 	 	 	 	
Notes and loans receivable, net of discount of $0 and $699 at June 30, 2016 and December 31, 2015, respectively	$	
5,076	 	$	
9,930	 	
Federal and state income tax receivable	 	
421	 	 	
421	 	
Other	 	
13	 	 	
1,232	 	
Total other receivables	 	
5,510	 	 	
11,583	 	
Less: current portion of notes and loans receivable	 	
2,097	 	 	
6,655	 	
Total other receivables, current portion	$	
3,413	 	$	
4,928	 	

 

7. PREPAID AND OTHER ASSETS
 
Prepaid and other assets include the balance of prepaid expenses, deposits, debt issuance costs on our revolving credit facility, restricted cash and other assets. The current portion of these assets is included in prepaid and other assets and the non-current portion is included in other assets, both of which are contained within the Condensed Consolidated Balance Sheets.
 
We reclassified $23.7 million of debt issuance costs related to our outstanding debt from the non-current portion of other assets to contra-liabilities included in long-term debt as of December 31, 2015 in connection with our retrospective adoption of ASU No. 2015-03. The remaining debt issuance costs included in the non-current portion of other assets relate to our line-of-credit arrangements and were not reclassified consistent with our adoption of ASU No. 2015-15.
 
The balance of the current portion of prepaid and other assets consisted of the following (in thousands):

 	 	 	 	 	 	 	 	
 	At June 30,	 	At December 31,	 	 	
 	2016	    	2015	 	 	
 	 	 	 	 	 	 	 	
Prepaid expenses and other assets	 	 	 	 	 	 	 	
Prepaid expenses	$	
7,206	 	$	
8,255	 	 	
Deposits	 	
8,307	 	 	
8,946	 	 	
Other	 	
3,683	 	 	
3,571	 	 	
Total prepaid expenses and other assets	$	
19,196	 	$	
20,772	 	 	
 
The balance of the non-current portion of other assets consisted of the following (in thousands):

 	At June 30,	 	At December 31,	 	 	
 	2016	    	2015	    	 	
Other assets	 	 	 	 	 	 	 	
Debt issuance costs	$	
700	 	$	
919	 	 	
Prepaid expenses and deposits	 	
4,012	 	 	
4,521	 	 	
Other	 	
4,016	 	 	
5,934	 	 	
Total other assets	$	
8,728	 	$	
11,374	 	 	

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8. INVENTORY
 
Our inventory primarily consists of component parts as well as finished goods and work-in-progress. The cost of inventory includes cost of materials, labor, overhead and freight. The inventory is stated at the lower of cost or market and accounted for using the FIFO method.
 
Inventory consisted of the following (in thousands):

 	At June
30,	 	At December 31,	 	 	
 	2016	 	2015	 	 	
Inventory	 	 	 	 	 	 	 	
Raw materials and component parts, net of reserves of $991 and $912 at June 30, 2016 and December 31, 2015, respectively	$	
17,754	 	$	
23,663	 	 	
Work in progress	 	
3,271	 	 	
1,495	 	 	
Finished goods	 	
4,968	 	 	
3,580	 	 	
Total inventory	$	
25,993	 	$	
28,738	 	 	

 
9. PROPERTY, EQUIPMENT AND LEASED ASSETS
 
Property, equipment and leased assets consist of the following (in thousands):

 	 	 	 	At June 30, 2016	 	At December 31, 2015	 	
 	 	Useful   Life	 	 	 	 	Accumulated	 	Net   Book	 	 	 	Accumulated	 	Net Book	 	
 	    	(Years)	   	   Cost  	   	Depreciation	   	Value	   	Cost	   	Depreciation	   	Value	 	
Property, equipment and leased assets	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Rental pool - deployed	 	
2	-	4	 	$	
109,264	 	$	
44,404	 	$	
64,860	 	$	
91,743	 	$	
29,993	 	$	
61,750	 	
Rental pool - undeployed	 	
2	-	4	 	 	
12,957	 	 	
4,749	 	 	
8,208	 	 	
11,950	 	 	
3,361	 	 	
8,589	 	
ATM equipment	 	 	5	 	 	 	
16,791	 	 	
10,242	 	 	
6,549	 	 	
20,601	 	 	
12,885	 	 	
7,716	 	
Leasehold and building improvements	 	Lease Term	 	 	
9,107	 	 	
2,817	 	 	
6,290	 	 	
7,564	 	 	
2,038	 	 	
5,526	 	
Cash advance equipment	 	 	3	 	 	 	
8,263	 	 	
3,510	 	 	
4,753	 	 	
7,662	 	 	
2,711	 	 	
4,951	 	
Machinery, office and other equipment	 	
2	-	5	 	 	
29,599	 	 	
17,316	 	 	
12,283	 	 	
32,313	 	 	
14,537	 	 	
17,776	 	
Total	 	 	 	 	 	$	
185,981	 	$	
83,038	 	$	
102,943	 	$	
171,833	 	$	
65,525	 	$	
106,308	 	
 
In the second quarter of 2016, our corporate aircraft was classified as held for sale and sold for $4.8 million during the period. We recognized a $0.9 million loss on the sale of the aircraft, which was included in operating expenses in the Condensed Consolidated Statements of Loss and Comprehensive Loss for the three and six months ended June 30, 2016. The aircraft was included in machinery, office and other equipment.
 
Depreciation expense related to other property, equipment and leased assets totaled approximately $ 12.5 million and $24.8 million for the three and six months ended June 30, 2016, respectively, and $10.7 million and $21.1 million for the three and six months ended June 30, 2015, respectively. Our property, equipment and leased assets were not impaired for the three and six months ended June 30, 2016 and 2015, respectively.
 
10. GOODWILL AND OTHER INTANGIBLE ASSETS
 
Goodwill
 
Goodwill represents the excess of the purchase price over the identifiable tangible and intangible assets acquired plus liabilities assumed arising from business combinations. The balance of goodwill was $789.8 million at June 30, 2016 and December 31, 2015, respectively.

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In accordance with ASC 350, we test goodwill at the reporting unit level, which in certain cases may be a component of an operating segment, for impairment on an annual basis and between annual tests if events and circumstances indicate it is more likely than not that the fair value of a reporting unit is less than its carrying amount.
 
The estimate of fair value requires significant judgment. We based our fair value estimates on assumptions that we believe to be reasonable but that are unpredictable and inherently uncertain, including estimates of future growth rates, operating margins and assumptions about the overall economic climate as well as the competitive environment for our reporting units. There can be no assurance that our estimates and assumptions made for purposes of our goodwill testing as of the time of testing will prove to be accurate predictions of the future. If our assumptions regarding business plans, competitive environments or anticipated growth rates are not correct, we may be required to record goodwill impairment charges in future periods, whether in connection with our next annual impairment testing, or earlier, if an indicator of an impairment is present prior to our next annual evaluation.
 
No impairment was identified for our goodwill for the three and six months ended June 30, 2016 and 2015.
Other Intangible Assets
 
Other intangible assets consist of the following (in thousands):

 	 	 	 	At June 30, 2016	 	At December 31, 2015	
 	 	Useful Life	 	 	 	 	Accumulated	 	Net   Book	 	 	 	 	Accumulated	 	Net   Book	
 	    	(years)	    	Cost	    	Amortization	    	Value	    	Cost	    	Amortization	    	Value	
Other intangible assets	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Contract rights under development and placement fee agreements	 	
1	-	7	 	$	
25,115	 	$	
9,426	 	$	
15,689	 	$	
16,453	 	$	
7,612	 	$	
8,841	
Customer contracts	 	
7	-	14	 	 	
50,177	 	 	
37,524	 	 	
12,653	 	 	
50,177	 	 	
34,755	 	 	
15,422	
Customer relationships	 	
8	-	12	 	 	
231,100	 	 	
32,205	 	 	
198,895	 	 	
231,100	 	 	
21,723	 	 	
209,377	
Developed technology and software	 	
1	-	6	 	 	
212,703	 	 	
94,755	 	 	
117,948	 	 	
197,658	 	 	
63,591	 	 	
134,067	
Patents, trademarks and other	 	
1	-	17	 	 	
28,439	 	 	
15,805	 	 	
12,634	 	 	
28,240	 	 	
13,485	 	 	
14,755	
Total	 	 	 	 	 	$	
547,534	 	$	
189,715	 	$	
357,819	 	$	
523,628	 	$	
141,166	 	$	
382,462	
 
Amortization expense related to other intangible assets totaled approximately $23.6 million and $46.8 million for the three and six months ended June 30, 2016, respectively, and $20.8 million and $41.4 million for the three and six months ended June 30, 2015, respectively. We capitalized and placed into service $3.9 million and $9.7 million of software development costs for the three and six months ended June 30, 2016, respectively, and $4.7 million and $5.7 million of software development costs for the three and six months ended June 30, 2015, respectively.
 
On a quarterly basis, we evaluate our other intangible assets for potential impairment as part of our quarterly review process. No impairment was identified for our other intangible assets during our assessment for the three and six months ended June 30, 2016 and 2015.
 
We enter into development and placement fee agreements to provide financing for new gaming facilities or for the expansion or improvement of existing facilities. All or a portion of the funds provided under development agreements are reimbursed to us, while funding under placement fee agreements is not reimbursed. In return for the fees under these agreements, each facility dedicates a percentage of its floor space, or an agreed upon unit count, for the placement of our electronic gaming machines (“EGMs”) over the term of the agreement, generally 12 to 83 months and we receive a fixed percentage or flat fee of those machines’ hold per day. Certain of the agreements contain EGM performance standards that could allow the respective facility to reduce a portion of our guaranteed floor space.
 
In addition, certain development agreements allow the facilities to buy out floor space after advances that are subject to repayment have been repaid. The development agreements typically provide for a portion of the amounts retained by each facility for its share of the operating profits of the facility to be used to repay some or all of the advances recorded as notes receivable,   which are included as part of other receivables current and non-current in the Condensed Consolidated Balance Sheets. There were no receivables related to development agreements at June 30, 2016 and December 31, 2015. Placement

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fees and amounts advanced in excess of those to be reimbursed by the customer for real property and land improvements are allocated to intangible assets and are generally amortized over the term of the contract, which is recorded as a reduction of revenue generated from the facility. In the past we have, and in the future, we may, by mutual agreement, amend these agreements to reduce our floor space at the facilities. Any proceeds received for the reduction of floor space is first applied against the intangible asset for that particular development or placement fee agreement, if any, and the remaining net book value of the intangible asset is prospectively amortized on a straight-line method over the remaining estimated useful life.
 
We paid approximately $10.2 million and $11.2 million to extend the term of placement fee agreements with a customer for certain of its locations for the three and six months ended June 30, 2016, respectively. We did not extend any placement fee agreements for the three months ended June 30, 2015. We paid approximately $1.2 million to extend the term of placement fee agreements with a customer for certain of its locations for the six months ended June 30, 2015.
 
11. ACCOUNTS PAYABLE AND ACCRUED EXPENSES
 
The following table presents our accounts payable and accrued expenses (in thousands):

 

 	 	 	 	 	 	 	
 	At June 30,	 	At December 31,	 	
 	2016	    	2015	  	
Accounts payable and accrued expenses	 	 	 	 	 	 	
Trade accounts payable	$	
54,699	 	$	
67,139	 	
Accrued interest	 	
23,800	 	 	
73	 	
Payroll and related expenses	 	
9,609	 	 	
8,565	 	
Deferred and unearned revenues	 	
9,572	 	 	
10,836	 	
Cash access processing and related expenses	 	
5,180	 	 	
4,662	 	
Accrued taxes	 	
2,149	 	 	
1,654	 	
Other	 	
10,649	 	 	
8,583	 	
Total accounts payable and accrued expenses	$	
115,658	 	$	
101,512	 	

 
12. LONG-TERM DEBT
 
The following table summarizes our outstanding indebtedness (in thousands):

 	At June 30,	 	At December 31,	 	 	
 	2016	    	2015	 	 	
Long-term debt	 	 	 	 	 	 	 	
Senior secured term loan	$	
470,600	 	$	
490,000	 	 	
Senior secured notes	 	
335,000	 	 	
335,000	 	 	
Senior unsecured notes	 	
350,000	 	 	
350,000	 	 	
Total debt	 	
1,155,600	 	 	
1,175,000	 	 	
Less: debt issuance costs and warrant discount	 	
(32,055)	 	 	
(35,101)	 	 	
Total debt after debt issuance costs and discount	 	
1,123,545	 	 	
1,139,899	 	 	
Less: current portion of long-term debt	 	
(10,000)	 	 	
(10,000)	 	 	
Long-term debt, less current portion	$	
1,113,545	 	$	
1,129,899	 	 	
 
We reclassified $23.7 million of debt issuance costs related to our outstanding debt from the non-current portion of other assets to contra-liabilities included in long-term debt as of December 31, 2015 in connection with our retrospective adoption of ASU No. 2015-03. The remaining debt issuance costs included in the non-current portion of other assets relates to our line-of-credit arrangements and were not reclassified consistent with our adoption of ASU No. 2015-15.
 
Credit Facilities
 
In December 2014, Everi Payments, as borrower, and Holdings entered into a credit facility with Bank of America, N.A., as administrative agent, collateral agent, swing line lender and letter of credit issuer; Deutsche Bank Securities Inc., as syndication agent; and Merrill Lynch, Pierce, Fenner & Smith Incorporated and Deutsche Bank Securities, Inc., as joint lead arrangers and joint book managers (the “Credit Agreement”). The Credit Agreement consists of the $500.0 million,

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six-year senior secured term loan facility that matures in 2020 (the “Term Loan”) and the $50.0 million, five-year senior secured revolving credit facility that matures in 2019 (the “Revolving Credit Facility,” and together with the Term Loan, the “Credit Facilities”). The fees associated with the Credit Facilities included discounts of approximately $7.5 million and debt issuance costs of approximately $13.9 million. All borrowings under the Credit Facilities are subject to the satisfaction of customary conditions, including the absence of a default and compliance with representations and warranties.
 
We are required to repay the Term Loan in an amount equal to 0.50% per quarter of the initial aggregate principal with the final principal repayment installment on the maturity date.  Interest is due in arrears each March, June, September and December and at the maturity date. However, interest may be remitted within one to three months of such dates.
 
The Term Loan had an applicable interest rate of 6.25% as of June 30, 2016 and December 31, 2015.
 
The interest rate per annum applicable to the Revolving Credit Facility is, at our option, the base rate or LIBOR plus, in each case, an applicable margin. The interest rate per annum applicable to the Term Loan is also, at our option, the base rate or LIBOR plus, in each case, an applicable margin. LIBOR will be reset at the beginning of each selected interest period based on the LIBOR rate then in effect; provided that, with respect to the Revolving Credit Facility, if LIBOR is below zero, then such rate will be equal to zero plus the applicable margin, and, with respect to the Term Loan, if LIBOR is below 1.0%, then such rate will be equal to 1.0% plus the applicable margin. The base rate is a fluctuating interest rate equal to the highest of (a) the prime lending rate announced by the administrative agent, (b) the federal funds effective rate from time to time plus 0.50%, and (c) LIBOR (after taking account of any applicable floor) applicable for an interest period of one month plus 1.00%. The applicable margins of 4.75% and 5.25% for the Revolving Credit Facility and Term Loan, respectively, are subject to adjustment based on our consolidated secured leverage ratio.
Voluntary prepayments of the Term Loan and the Revolving Credit Facility and voluntary reductions in the unused commitments are permitted in whole or in part, in minimum amounts as set forth in the Credit Agreement, with prior notice but without premium or penalty.
Subject to certain exceptions, the obligations under the Credit Facilities are secured by substantially all of the present and after acquired assets of each of Everi Payments, Holdings and the subsidiary guarantors (the “Collateral”) including: (a) a perfected first priority pledge of all the capital stock of Everi Payments and each domestic direct, wholly owned material restricted subsidiary held by Holdings, Everi Payments or any such subsidiary guarantor; and (b) a perfected first priority security interest in substantially all other tangible and intangible assets of Holdings, Everi Payments, and such subsidiary guarantors (including, but not limited to, accounts receivable, inventory, equipment, general intangibles, investment property, real property, intellectual property and the proceeds of the foregoing). Subject to certain exceptions, the Credit Facilities are unconditionally guaranteed by Holdings and such subsidiary guarantors and Everi Games Holding and its material domestic subsidiaries.
The Credit Agreement contains certain covenants that, among other things, limit Holdings’ ability, and the ability of certain of its subsidiaries, to incur additional indebtedness; sell assets or consolidate or merge with or into other companies; pay dividends or repurchase or redeem capital stock; make certain investments; issue capital stock of subsidiaries; incur liens; prepay, redeem or repurchase subordinated debt; and enter into certain types of transactions with our affiliates. The Credit Agreement also requires Holdings, together with its subsidiaries, to comply with a consolidated secured leverage ratio as well as an annual excess cash flow payment requirement.  Based on our excess cash flow calculation at December 31, 2015, an excess cash flow payment of approximately $14.4 million was made during the three months ended June 30, 2016.
Events of default under the Credit Agreement include customary events such as a cross-default provision with respect to other material debt (which includes Everi Payments’ 7.25% Senior Secured Notes due 2021 and 10.00% Senior Unsecured Notes due 2022). In addition, an event of default will occur if Holdings undergoes a change of control. This is defined to include the case where Holdings ceases to own 100% of the equity interests of Everi Payments, or where any person or group acquires a percentage of the economic or voting interests of Holdings’ capital stock of 35% or more (determined on a fully diluted basis), or where a majority of the board of directors of Everi Payments ceases to consist of persons who are directors of Holdings on the closing date of the Credit Facilities or other directors whose nomination for election to the board of directors of Holdings was recommended by a majority of the then continuing directors.

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At June 30, 2016, we had approximately $470.6 million of borrowings outstanding under the Term Loan and no borrowings outstanding under the Revolving Credit Facility. We had $50.0 million of additional borrowing availability under the Revolving Credit Facility as of June 30, 2016. The weighted average interest rate on the Credit Facilities was approximately 6.25% for the six months ended June 30, 2016.
We were in compliance with the terms of the Credit Facilities as of June 30, 2016 and December 31, 2015.
Senior Secured Notes and Refinance of Senior Secured Notes
In December 2014, we issued $350.0 million in aggregate principal amount of 7.75% Secured Notes due 2021 (the “Secured Notes”). The fees associated with the Secured Notes included debt issuance costs of approximately $13.6 million. The Secured Notes were acquired by the initial purchasers pursuant to the terms of a purchase agreement. Under the terms of the purchase agreement, during a one-year period following the closing and upon prior notice from the initial purchasers, the Company was required to use commercially reasonable efforts to aid the purchasers in the resale of the Secured Notes, including by preparing an updated offering memorandum and participating in reasonable marketing efforts including road shows, to the extent required therein. Alternatively, we had the ability to redeem the Secured Notes from the initial purchasers without penalty. On April 15, 2015, the Company entered into a note purchase agreement with Everi Payments, CPPIB Credit Investments III Inc. (the “Purchaser”), and Deutsche Bank Trust Company Americas, as collateral agent (the “Note Purchase Agreement”), and issued $335.0 million in aggregate principal amount of the 7.25% Secured Notes due 2021 (the “Refinanced Secured Notes”) to the Purchaser in a private offering. With the proceeds from the issuance of the Refinanced Secured Notes, we redeemed, in full, the Company’s then outstanding Secured Notes from the initial purchasers in accordance with the terms of the indenture governing the Secured Notes. In connection with the issuance of the Refinanced Secured Notes during the second quarter of 2015, we expensed $13.0 million of related debt issuance costs and fees to loss on extinguishment of debt associated with the redeemed Secured Notes that were outstanding prior to the refinance transaction.
In connection with the issuance of the Refinanced Secured Notes and pursuant to the terms of the Note Purchase Agreement, the Company issued a warrant to purchase shares of the Company’s common stock (the “Warrant”) to the Purchaser. The Warrant expires on the sixth anniversary of the date of issuance. The number of shares issuable pursuant to the Warrant and the warrant exercise price are subject to adjustment for stock splits, reverse stock splits, stock dividends, mergers and certain other events. The Warrant was valued at $2.2 million using a modified Black-Scholes model and was accounted for as a debt discount.
Interest is due quarterly in arrears each January, April, July and October.
We were in compliance with the terms of the Refinanced Secured Notes as of June 30, 2016 and December 31, 2015.
Senior Unsecured Notes
In December 2014, we issued $350.0 million in aggregate principal amount of 10.0% Unsecured Notes due 2022 (the “Unsecured Notes”). The fees associated with the Unsecured Notes included original issue discounts of approximately $3.8 million and debt issuance costs of approximately $14.0 million.
Interest is due semi-annually in arrears each January and July.
The Unsecured Notes were acquired by the initial purchasers pursuant to the terms of a purchase agreement. Under the terms of the purchase agreement, during a one-year period following the closing and upon prior notice from the initial purchasers, the Company was required to use commercially reasonable efforts to aid the purchasers in the resale of the Unsecured Notes, including by preparing an updated offering memorandum and participating in reasonable marketing efforts including road shows, to the extent required therein. The Unsecured Notes were resold by the initial purchasers to third parties in the second quarter of 2015.
In connection with the issuance of the Unsecured Notes, the Company entered into a registration rights agreement pursuant to which the Company agreed, for the benefit of the initial holders of the Unsecured Notes, to file with the SEC, and use its commercially reasonable efforts to cause to become effective, a registration statement relating to an offer to exchange the Unsecured Notes for an issue of SEC-registered notes with terms identical to the Unsecured Notes. On October 23, 2015, we filed a registration statement on Form S-4 with the SEC in accordance with the registration rights agreement

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outlining our offer to exchange the Unsecured Notes for identical notes without transfer restrictions. The registration statement was declared effective on November 3, 2015, and the exchange offer for the Unsecured Notes was completed on December 4, 2015 with 100% percent participation.
We were in compliance with the terms of the Unsecured Notes as of June 30, 2016 and December 31, 2015.
 
13. COMMITMENTS AND CONTINGENCIES
 
We are subject to claims and suits that arise from time to time in the ordinary course of business. We do not believe the liabilities, if any, which may ultimately result from the outcome of such matters, individually or in the aggregate, will have a material adverse impact on our financial position, liquidity or results of operations.
 
Gain Contingency Settlement
 
In January 2014, we filed a complaint against certain third party defendants alleging conspiracy in restraint of competition regarding interchange fees, monopolization by defendants in the relevant market, and attempted monopolization of the defendants in the relevant market. We demanded a trial by jury of all issues so triable. The defendants filed a motion to dismiss on March 13, 2014. A settlement agreement was reached as of January 16, 2015 and, on January 22, 2015, the settlement agreement was executed and delivered for which we received $14.4 million in cash and recorded the settlement proceeds in the first quarter of 2015. This settlement is included as a reduction of operating expenses in our Condensed Consolidated Statements of Loss and Comprehensive Loss for the six months ended June 30, 2015.
 
14. SHAREHOLDERS’ EQUITY
 
Preferred Stock. Our amended and restated certificate of incorporation, as amended, allows our Board of Directors, without further action by stockholders, to issue up to 50,000,000 shares of preferred stock in one or more series and to fix the designations, powers, preferences, privileges and relative participating, optional, or special rights as well as the qualifications, limitations or restrictions of the preferred stock, including dividend rights, conversion rights, voting rights, terms of redemption and liquidation preferences. As of June 30, 2016 and December 31, 2015, we had no shares of preferred stock outstanding.
 
Common Stock. Subject to the preferences that may apply to shares of preferred stock that may be outstanding at the time, the holders of outstanding shares of common stock are entitled to receive dividends out of assets legally available at the times and in the amounts as our Board of Directors may from time to time determine. All dividends are non-cumulative. In the event of the liquidation, dissolution or winding up of Everi, the holders of common stock are entitled to share ratably in all assets remaining after the payment of liabilities, subject to the prior distribution rights of preferred stock, if any, then outstanding. Each stockholder is entitled to one vote for each share of common stock held on all matters submitted to a vote of stockholders. Cumulative voting for the election of directors is not provided for. The common stock is not entitled to preemptive rights and is not subject to conversion or redemption. There are no sinking fund provisions applicable to the common stock. Each outstanding share of common stock is fully paid and non-assessable. As of June 30, 2016 and December 31, 2015, we had 90,897,797 and 90,877,273 shares of common stock issued, respectively.
 
Treasury Stock. Employees may direct us to withhold vested shares of restricted stock to satisfy the minimum statutory withholding requirements applicable to their restricted stock vesting. We repurchased or withheld from restricted stock awards 2,324 and 4,912 shares of common stock for the three and six months ended June 30, 2016, respectively, at an aggregate purchase price of $4,081 and $13,015, respectively, and 2,599 and 5,444 shares of common stock for the three and six months ended June 30, 2015, respectively, at an aggregate purchase price of $20,167 and $39,910, respectively, to satisfy the minimum applicable tax withholding obligations related to the vesting of such restricted stock awards. 

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15. WEIGHTED AVERAGE COMMON SHARES
 
The weighted average number of shares of common stock outstanding used in the computation of basic and diluted earnings per share is as follows (in thousands):

 	 	 	 	 	 	 	 	 	 	 	
 	 	Three Months Ended June 30,	 	 	Six Months Ended June 30,	 	
 	 	2016	    	2015	 	    	2016	    	2015	 	
Weighted average shares	 	 	 	 	 	 	 	 	 	 	
Weighted average number of common shares outstanding - basic	 	
66,041	 	
65,844	 	 	
66,038	 	
65,734	 	
Potential dilution from equity grants (1)	 	 —	 	 —	 	 	 —	 	 —	 	
Weighted average number of common shares outstanding - diluted	 	
66,041	 	
65,844	 	 	
66,038	 	
65,734	 	

	(1)		The Company was in a net loss position for the three and six months ended June 30, 2016 and 2015, respectively, and therefore, no potential dilution from the application of the treasury stock method was applicable. Equity awards to purchase approximately 17.1 million and 15.9 million of common stock for the three and six months ended June 30, 2016 and 11.9 million and 10.8 million of common stock for the three and six months ended June 30, 2015, were excluded from the computation of diluted net loss per share as this effect would have been antidilutive .	
 
16. SHARE-BASED COMPENSATION
 
Equity Incentive Awards
 
Our 2014 Equity Incentive Plan (the “2014 Plan”) and our 2012 Equity Incentive Plan (as amended, the “2012 Plan”) are used to attract and retain the best available personnel, to provide additional incentives to employees, directors and consultants and to promote the success of our business. The 2014 Plan superseded the then current 2005 Stock Incentive Plan (the “2005 Plan”). The 2012 Plan was assumed in connection with our acquisition of Everi Games Holding and conformed to include similar provisions to those as set forth in the 2014 Plan. Our equity plans are administered by the Compensation Committee of our Board of Directors, which has the authority to select individuals who are to receive options or other equity incentive awards and to specify the terms and conditions of grants of equity incentive awards, the vesting provisions, the terms and the exercise prices.
 
Generally, we grant the following award types: (a) time-based options, (b) cliff-vesting time-based options, (c) market-based options and (d) restricted stock. These awards have varying vesting provisions and expiration periods. For the three and six months ended June 30, 2016, we granted time- and market-based options.  
 
Our time-based stock options granted under our equity plans vest at a rate of 25% per year on each of the first four anniversaries of the option grant dates. These options expire after a ten-year period.
 
Our market-based options granted under our equity plans in 2016 vest at a rate of 25% per year on each of the first four anniversaries, provided that as of the vesting date for each vesting tranche, the closing price of the Company’s shares on the New York Stock Exchange is at least a specified price hurdle, defined as a fifty percent (50%) premium to the closing stock price on the grant date. If the price hurdle is not met as of the vesting date for a vesting tranche, then the vested tranche shall vest and become vested shares on the last day of a period of thirty (30) consecutive trading days during which the closing price is at least the price hurdle. These options expire after a ten-year period.
 
Our market-based stock options granted under the 2014 Plan in 2015 vest if our average stock price in any period of 30 consecutive trading days meets certain target prices during a four-year period that commenced on the date of grant for these options. These options expire after a seven-year period.

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A summary of award activity is as follows (in thousands):

 	    	Stock Options	    	Restricted Stock	 	
 	 	Granted	 	Granted	 	
Outstanding, December 31, 2015	 	
17,440	 	
310	 	
Additional authorized shares	 	 —	 	 —	 	
Granted	 	
4,006	 	 —	 	
Exercised options or vested shares	 	 —	 	
(21)	 	
Canceled or forfeited	 	
(2,991)	 	
(154)	 	
Outstanding, June 30, 2016	 	
18,455	 	
135	 	
 
The maximum number of shares available for future equity awards, both under the 2014 Plan and 2012 Plan, is approximately 5.0 million shares of our common stock. There are no shares available for future equity awards under the 2005 Plan.

Stock Options
 
The fair value of our standard time-based options was determined as of the date of grant using the Black-Scholes option pricing model with the following assumptions:

 	 	Six months ended	
 	 	June 30,	
 	    	2016	    	2015	    	
Risk-free interest rate	 	
1	%  	
1	%  	
Expected life of options (in years)	 	
5	 	
4	 	
Expected volatility	 	
51	%  	
43	%  	
Expected dividend yield	 	 —	%  	 —	%  	
 
For the three and six months ended June 30, 2016, certain executive and director grants were valued under the Black-Scholes option pricing model that utilized different assumptions from those used for our standard time-based options. For the time-based options granted on February 25, 2016, the assumptions were: (a) risk-free interest rate of 1%; (b) expected term of five years; (c) expected volatility of 49%; and (d) no expected dividend yield. For the time-based options granted on February 13, 2016, the assumptions were: (a) risk-free interest rate of 1%; (b) expected term of six years; (c) expected volatility of 49%; and (d) no expected dividend yield.
 
The fair value of market-based options was determined as of the date of grant using a lattice-based option valuation model with the following assumptions:

 	 	Six months ended	
 	 	June 30,	
 	    	2016	    	2015	    	
Risk-free interest rate	 	
2	%  	
1	%  	
Measurement period (in years)	 	
10	 	
4	 	
Expected volatility	 	
68	%  	
47	%  	
Expected dividend yield	 	 —	%  	 —	%  	

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The following tables present the options activity:

 	    	 	    	 	 	    	Weighted	    	 	 	 	
 	 	Number of	 	Weighted Average	 	Average Life	 	Aggregate	 	
 	 	Common Shares	 	Exercise Price	 	Remaining	 	Intrinsic Value	 	
 	 	(in thousands)	 	(per share)	 	(years)	 	(in thousands)	 	
Outstanding, December 31, 2015	 	
17,440	 	$	
7.41	 	
6.6	 	$	
1,212	 	
Granted	 	
4,006	 	 	
1.65	 	 	 	 	 	 	
Exercised	 	 —	 	 	 —	 	 	 	 	 	 	
Canceled or forfeited	 	
(2,991)	 	 	
7.35	 	 	 	 	 	 	
Outstanding, June 30, 2016	 	
18,455	 	$	
6.17	 	
6.9	 	$	 —	 	
Vested and expected to vest, June 30, 2016	 	
16,336	 	$	
6.28	 	
6.7	 	$	 —	 	
Exercisable, June 30, 2016	 	
9,325	 	$	
7.41	 	
5.1	 	$	 —	 	
 
There were 3.4 million and 4.0 million options granted for the three and six months ended June 30, 2016 , respectively. There were 6.1 million options granted for the three and six months ended June 30, 2015. The weighted average grant date fair value per share of the options granted was $0.73 and $0.81 for the three and six months ended June 30, 2016, respectively. The weighted average grant date fair value per share of the options granted was $2.49 for the three and six months ended June 30, 2015. No options were exercised during the three and six months ended June 30, 2016. The total intrinsic value of options exercised was $0.3 million and $0.8 million for the three and six months ended June 30, 2015, respectively.
 
There was $15.2 million in unrecognized compensation expense related to options expected to vest as of June 30, 2016. This cost is expected to be recognized on a straight-line basis over a weighted average period of 2.5 years. We recorded $2.6 million in non-cash compensation expense related to options granted that were expected to vest for the six months ended June 30, 2016. There were no proceeds received from the exercise of options as no exercises occurred during the period.
 
There was $21.8 million in unrecognized compensation expense related to options expected to vest as of June 30, 2015. This cost was expected to be recognized on a straight-line basis over a weighted average period of 3.0 years. We recorded $3.5 million in non-cash compensation expense related to options granted that were expected to vest as of June 30, 2015. We received $1.7 million in cash from the exercise of options for the six months ended June 30, 2015.
 
Restricted Stock
 
The following is a summary of non-vested share awards for our time-based restricted stock:

 	    	 	    	Weighted	 	
 	 	Shares	 	Average Grant	 	
 	 	Outstanding	 	Date Fair Value	 	
 	 	(in thousands)	 	(per share)	 	
Outstanding, December 31, 2015	 	
310	 	$	
7.11	 	
Granted	 	 —	 	 	 —	 	
Vested	 	
(21)	 	 	
7.09	 	
Forfeited	 	
(154)	 	 	
7.12	 	
Outstanding, June 30, 2016	 	
135	 	$	
7.11	 	
 
There were no shares of restricted stock granted for the three and six months ended June 30, 2016 and 2015. The total fair value of restricted stock vested was $11,422 and $ 23,608 for the three and six months ended June 30, 2016, respectively. The total fair value of restricted stock vested was $0.1 million and $0.2 million for the three and six months ended June 30, 2015, respectively.
 
There was $1.5 million in unrecognized compensation expense related to shares of time based restricted stock expected to vest as of June 30, 2016. This cost is expected to be recognized on a straight-line basis over a weighted average period of

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2.0 years. There were 20,500   shares of restricted stock that vested and we recorded $0.2 million in non-cash compensation expense related to the restricted stock granted that was expected to vest during the six months ended June 30, 2016.
 
There was $2.5 million in unrecognized compensation expense related to shares of time-based restricted shares expected to vest as of June 30, 2015. This cost was expected to be recognized on a straight-line basis over a weighted average period of 2.8 years. There were 21,700 shares of time-based restricted shares vested and we recorded $0.4 million in non-cash compensation expense related to the restricted stock granted that was expected to vest for the six months ended June 30, 2015.
 
17. INCOME TAXES
 
The provision for income tax reflected an effective income tax rate benefit of 42.2% and 40.0% for the three and six months ended June 30, 2016, respectively, which was higher than the statutory federal rate of 35.0% primarily due to state taxes, the true-up of certain foreign losses, the lower foreign tax rate applicable to our foreign source income, and the benefit from a research credit. The provision for income tax reflected an effective income tax rate expense of 41.0% and 35.8% for the same periods in the prior year, which was higher than the statutory federal rate of 35.0% primarily due to state taxes, the lower foreign tax rate applicable to our foreign source income; partially offset by non-statutory stock options that expired in the year.
 
We have analyzed filing positions in all of the federal, state and foreign jurisdictions where we are required to file income tax returns, as well as all open tax years in these jurisdictions. As part of our acquisition of Everi Games Holding in 2014, the Company recorded $0.7 million of unrecognized tax benefits. The Company has not accrued any penalties and interest for its unrecognized tax benefits.  Other than the unrecognized tax benefit related to the acquisition of Everi Games Holding, we believe that our income tax filing positions and deductions will be sustained upon audit and we do not anticipate any adjustments that will result in a material change to our financial position. We may from time to time be assessed interest or penalties by tax jurisdictions, although any such assessments historically have been minimal and immaterial to our financial results. Our policy for recording interest and penalties associated with audits and unrecognized tax benefits is to record such items as a component of income tax expense.
 
18. SEGMENT INFORMATION
 
Operating segments are components of an enterprise about which separate financial information is available that is evaluated regularly by the chief operating decision-making group in deciding how to allocate resources and in assessing performance. Our chief operating decision-making group consists of the Chief Executive Officer and the Chief Financial Officer. This group manages the business, allocates resources and measures profitability based on our operating segments. The operating segments are reviewed separately because each represents products that can be sold separately to our customers.
 
Our chief operating decision-making group has determined the following to be the operating segments for which we conduct business: (a) Games and (b) Payments. We have reported our financial performance based on our segments in both the current and prior periods. Each of these segments is monitored by our management for performance against its internal forecast and is consistent with our internal management reporting.
 
	·		The Games segment provides solutions directly to gaming establishments to offer their patrons gaming entertainment related experiences including: leased gaming equipment; sales and maintenance related services of gaming equipment; gaming systems; and ancillary products and services.	
 
	·		The Payments segment provides solutions directly to gaming establishments to offer their patrons cash access related services and products, including: access to cash at gaming facilities via ATM cash withdrawals, credit card cash access transactions and point of sale debit card transactions; check-related services; fully integrated kiosks and maintenance services; compliance, audit and data software; casino credit data and reporting services and other ancillary offerings.	
 
Corporate overhead expenses have been allocated to the segments either through specific identification or based on a reasonable methodology. In addition, we allocate depreciation and amortization expenses to the business segments.

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Our business is predominantly domestic, with no specific regional concentrations and no significant assets in foreign locations.
 
The accounting policies of the operating segments are generally the same as those described in the summary of significant accounting policies.
 
The following tables present segment information (in thousands):

 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	For the Three Months Ended June 30,	 	 	For the Six Months Ended June 30,	
 	    	2016	    	2015	    	 	2016	    	2015	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Revenues	 	 	 	 	 	 	 	 	 	 	 	 	 	
Games	 	$	
54,264	 	$	
54,868	 	 	$	
102,442	 	$	
109,913	
Payments	 	 	
159,736	 	 	
151,496	 	 	 	
317,327	 	 	
303,924	
Total revenues	 	$	
214,000	 	$	
206,364	 	 	$	
419,769	 	$	
413,837	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Operating (loss) income	 	 	 	 	 	 	 	 	 	 	 	 	 	
Games	 	$	
(7,210)	 	$	
4,199	 	 	$	
(10,456)	 	$	
4,813	
Payments	 	 	
13,270	 	 	
12,137	 	 	 	
20,300	 	 	
39,664	
Total operating income	 	$	
6,060	 	$	
16,336	 	 	$	
9,844	 	$	
44,477	

 	 	 	 	 	 	 	
 	 	At June 30, 2016	    	At December 31, 2015	
Total assets	 	 	 	 	 	 	
Games	 	$	
1,071,229	 	$	
1,086,147	
Payments	 	 	
399,131	 	 	
464,238	
Total assets	 	$	
1,470,360	 	$	
1,550,385	
 
Major Customers. For the three and six months ended June 30, 2016 and 2015,   no single customer accounted for more than 10% of our revenues. Our five largest customers accounted for approximately 31% and 32% for the three and six months ended June 30, 2016, respectively, and 28% and 30% for the three and six months ended June 30, 2015, respectively.
 
19. CONDENSED CONSOLIDATING FINANCIAL INFORMATION
 
We conduct substantially all of our business through our U.S. and foreign subsidiaries. Everi Payments’ (“Subsidiary Issuer”) obligations under the Unsecured Notes are fully and unconditionally guaranteed, subject to certain customary release provisions, on a joint and several basis by Holdings (“Parent”) and substantially all of our 100%-owned U.S. subsidiaries other than Subsidiary Issuer (the “Guarantor Subsidiaries” and, together with Parent, the “Guarantors” and each a “Guarantor”). The guarantees of our Unsecured Notes will be released under the following customary circumstances: (i) the sale or disposition of all or substantially all of the assets of the Guarantor (by way of merger, consolidation, or otherwise) to a person that is not (either before or after giving effect to such transaction) Parent, Subsidiary Issuer or a restricted subsidiary; (ii) the sale or disposition of sufficient capital stock of the Guarantor to a person that is not (either before or after giving effect to such transaction) Parent, Subsidiary Issuer or a restricted subsidiary and the Guarantor ceases to be a restricted subsidiary of Subsidiary Issuer as a result of the sale or other disposition; (iii) the designation of the Guarantor as an unrestricted subsidiary in accordance with the indenture governing the Unsecured Notes; or (iv) the legal or covenant defeasance of the Unsecured Notes or the satisfaction and discharge of the indenture governing the Unsecured Notes.
 
Presented below is condensed consolidating financial information for (a) Parent, (b) Subsidiary Issuer, (c) the Guarantor Subsidiaries and (d) our U.S. subsidiaries that are not Guarantor Subsidiaries and our foreign subsidiaries (collectively, the “Non-Guarantor Subsidiaries”) as of June 30, 2016 and December 31, 2015 and for the three and six months ended June 30, 2016 and 2015. The condensed consolidating financial information has been presented to show the nature of assets held and the results of operations and cash flows of Parent, Subsidiary Issuer, the Guarantor Subsidiaries and the

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Non-Guarantor Subsidiaries assuming that the guarantee structure of the Unsecured Notes had been in effect at the beginning of the periods presented.

 	Three Months Ended June 30, 2016	
 	Parent	    	Subsidiary
Issuer	    	Guarantor
Subsidiaries	    	Non-Guarantor
Subsidiaries	    	Eliminations	    	Total	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Revenues	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Games	$	 —	 	$	 —	 	$	
54,264	 	$	 —	 	$	 —	 	$	
54,264	
Payments	 	 —	 	 	
148,231	 	 	
7,685	 	 	
4,194	 	 	
(374)	 	 	
159,736	
Total revenues	 	 —	 	 	
148,231	 	 	
61,949	 	 	
4,194	 	 	
(374)	 	 	
214,000	
Costs and expenses	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Games cost of revenue (exclusive of depreciation and amortization)	 	 —	 	 	 —	 	 	
12,968	 	 	 —	 	 	 —	 	 	
12,968	
Payments cost of revenue (exclusive of depreciation and amortization)	 	 —	 	 	
118,885	 	 	
2,206	 	 	
2,407	 	 	 —	 	 	
123,498	
Operating expenses	 	 —	 	 	
16,496	 	 	
14,107	 	 	
504	 	 	
(374)	 	 	
30,733	
Research and development	 	 —	 	 	 —	 	 	
4,671	 	 	 —	 	 	 —	 	 	
4,671	
Depreciation	 	 —	 	 	
1,965	 	 	
10,474	 	 	
31	 	 	 —	 	 	
12,470	
Amortization	 	 —	 	 	
3,142	 	 	
19,888	 	 	
570	 	 	 —	 	 	
23,600	
Total costs and expenses	 	 —	 	 	
140,488	 	 	
64,314	 	 	
3,512	 	 	
(374)	 	 	
207,940	
Operating income (loss)	 	 —	 	 	
7,743	 	 	
(2,365)	 	 	
682	 	 	 —	 	 	
6,060	
Other expenses (income)	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Interest expense, net of interest income	 	 —	 	 	
1,576	 	 	
23,105	 	 	
61	 	 	 —	 	 	
24,742	
Equity in loss (income) of subsidiaries	 	
10,796	 	 	
(3,520)	 	 	 —	 	 	 —	 	 	
(7,276)	 	 	 —	
Total other expenses (income)	 	
10,796	 	 	
(1,944)	 	 	
23,105	 	 	
61	 	 	
(7,276)	 	 	
24,742	
(Loss) income before income tax	 	
(10,796)	 	 	
9,687	 	 	
(25,470)	 	 	
621	 	 	
7,276	 	 	
(18,682)	
Income tax provision (benefit)	 	 —	 	 	
1,823	 	 	
(9,960)	 	 	
251	 	 	 —	 	 	
(7,886)	
Net (loss) income	 	
(10,796)	 	 	
7,864	 	 	
(15,510)	 	 	
370	 	 	
7,276	 	 	
(10,796)	
Foreign currency translation	 	
(435)	 	 	 —	 	 	 —	 	 	
(435)	 	 	
435	 	 	
(435)	
Comprehensive (loss) income	$	
(11,231)	 	$	
7,864	 	$	
(15,510)	 	$	
(65)	 	$	
7,711	 	$	
(11,231)	

 

24

Table of Contents

 	Six Months Ended June 30, 2016	
 	Parent	    	Subsidiary
Issuer	    	Guarantor
Subsidiaries	    	Non-Guarantor
Subsidiaries	    	Eliminations	    	Total	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Revenues	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Games	$	 —	 	$	 —	 	$	
102,442	 	$	 —	 	$	 —	 	$	
102,442	
Payments	 	 —	 	 	
294,617	 	 	
15,103	 	 	
8,352	 	 	
(745)	 	 	
317,327	
Total revenues	 	 —	 	 	
294,617	 	 	
117,545	 	 	
8,352	 	 	
(745)	 	 	
419,769	
Costs and expenses	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Games cost of revenue (exclusive of depreciation and amortization)	 	 —	 	 	 —	 	 	
21,404	 	 	 —	 	 	 —	 	 	
21,404	
Payments cost of revenue (exclusive of depreciation and amortization)	 	 —	 	 	
236,949	 	 	
4,548	 	 	
4,658	 	 	 —	 	 	
246,155	
Operating expenses	 	 —	 	 	
37,421	 	 	
23,081	 	 	
981	 	 	
(745)	 	 	
60,738	
Research and development	 	 —	 	 	 —	 	 	
10,040	 	 	 —	 	 	 —	 	 	
10,040	
Depreciation	 	 —	 	 	
4,484	 	 	
20,260	 	 	
61	 	 	 —	 	 	
24,805	
Amortization	 	 —	 	 	
6,242	 	 	
39,391	 	 	
1,150	 	 	 —	 	 	
46,783	
Total costs and expenses	 	 —	 	 	
285,096	 	 	
118,724	 	 	
6,850	 	 	
(745)	 	 	
409,925	
Operating income (loss)	 	 —	 	 	
9,521	 	 	
(1,179)	 	 	
1,502	 	 	 —	 	 	
9,844	
Other expense (income)	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Interest expense, net of interest income	 	 —	 	 	
3,509	 	 	
46,103	 	 	
122	 	 	 —	 	 	
49,734	
Equity in loss (income) of subsidiaries	 	
23,948	 	 	
(6,814)	 	 	 —	 	 	 —	 	 	
(17,134)	 	 	 —	
Total other (income) expense	 	
23,948	 	 	
(3,305)	 	 	
46,103	 	 	
122	 	 	
(17,134)	 	 	
49,734	
(Loss) income before income tax	 	
(23,948)	 	 	
12,826	 	 	
(47,282)	 	 	
1,380	 	 	
17,134	 	 	
(39,890)	
Income tax expense (benefit)	 	 —	 	 	
1,936	 	 	
(18,382)	 	 	
504	 	 	 —	 	 	
(15,942)	
Net (loss) income	 	
(23,948)	 	 	
10,890	 	 	
(28,900)	 	 	
876	 	 	
17,134	 	 	
(23,948)	
Foreign currency translation	 	
(920)	 	 	 —	 	 	 —	 	 	
(920)	 	 	
920	 	 	
(920)	
Comprehensive (loss) income	$	
(24,868)	 	$	
10,890	 	$	
(28,900)	 	$	
(44)	 	$	
18,054	 	$	
(24,868)	

25

Table of Contents

 	Three Months Ended June 30, 2015	
 	Parent	    	Subsidiary
Issuer	    	Guarantor
Subsidiaries	    	Non-Guarantor
Subsidiaries	    	Eliminations	    	Total	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Revenues	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Games	$	 —	 	$	 —	 	$	
54,868	 	$	 —	 	$	 —	 	$	
54,868	
Payments	 	 —	 	 	
139,818	 	 	
7,572	 	 	
4,256	 	 	
(150)	 	 	
151,496	
Total revenues	 	 —	 	 	
139,818	 	 	
62,440	 	 	
4,256	 	 	
(150)	 	 	
206,364	
Costs and expenses	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Games cost of revenue (exclusive of depreciation and amortization)	 	 —	 	 	 —	 	 	
12,246	 	 	 —	 	 	 —	 	 	
12,246	
Payments cost of revenue (exclusive of depreciation and amortization)	 	 —	 	 	
110,659	 	 	
2,129	 	 	
2,188	 	 	 —	 	 	
114,976	
Operating expenses	 	 —	 	 	
18,809	 	 	
7,736	 	 	
452	 	 	
(150)	 	 	
26,847	
Research and development	 	 —	 	 	 —	 	 	
4,470	 	 	 —	 	 	 —	 	 	
4,470	
Depreciation	 	 —	 	 	
1,787	 	 	
8,880	 	 	
50	 	 	 —	 	 	
10,717	
Amortization	 	 —	 	 	
2,193	 	 	
17,964	 	 	
615	 	 	 —	 	 	
20,772	
Total costs and expenses	 	 —	 	 	
133,448	 	 	
53,425	 	 	
3,305	 	 	
(150)	 	 	
190,028	
Operating income	 	 —	 	 	
6,370	 	 	
9,015	 	 	
951	 	 	 —	 	 	
16,336	
Other expense  (income)	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Interest expense, net of interest income	 	 —	 	 	
1,834	 	 	
23,036	 	 	
88	 	 	 —	 	 	
24,958	
Equity in loss (income) of subsidiaries	 	
12,741	 	 	
(3,665)	 	 	 —	 	 	 —	 	 	
(9,076)	 	 	 —	
Loss on extinguishment of debt	 	 —	 	 	
12,977	 	 	 —	 	 	 —	 	 	 —	 	 	
12,977	
Total other expense (income)	 	
12,741	 	 	
11,146	 	 	
23,036	 	 	
88	 	 	
(9,076)	 	 	
37,935	
(Loss) income before income tax	 	
(12,741)	 	 	
(4,776)	 	 	
(14,021)	 	 	
863	 	 	
9,076	 	 	
(21,599)	
Income tax (benefit) provision	 	 —	 	 	
(3,684)	 	 	
(5,502)	 	 	
328	 	 	 —	 	 	
(8,858)	
Net (loss) income	 	
(12,741)	 	 	
(1,092)	 	 	
(8,519)	 	 	
535	 	 	
9,076	 	 	
(12,741)	
Foreign currency translation	 	
811	 	 	 —	 	 	 —	 	 	
811	 	 	
(811)	 	 	
811	
Comprehensive loss (income)	$	
(11,930)	 	$	
(1,092)	 	$	
(8,519)	 	$	
1,346	 	$	
8,265	 	$	
(11,930)	

 

26

Table of Contents

 	Six Months Ended June 30, 2015	
 	Parent	    	Subsidiary
Issuer	    	Guarantor
Subsidiaries	    	Non-Guarantor
Subsidiaries	    	Eliminations	    	Total	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Revenues	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Games	$	 —	 	$	 —	 	$	
109,913	 	$	 —	 	$	 —	 	$	
109,913	
Payments	 	 —	 	 	
281,228	 	 	
14,896	 	 	
8,086	 	 	
(286)	 	 	
303,924	
Total revenues	 	 —	 	 	
281,228	 	 	
124,809	 	 	
8,086	 	 	
(286)	 	 	
413,837	
Costs and expenses	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Games cost of revenue (exclusive of depreciation and amortization)	 	 —	 	 	 —	 	 	
24,324	 	 	 —	 	 	 —	 	 	
24,324	
Payments cost of revenue (exclusive of depreciation and amortization)	 	 —	 	 	
221,248	 	 	
4,422	 	 	
4,251	 	 	 —	 	 	
229,921	
Operating expenses	 	 —	 	 	
23,000	 	 	
19,095	 	 	
879	 	 	
(286)	 	 	
42,688	
Research and development	 	 —	 	 	 —	 	 	
9,906	 	 	 —	 	 	 —	 	 	
9,906	
Depreciation	 	 —	 	 	
3,561	 	 	
17,422	 	 	
111	 	 	 —	 	 	
21,094	
Amortization	 	 —	 	 	
4,408	 	 	
35,735	 	 	
1,284	 	 	 —	 	 	
41,427	
Total costs and expenses	 	 —	 	 	
252,217	 	 	
110,904	 	 	
6,525	 	 	
(286)	 	 	
369,360	
Operating income	 	 —	 	 	
29,011	 	 	
13,905	 	 	
1,561	 	 	 —	 	 	
44,477	
Other expense (income)	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Interest expense, net of interest income	 	 —	 	 	
4,612	 	 	
45,823	 	 	
178	 	 	 —	 	 	
50,613	
Equity in loss (income) of subsidiaries	 	
12,272	 	 	
(6,712)	 	 	 —	 	 	 —	 	 	
(5,560)	 	 	 —	
Loss on extinguishment of debt	 	 —	 	 	
12,977	 	 	 —	 	 	 —	 	 	 —	 	 	
12,977	
Total other expense (income)	 	
12,272	 	 	
10,877	 	 	
45,823	 	 	
178	 	 	
(5,560)	 	 	
63,590	
(Loss) income before income tax	 	
(12,272)	 	 	
18,134	 	 	
(31,918)	 	 	
1,383	 	 	
5,560	 	 	
(19,113)	
Income tax expense (benefit)	 	 —	 	 	
5,022	 	 	
(12,444)	 	 	
581	 	 	 —	 	 	
(6,841)	
Net (loss) income	 	
(12,272)	 	 	
13,112	 	 	
(19,474)	 	 	
802	 	 	
5,560	 	 	
(12,272)	
Foreign currency translation	 	
(62)	 	 	 —	 	 	 —	 	 	
(62)	 	 	
62	 	 	
(62)	
Comprehensive (loss) income	$	
(12,334)	 	$	
13,112	 	$	
(19,474)	 	$	
740	 	$	
5,622	 	$	
(12,334)	

27

Table of Contents

 	At June 30, 2016	
 	Parent	    	Subsidiary
Issuer	    	Guarantor
Subsidiaries	    	Non-Guarantor
Subsidiaries	    	Eliminations	    	Total	
ASSETS	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Current assets	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Cash and cash equivalents	$	 —	 	$	
61,003	 	$	
10,574	 	$	
13,527	 	$	 —	 	$	
85,104	
Settlement receivables	 	 —	 	 	
24,218	 	 	 —	 	 	
2,655	 	 	 —	 	 	
26,873	
Trade receivables, net	 	 —	 	 	
6,296	 	 	
42,052	 	 	
1	 	 	 —	 	 	
48,349	
Other receivables	 	 —	 	 	
2,401	 	 	
923	 	 	
89	 	 	 —	 	 	
3,413	
Inventory	 	 —	 	 	
10,610	 	 	
15,383	 	 	 —	 	 	 —	 	 	
25,993	
Prepaid expenses and other assets	 	 —	 	 	
7,303	 	 	
3,493	 	 	
8,400	 	 	 —	 	 	
19,196	
Intercompany balances	 	 —	 	 	
83,020	 	 	
178,337	 	 	
1,717	 	 	
(263,074)	 	 	 —	
Total current assets	 	 —	 	 	
194,851	 	 	
250,762	 	 	
26,389	 	 	
(263,074)	 	 	
208,928	
Non-current assets	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Property, equipment and leasehold improvements, net	 	 —	 	 	
18,346	 	 	
84,324	 	 	
273	 	 	 —	 	 	
102,943	
Goodwill	 	 —	 	 	
154,395	 	 	
634,811	 	 	
639	 	 	 —	 	 	
789,845	
Other intangible assets, net	 	 —	 	 	
28,965	 	 	
323,081	 	 	
5,773	 	 	 —	 	 	
357,819	
Other receivables	 	 —	 	 	
2,087	 	 	
10	 	 	 —	 	 	 —	 	 	
2,097	
Investment in subsidiaries	 	
115,183	 	 	
165,027	 	 	 —	 	 	
84	 	 	
(280,294)	 	 	 —	
Deferred tax asset	 	 —	 	 	
60,478	 	 	 —	 	 	 —	 	 	
(60,478)	 	 	 —	
Other assets	 	 —	 	 	
5,988	 	 	
2,212	 	 	
528	 	 	 —	 	 	
8,728	
Intercompany balances	 	 —	 	 	
1,139,750	 	 	 —	 	 	 —	 	 	
(1,139,750)	 	 	 —	
Total non-current assets	 	
115,183	 	 	
1,575,036	 	 	
1,044,438	 	 	
7,297	 	 	
(1,480,522)	 	 	
1,261,432	
Total assets	$	
115,183	 	$	
1,769,887	 	$	
1,295,200	 	$	
33,686	 	$	
(1,743,596)	 	$	
1,470,360	
LIABILITIES AND STOCKHOLDERS’ EQUITY	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Current liabilities	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Settlement liabilities	$	 —	 	$	
95,922	 	$	
137	 	$	
5,403	 	$	 —	 	$	
101,462	
Accounts payable and accrued expenses	 	 —	 	 	
85,135	 	 	
29,126	 	 	
1,397	 	 	 —	 	 	
115,658	
Current portion of long-term debt	 	 —	 	 	
10,000	 	 	 —	 	 	 —	 	 	 —	 	 	
10,000	
Intercompany balances	 	 —	 	 	
180,052	 	 	
76,963	 	 	
6,059	 	 	
(263,074)	 	 	 —	
Total current liabilities	 	 —	 	 	
371,109	 	 	
106,226	 	 	
12,859	 	 	
(263,074)	 	 	
227,120	
Non-current liabilities	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Deferred tax liability	 	 —	 	 	 —	 	 	
71,338	 	 	 —	 	 	
(60,478)	 	 	
10,860	
Long-term debt, less current portion	 	 —	 	 	
1,113,545	 	 	 —	 	 	 —	 	 	 —	 	 	
1,113,545	
Other accrued expenses and liabilities	 	 —	 	 	
3,175	 	 	
353	 	 	 —	 	 	 —	 	 	
3,528	
Intercompany balances	 	 —	 	 	 —	 	 	
1,139,750	 	 	 —	 	 	
(1,139,750)	 	 	 —	
Total non-current liabilities	 	 —	 	 	
1,116,720	 	 	
1,211,441	 	 	 —	 	 	
(1,200,228)	 	 	
1,127,933	
Total liabilities	 	 —	 	 	
1,487,829	 	 	
1,317,667	 	 	
12,859	 	 	
(1,463,302)	 	 	
1,355,053	
Stockholders’ equity	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Common stock	 	
91	 	 	 —	 	 	 —	 	 	 —	 	 	 —	 	 	
91	
Convertible preferred stock	 	 —	 	 	 —	 	 	 —	 	 	 —	 	 	 —	 	 	 —	
Additional paid-in capital	 	
260,788	 	 	
82,365	 	 	
4,510	 	 	
21,098	 	 	
(107,973)	 	 	
260,788	
Retained earnings	 	
31,232	 	 	
200,419	 	 	
(27,101)	 	 	
2,055	 	 	
(175,373)	 	 	
31,232	
Accumulated other comprehensive income	 	
(726)	 	 	
(726)	 	 	
124	 	 	
(2,326)	 	 	
3,052	 	 	
(602)	
Treasury stock, at cost	 	
(176,202)	 	 	 —	 	 	 —	 	 	 —	 	 	 —	 	 	
(176,202)	
Total stockholders’ equity	 	
115,183	 	 	
282,058	 	 	
(22,467)	 	 	
20,827	 	 	
(280,294)	 	 	
115,307	
Total liabilities and stockholders’ equity	$	
115,183	 	$	
1,769,887	 	$	
1,295,200	 	$	
33,686	 	$	
(1,743,596)	 	$	
1,470,360	

28

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 	At December 31, 2015	
 	Parent	    	Subsidiary
Issuer	    	Guarantor
Subsidiaries	    	Non-Guarantor
Subsidiaries	    	Eliminations	    	Total	
ASSETS	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Current assets	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Cash and cash equivalents	$	
6	 	$	
87,078	 	$	
3,900	 	$	
11,046	 	$	 —	 	$	
102,030	
Settlement receivables	 	 —	 	 	
42,437	 	 	 —	 	 	
2,496	 	 	 —	 	 	
44,933	
Trade receivables, net	 	 —	 	 	
10,750	 	 	
41,634	 	 	
(2)	 	 	 —	 	 	
52,382	
Other receivables	 	 —	 	 	
4,063	 	 	
833	 	 	
32	 	 	 —	 	 	
4,928	
Inventory	 	 —	 	 	
12,772	 	 	
15,966	 	 	 —	 	 	 —	 	 	
28,738	
Prepaid expenses and other assets	 	 —	 	 	
6,464	 	 	
5,160	 	 	
9,148	 	 	 —	 	 	
20,772	
Intercompany balances	 	 —	 	 	
39,810	 	 	
168,659	 	 	
1,431	 	 	
(209,900)	 	 	 —	
Total current assets	 	
6	 	 	
203,374	 	 	
236,152	 	 	
24,151	 	 	
(209,900)	 	 	
253,783	
Non-current assets	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Property, equipment and leasehold improvements, net	 	 —	 	 	
26,472	 	 	
79,514	 	 	
322	 	 	 —	 	 	
106,308	
Goodwill	 	 —	 	 	
154,395	 	 	
634,811	 	 	
597	 	 	 —	 	 	
789,803	
Other intangible assets, net	 	 —	 	 	
32,000	 	 	
343,629	 	 	
6,833	 	 	 —	 	 	
382,462	
Other receivables	 	 —	 	 	
3,256	 	 	
3,399	 	 	 —	 	 	 —	 	 	
6,655	
Investment in subsidiaries	 	
137,414	 	 	
159,735	 	 	 —	 	 	
86	 	 	
(297,235)	 	 	 —	
Deferred tax asset	 	 —	 	 	
65,577	 	 	 —	 	 	 —	 	 	
(65,577)	 	 	 —	
Other assets	 	 —	 	 	
7,256	 	 	
3,667	 	 	
451	 	 	 —	 	 	
11,374	
Intercompany balances	 	 —	 	 	
1,136,505	 	 	 —	 	 	 —	 	 	
(1,136,505)	 	 	 —	
Total non-current assets	 	
137,414	 	 	
1,585,196	 	 	
1,065,020	 	 	
8,289	 	 	
(1,499,317)	 	 	
1,296,602	
Total assets	$	
137,420	 	$	
1,788,570	 	$	
1,301,172	 	$	
32,440	 	$	
(1,709,217)	 	$	
1,550,385	
LIABILITIES AND STOCKHOLDERS’ EQUITY	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Current liabilities	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Settlement liabilities	$	 —	 	$	
136,109	 	$	
162	 	$	
3,548	 	$	 —	 	$	
139,819	
Accounts payable and accrued expenses	 	 —	 	 	
67,736	 	 	
32,593	 	 	
1,183	 	 	 —	 	 	
101,512	
Current portion of long-term debt	 	 —	 	 	
10,000	 	 	 —	 	 	 —	 	 	 —	 	 	
10,000	
Intercompany balances	 	 —	 	 	
170,091	 	 	
32,732	 	 	
7,077	 	 	
(209,900)	 	 	 —	
Total current liabilities	 	 —	 	 	
383,936	 	 	
65,487	 	 	
11,808	 	 	
(209,900)	 	 	
251,331	
Non-current liabilities	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Deferred tax liability	 	 —	 	 	 —	 	 	
93,221	 	 	 —	 	 	
(65,577)	 	 	
27,644	
Long-term debt, less current portion	 	 —	 	 	
1,129,899	 	 	 —	 	 	 —	 	 	 —	 	 	
1,129,899	
Other accrued expenses and liabilities	 	 —	 	 	
3,624	 	 	
467	 	 	 —	 	 	 —	 	 	
4,091	
Intercompany balances	 	 —	 	 	 —	 	 	
1,136,505	 	 	 —	 	 	
(1,136,505)	 	 	 —	
Total non-current liabilities	 	 —	 	 	
1,133,523	 	 	
1,230,193	 	 	 —	 	 	
(1,202,082)	 	 	
1,161,634	
Total liabilities	 	 —	 	 	
1,517,459	 	 	
1,295,680	 	 	
11,808	 	 	
(1,411,982)	 	 	
1,412,965	
Stockholders’ equity	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Common stock	 	
91	 	 	 —	 	 	 —	 	 	 —	 	 	 —	 	 	
91	
Convertible preferred stock	 	 —	 	 	 —	 	 	 —	 	 	 —	 	 	 —	 	 	 —	
Additional paid-in capital	 	
258,020	 	 	
80,443	 	 	
3,670	 	 	
21,101	 	 	
(105,214)	 	 	
258,020	
Retained earnings	 	
55,180	 	 	
190,375	 	 	
1,797	 	 	
1,180	 	 	
(193,352)	 	 	
55,180	
Accumulated other comprehensive income	 	
318	 	 	
293	 	 	
25	 	 	
(1,649)	 	 	
1,331	 	 	
318	
Treasury stock, at cost	 	
(176,189)	 	 	 —	 	 	 —	 	 	 —	 	 	 —	 	 	
(176,189)	
Total stockholders’ equity	 	
137,420	 	 	
271,111	 	 	
5,492	 	 	
20,632	 	 	
(297,235)	 	 	
137,420	
Total liabilities and stockholders’ equity	$	
137,420	 	$	
1,788,570	 	$	
1,301,172	 	$	
32,440	 	$	
(1,709,217)	 	$	
1,550,385	

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Table of Contents

 	Six Months Ended June 30, 2016	
 	Parent	    	Subsidiary
Issuer	    	Guarantor
Subsidiaries	    	Non-Guarantor
Subsidiaries	    	Eliminations	    	Total	
Cash flows from operating activities	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Net (loss) income	$	
(23,948)	 	$	
10,890	 	$	
(28,900)	 	$	
876	 	$	
17,134	 	$	
(23,948)	
Adjustments to reconcile net (loss) income to cash provided by operating activities:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Depreciation and amortization	 	 —	 	 	
10,726	 	 	
59,651	 	 	
1,211	 	 	 —	 	 	
71,588	
Amortization of financing costs	 	 —	 	 	
3,349	 	 	 —	 	 	 —	 	 	 —	 	 	
3,349	
Loss on sale or disposal of assets	 	 —	 	 	
924	 	 	
764	 	 	 —	 	 	 —	 	 	
1,688	
Accretion of contract rights	 	 —	 	 	 —	 	 	
4,339	 	 	 —	 	 	 —	 	 	
4,339	
Provision for bad debts	 	 —	 	 	
17	 	 	
4,938	 	 	 —	 	 	 —	 	 	
4,955	
Write-down of assets	 	 —	 	 	 —	 	 	
4,289	 	 	 —	 	 	 —	 	 	
4,289	
Reserve for obsolescence	 	 —	 	 	
365	 	 	
302	 	 	 —	 	 	 —	 	 	
667	
Equity loss (income)	 	
23,948	 	 	
(6,814)	 	 	 —	 	 	 —	 	 	
(17,134)	 	 	 —	
Stock-based compensation	 	 —	 	 	
1,929	 	 	
839	 	 	 —	 	 	 —	 	 	
2,768	
Other non-cash items	 	 —	 	 	 —	 	 	
(38)	 	 	 —	 	 	 —	 	 	
(38)	
Changes in operating assets and liabilities:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Net settlement receivables and liabilities	 	 —	 	 	
(21,968)	 	 	
(25)	 	 	
1,523	 	 	 —	 	 	
(20,470)	
Other changes in operating assets and liabilities	 	
1	 	 	
(4,950)	 	 	
12,055	 	 	
119	 	 	 —	 	 	
7,225	
Net cash provided (used in) by operating activities	 	
1	 	 	
(5,532)	 	 	
58,214	 	 	
3,729	 	 	 —	 	 	
56,412	
Cash flows from investing activities	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Capital expenditures	 	 —	 	 	
(5,953)	 	 	
(40,452)	 	 	
(104)	 	 	 —	 	 	
(46,509)	
Proceeds from sale of fixed assets	 	 —	 	 	
4,608	 	 	 —	 	 	 —	 	 	 —	 	 	
4,608	
Advances under development and placement agreements	 	 —	 	 	 —	 	 	
(11,187)	 	 	 —	 	 	 —	 	 	
(11,187)	
Changes in restricted cash and cash equivalents	 	 —	 	 	
54	 	 	 —	 	 	 —	 	 	 —	 	 	
54	
Intercompany Investing Activities	 	
6	 	 	
586	 	 	
99	 	 	
(45)	 	 	
(646)	 	 	 —	
Net cash provided by (used in) investing activities	 	
6	 	 	
(705)	 	 	
(51,540)	 	 	
(149)	 	 	
(646)	 	 	
(53,034)	
Cash flows from financing activities	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Repayments of credit facility	 	 —	 	 	
(19,400)	 	 	 —	 	 	 —	 	 	 —	 	 	
(19,400)	
Debt issuance costs	 	 —	 	 	
(480)	 	 	 —	 	 	 —	 	 	 —	 	 	
(480)	
Purchase of treasury stock	 	
(13)	 	 	 —	 	 	 —	 	 	 —	 	 	 —	 	 	
(13)	
Intercompany financing activities	 	 —	 	 	
42	 	 	 —	 	 	
(688)	 	 	
646	 	 	 —	
Net cash used in financing activities	 	
(13)	 	 	
(19,838)	 	 	 —	 	 	
(688)	 	 	
646	 	 	
(19,893)	
Effect of exchange rates on cash	 	 —	 	 	 —	 	 	 —	 	 	
(411)	 	 	 —	 	 	
(411)	
Cash and cash equivalents	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Net (decrease) increase for the period	 	
(6)	 	 	
(26,075)	 	 	
6,674	 	 	
2,481	 	 	 —	 	 	
(16,926)	
Balance, beginning of the period	 	
6	 	 	
87,078	 	 	
3,900	 	 	
11,046	 	 	 —	 	 	
102,030	
Balance, end of the period	$	 —	 	 	
61,003	 	 	
10,574	 	 	
13,527	 	 	 —	 	 	
85,104	

 

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 	Six Months Ended June 30, 2015	
 	Parent	    	Subsidiary
Issuer	    	Guarantor
Subsidiaries	    	Non-Guarantor
Subsidiaries	    	Eliminations	    	Total	
Cash flows from operating activities	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Net (loss) income	$	
(12,272)	 	$	
13,112	 	$	
(19,474)	 	$	
802	 	$	
5,560	 	$	
(12,272)	
Adjustments to reconcile net income to cash provided by operating activities:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Depreciation and amortization	 	 —	 	 	
7,969	 	 	
53,157	 	 	
1,395	 	 	 —	 	 	
62,521	
Amortization of financing costs	 	 —	 	 	
3,730	 	 	 —	 	 	 —	 	 	 —	 	 	
3,730	
(Gain) loss on sale or disposal of assets	 	 —	 	 	
(13)	 	 	
387	 	 	 —	 	 	 —	 	 	
374	
Accretion of contract rights	 	 —	 	 	 —	 	 	
4,092	 	 	 —	 	 	 —	 	 	
4,092	
Provision for bad debts	 	 —	 	 	 —	 	 	
4,370	 	 	 —	 	 	 —	 	 	
4,370	
Reserve for obsolescence	 	 —	 	 	
120	 	 	
4	 	 	 —	 	 	 —	 	 	
124	
Loss on early extinguishment of debt	 	 —	 	 	
12,977	 	 	 —	 	 	 —	 	 	 —	 	 	
12,977	
Equity in loss (income) of subsidiaries	 	
12,272	 	 	
(6,712)	 	 	 —	 	 	 —	 	 	
(5,560)	 	 	 —	
Stock-based compensation	 	 —	 	 	
3,432	 	 	
522	 	 	 —	 	 	 —	 	 	
3,954	
Other non-cash items	 	 —	 	 	
76	 	 	
(96)	 	 	 —	 	 	 —	 	 	
(20)	
Changes in operating assets and liabilities:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Net settlement receivables and liabilities	 	 —	 	 	
43,663	 	 	
91	 	 	
(1,970)	 	 	 —	 	 	
41,784	
Other changes in operating assets and liabilities	 	
28	 	 	
15,719	 	 	
(10,163)	 	 	
(827)	 	 	 —	 	 	
4,757	
Net cash provided by (used in) operating activities	 	
28	 	 	
94,073	 	 	
32,890	 	 	
(600)	 	 	 —	 	 	
126,391	
Cash flows from investing activities	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Capital expenditures	 	 —	 	 	
(5,387)	 	 	
(23,993)	 	 	
(280)	 	 	 —	 	 	
(29,660)	
Acquisitions, net of cash acquired	 	 —	 	 	
(2,257)	 	 	 —	 	 	 —	 	 	 —	 	 	
(2,257)	
Proceeds from sale of fixed assets	 	 —	 	 	
29	 	 	 —	 	 	 —	 	 	 —	 	 	
29	
Advances under development and placement agreements	 	 —	 	 	 —	 	 	
(1,255)	 	 	 —	 	 	 —	 	 	
(1,255)	
Repayments under development agreements	 	 —	 	 	 —	 	 	
2,392	 	 	 —	 	 	 —	 	 	
2,392	
Changes in restricted cash and cash equivalents	 	 —	 	 	
60	 	 	 —	 	 	 —	 	 	 —	 	 	
60	
Intercompany investing activities	 	
(3,907)	 	 	
5,423	 	 	 —	 	 	
(106)	 	 	
(1,410)	 	 	 —	
Net cash used in investing activities	 	
(3,907)	 	 	
(2,132)	 	 	
(22,856)	 	 	
(386)	 	 	
(1,410)	 	 	
(30,691)	
Cash flows from financing activities	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Repayments of credit facility	 	 —	 	 	
(5,000)	 	 	 —	 	 	 —	 	 	 —	 	 	
(5,000)	
Repayments of secured notes	 	 —	 	 	
(350,000)	 	 	 —	 	 	 —	 	 	 —	 	 	
(350,000)	
Proceeds from issuance of secured notes	 	 —	 	 	
335,000	 	 	 —	 	 	 —	 	 	 —	 	 	
335,000	
Debt issuance costs	 	 —	 	 	
(1,154)	 	 	 —	 	 	 —	 	 	 —	 	 	
(1,154)	
Issuance of warrant	 	
2,246	 	 	
(2,246)	 	 	 —	 	 	 —	 	 	 —	 	 	 —	
Proceeds from exercise of stock options	 	
1,673	 	 	 —	 	 	 —	 	 	 —	 	 	 —	 	 	
1,673	
Purchase of treasury stock	 	
(40)	 	 	 —	 	 	 —	 	 	 —	 	 	 —	 	 	
(40)	
Intercompany financing activities	 	 —	 	 	
106	 	 	 —	 	 	
(1,516)	 	 	
1,410	 	 	 —	
Net cash provided by (used in) financing activities	 	
3,879	 	 	
(23,294)	 	 	 —	 	 	
(1,516)	 	 	
1,410	 	 	
(19,521)	
Effect of exchange rates on cash	 	 —	 	 	 —	 	 	 —	 	 	
(257)	 	 	 —	 	 	
(257)	
Cash and cash equivalents	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Net increase (decrease) for the period	 	 —	 	 	
68,647	 	 	
10,034	 	 	
(2,759)	 	 	 —	 	 	
75,922	
Balance, beginning of the period	 	 —	 	 	
68,143	 	 	
6,489	 	 	
14,463	 	 	 —	 	 	
89,095	
Balance, end of the period	$	 —	 	$	
136,790	 	$	
16,523	 	$	
11,704	 	$	 —	 	$	
165,017	

 

31

Table of Contents

20. SUBSEQUENT EVENTS
 
As of the date of filing, we had not identified, and were not aware of, any subsequent events for the current period.

32

Table of Contents
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations. 
 
Cautionary Information Regarding Forward-Looking Statements
 
The following management discussion and analysis of financial condition and results of operations contains “forward-looking statements” as defined in the U.S. Private Securities Litigation Reform Act of 1995. In this context, forward-looking statements often address our expected future business and financial performance, and often contain words such as “anticipate,” “believe,” “expect,” “intend,” “estimate,” “project,” “may,” “should,” “will,” “likely,” “will likely result,” “will continue,” “future,” “plan,” “target,” “forecast,” “goal,” “observe,” “seek,” “strategy” and similar expressions to identify forward-looking statements. These forward-looking statements are subject to various risks and uncertainties that could cause actual results to differ materially from those projected or assumed, including, but not limited to, the following: the risk that our recent acquisition of Everi Games Holding will not produce the expected results we anticipate; our ability to execute on mergers, acquisitions and/or strategic alliances, including our ability to integrate and operate such acquisitions consistent with our forecasts, including Everi Games Holding; expectations regarding our existing and future installed base and win per day; expectations regarding development and placement fee arrangements; expectations regarding customers’ preferences and demands for future gaming offerings; expectations regarding our product portfolio; our continued development of new game content; our entry in new markets;  the overall growth of the gaming industry, if any; our ability to replace revenue associated with terminated contracts; margin degradation from contract renewals; our ability to comply with the Europay, MasterCard and Visa global standard for cards equipped with computer chips; our ability to introduce new products and services; gaming establishment and patron preferences; national and international economic conditions; changes in gaming regulatory, card association and statutory requirements; regulatory and licensing difficulties; competitive pressures; operational limitations; gaming market contraction; changes to tax laws; uncertainty of litigation outcomes; interest rate fluctuations; inaccuracies in underlying operating assumptions; expenditures and product development; business prospects; anticipated sales performance; unanticipated expenses or capital needs; technological obsolescence; our ability to comply with our debt covenants and service outstanding debt; employee turnover and other statements that are not historical facts. If any of these assumptions prove to be incorrect, the results contemplated by the forward-looking statements regarding our future results of operations are unlikely to be realized.
 
These cautionary statements qualify our forward-looking statements, and you are cautioned not to place undue reliance on these forward-looking statements. Any forward-looking statement speaks only as of the date on which it is made, and we disclaim any intention or obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.
 
This quarterly report should be read in conjunction with our Annual Report on Form 10-K for the fiscal year ended December 31, 2015 and the information included in our other press releases, reports and other filings with the Securities and Exchange Commission (the “SEC”). Understanding the information contained in these filings is important in order to fully understand our reported financial results and our business outlook for future periods.
 
Overview
 
Everi Holdings Inc. (formerly known as Global Cash Access Holdings, Inc.) (“Everi Holdings”, “Holdings” or “Everi”) is a holding company, the assets of which are the issued and outstanding shares of capital stock of each of Everi Games Holding Inc. (formerly known as Multimedia Games Holding Company, Inc.) (“Everi Games Holding”), which owns all of the issued and outstanding shares of capital stock of Everi Games Inc. (formerly known as Multimedia Games, Inc.) (“Everi Games” or “Games”) and Everi Payments Inc. (formerly known as Global Cash Access, Inc.) (“Everi Payments” or “Payments”). Unless otherwise indicated, the terms the “Company,” “we,” “us” and “our” refer to Holdings together with its consolidated subsidiaries.
 
Everi is dedicated to providing video and mechanical reel gaming content and technology solutions, integrated gaming payments solutions and compliance and efficiency software. Everi Games provides: (a) comprehensive content, electronic gaming units and systems for Native American and commercial casinos, including the award winning TournEvent® slot tournament solution; and (b) the central determinant system for the video lottery terminals installed at racetracks in the State of New York. Everi Payments provides: (a) access to cash at gaming facilities via Automated Teller Machine, or ATM, cash withdrawals, credit card cash access transactions, point of sale debit card transactions, and check verification and warranty services; (b) fully integrated gaming industry kiosks that provide cash access and related services; (c)

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products and services that improve credit decision making, automate cashier operations and enhance patron marketing activities for gaming establishments; (d) compliance, audit and data solutions; and (e) online payment processing solutions for gaming operators in states that offer intrastate, Internet-based gaming and lottery activities.
 
Trends and Developments Impacting our Business
 
Our strategic planning and forecasting processes include the consideration of economic and industry-wide trends that may impact our Games and Payments businesses. We have identified the more material positive and negative trends affecting our business as the following:
 
	·		Casino gaming is dependent upon discretionary consumer spending, which is typically the first type of spending that is restrained by consumers when they are uncertain about their jobs and income. Global economic uncertainty in the marketplace may have an impact on casino gaming and ultimately the demand for new gaming equipment.	
 
	·		The total North American installed slot base remained relatively flat to 2015. We expect flat to moderate growth in the forward replacement cycle for electronic gaming machines (“EGMs”). 	
 
	·		The volume of new casino openings and new market expansions have slowed from previous years. The reduced demand as a result of fewer new market expansions will reduce the overall demand for slot machines.	
 
	·		The payments card industry has implemented significant changes in the card acceptance requirements, specifically implementing standards surrounding cash access equipment’s ability to accept cards enabled with Europay, MasterCard and Visa jointly developed card security features (“EMV”) compliant chips.  The effective dates for certain of these requirements will continue for the next couple of years and will impact our ability to accept certain card based transactions in the future, our development efforts surrounding our core processing platform, and required capital expenditures to obtain equipment and technology to support EMV.	
 
	·		There has been a greater use of personal identification number debit transactions by our customers as opposed to signature-based debit transactions. 	
 
	·		We face continued competition from smaller competitors in the gaming cash access market and face additional competition from larger gaming equipment manufacturers and systems providers. This increased competition has resulted in pricing pressure for both our Games and Payments businesses.	
 
	·		Governmental oversight related to the cost of transaction processing and related fees to the consumer has increased in recent years. We expect the financial services and payments industry to respond to these legislative acts by changing other fees and costs, which may negatively impact our Payments business in the future.	
 
	·		Casino operators continue to try to broaden their appeal by focusing on investments in the addition of non-gaming amenities to their facilities, which could impact casino operator’s capital allocation for games.	
 
Factors Affecting Comparability
 
Our condensed consolidated financial statements included in this report that present our financial condition and results of operations reflect the following transactions and events:
 
	·		In April 2015, we redeemed, in full, $350.0 million in aggregate principal amount of 7.75% Secured Notes due 2021 (the “Secured Notes”) and issued $335.0 million in aggregate principal amount of 7.25% Secured Notes due 2021 (the “Refinanced Secured Notes”). As a result, we expensed $13.0 million of debt issuance costs and fees to loss on extinguishment of debt during the three months ended June 30, 2015.	
 
	·		In January 2015, a settlement agreement was reached in connection with a lawsuit we participated in as plaintiffs for which we received and recorded the settlement proceeds of $14.4 million in the first quarter of 2015. This settlement is included as a reduction of operating expenses in our Consolidated Statements of (Loss) Income and Comprehensive (Loss) Income for the year ended December 30, 2015.	

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As a result of the above transactions and events, the results of operations and earnings per share in the periods covered by the condensed consolidated financial statements may not be directly comparable.
 
Operating Segments
 
Operating segments are components of an enterprise about which separate financial information is available that is evaluated regularly by the chief operating decision-making group in deciding how to allocate resources and in assessing performance. Our chief operating decision-making group consists of the Chief Executive Officer and the Chief Financial Officer. This group manages the business, allocates resources and measures profitability based on our operating segments. The operating segments are reviewed separately because each represents products that can be sold separately to our customers.
Our chief operating decision-making group has determined the following to be the operating segments for which we conduct business: (a) Games and (b) Payments. We have reported our financial performance based on our segments in both the current and prior periods. Each of these segments is monitored by our management for performance against its internal forecast and is consistent with our internal management reporting.  

	·		The Games segment provides solutions directly to gaming establishments to offer their patrons gaming entertainment related experiences including: leased gaming equipment; sales and maintenance related services of gaming equipment; gaming systems; and ancillary products and services.	
 
	·		The Payments segment provides solutions directly to gaming establishments to offer their patrons cash access related services and products including: access to cash at gaming facilities via ATM cash withdrawals, credit card cash access transactions and point of sale debit card transactions; check-related services; fully integrated kiosks and maintenance services; compliance, audit and data software; casino credit data and reporting services and other ancillary offerings.	
 
Corporate overhead expenses have been allocated to the segments either through specific identification or based on a reasonable methodology. In addition, we allocate depreciation and amortization expenses to the business segments.
 
Our business is predominantly domestic, with no specific regional concentrations and no significant assets in foreign locations.

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Results of Operations
 
Three months ended June 30, 2016 compared to three months ended June 30, 2015
 
The following table presents our unaudited condensed consolidated results of operations (in thousands)*:

 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	Three Months Ended	 	 	 	 	 	 	
 	 	June 30, 2016	 	June 30, 2015	 	June 30, 2016 vs 2015	 	
 	    	$	    	%	    	$	    	%	    	$ Variance	    	% Variance	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Revenues	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Games	 	$	
54,264	 	
25	%  	$	
54,868	 	
27	%  	$	
(604)	 	
(1)	%  	
Payments	 	 	
159,736	 	
75	%  	 	
151,496	 	
73	%  	 	
8,240	 	
5	%  	
Total revenues	 	 	
214,000	 	
100	%  	 	
206,364	 	
100	%  	 	
7,636	 	
4	%  	
Costs and expenses	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Games cost of revenue (exclusive of depreciation and amortization)	 	 	
12,968	 	
6	%  	 	
12,246	 	
6	%  	 	
722	 	
6	%  	
Payments cost of revenue (exclusive of depreciation and amortization)	 	 	
123,498	 	
58	%  	 	
114,976	 	
56	%  	 	
8,522	 	
7	%  	
Operating expenses	 	 	
30,733	 	
14	%  	 	
26,847	 	
13	%  	 	
3,886	 	
14	%  	
Research and development	 	 	
4,671	 	
2	%  	 	
4,470	 	
2	%  	 	
201	 	
4	%  	
Depreciation	 	 	
12,470	 	
6	%  	 	
10,717	 	
5	%  	 	
1,753	 	
16	%  	
Amortization	 	 	
23,600	 	
11	%  	 	
20,772	 	
10	%  	 	
2,828	 	
14	%  	
Total costs and expenses	 	 	
207,940	 	
97	%  	 	
190,028	 	
92	%  	 	
17,912	 	
9	%  	
Operating income	 	 	
6,060	 	
3	%  	 	
16,336	 	
8	%  	 	
(10,276)	 	
(63)	%  	
Other expenses	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Interest expense, net of interest income	 	 	
24,742	 	
12	%  	 	
24,958	 	
12	%  	 	
(216)	 	
(1)	%  	
Loss on extinguishment of debt	 	 	 —	 	 —	%  	 	
12,977	 	
6	%  	 	
(12,977)	 	 —	%  	
Total other expenses	 	 	
24,742	 	
12	%  	 	
37,935	 	
18	%  	 	
(13,193)	 	
(35)	%  	
Loss before income tax	 	 	
(18,682)	 	
(9)	%  	 	
(21,599)	 	
(10)	%  	 	
2,917	 	
(14)	%  	
Income tax benefit	 	 	
(7,886)	 	
(4)	%  	 	
(8,858)	 	
(4)	%  	 	
972	 	
(11)	%  	
Net loss	 	$	
(10,796)	 	
(5)	%  	$	
(12,741)	 	
(6)	%  	$	
1,945	 	
(15)	%  	

*    Rounding may cause variances.

Revenues
 
Total revenues increased by $7.6 million, or 4%, to $214.0 million for the three months ended June 30, 2016, as compared to the same period in the prior year. This was primarily due to increased Payments revenues, slightly offset by lower Games revenues.
 
Games revenues decreased by $0.6 million, or 1%, to $54.3 million for the three months ended June 30, 2016, as compared to the same period in the prior year. This was primarily due to a decrease in leased units and win per day per unit, mostly offset by increased unit sales and a higher average sales price per unit.
 
Payments revenues increased by $8.2 million, or 5%, to $159.7 million for the three months ended June 30, 2016, as compared to the same period in the prior year. This was primarily due to higher transaction volumes from our ATM portfolio acquisitions and increased fees related to ATM cash withdrawals.
 
Costs and Expenses
 
Games cost of revenues (exclusive of depreciation and amortization) increased by $0.7 million, or 6%, to $13.0 million for the three months ended June 30, 2016, as compared to the same period in the prior year. This was primarily due to higher costs associated with the increased unit sales volume.

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Payments cost of revenues (exclusive of depreciation and amortization) increased by $8.5 million, or 7%, to $123.5 million for the three months ended June 30, 2016, as compared to the same period in the prior year. This was primarily due to the ATM portfolio acquisitions and higher commission expense on ATM revenues.
 
Operating expenses increased by $3.9 million, or 14%, to $30.7 million for the three months ended June 30, 2016, as compared to the same period in the prior year. This was primarily due to the write-down of an acquired note receivable and warrant associated with Bee Cave, partially offset by a decrease in stock-based compensation expense.
 
Depreciation increased by $1.8 million, or 16%, to $12.5 million for the three months ended June 30, 2016, as compared to the same period in the prior year. This was primarily related to increased fixed assets being placed in service.
 
Amortization increased by $2.8 million, or 14%, to $23.6 million for the three months ended June 30, 2016, as compared to the same period in the prior year. This was primarily related to an increase in intangible assets being placed in service related to developed technology and software as well as certain intangible assets acquired in the third and fourth quarters of 2015.
 
Primarily as a result of the factors described above, operating income decreased by $10.3 million, or 63%, to $6.1 million for the three months ended June 30, 2016, as compared to the same period in the prior year. The operating income margin decreased from 8% for the three months ended June 30, 2015 to 3% for the three months ended June 30, 2016.
 
Interest expense, net of interest income, decreased by $0.2 million, or 1%, to $24.7 million for the three months ended June 30, 2016, as compared to the same period in the prior year. The decrease is related to lower outstanding debt balances and write-off of debt issuance costs related to our Refinanced Secured Notes offset by a higher interest rate under the Contract Cash Solutions agreement with Wells Fargo.
 
Income tax benefit decreased by $1.0 million, or 11%, to a benefit of $7.9 million for the three months ended June 30, 2016, as compared to the same period in the prior year. This was primarily due to the decrease in loss before income tax expense of $2.9 million. The benefit for income tax reflected an effective income tax rate benefit of 42.2% for the three months ended June 30, 2016, which was higher than the statutory federal rate of 35% primarily due to state taxes, the increased valuation of certain foreign losses, the lower foreign tax rate applicable to our foreign source income, and the benefit from a research credit. The provision for income tax reflected an effective income tax rate expense of 41.0% for the same period in the prior year, which was higher than the statutory federal rate of 35% primarily due to state taxes, the lower foreign tax rate applicable to our foreign source income.

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Six months ended June 30, 2016 compared to six months ended June 30, 2015
 
The following table presents our unaudited condensed consolidated results of operations (in thousands)*:

 	 	Six Months Ended	 	 	 	 	 	 	
 	 	June 30, 2016	 	June 30, 2015	 	June 30, 2016 vs 2015	 	
 	    	$	    	%	    	$	    	%	    	$ Variance	    	% Variance	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Revenues	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Games	 	$	
102,442	 	
24	%   	$	
109,913	 	
27	%   	$	
(7,471)	 	
(7)	%   	
Payments	 	 	
317,327	 	
76	%   	 	
303,924	 	
73	%   	 	
13,403	 	
4	%   	
Total revenues	 	 	
419,769	 	
100	%   	 	
413,837	 	
100	%   	 	
5,932	 	
1	%   	
Costs and expenses	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Games cost of revenue (exclusive of depreciation and amortization)	 	 	
21,404	 	
5	%   	 	
24,324	 	
6	%   	 	
(2,920)	 	
(12)	%   	
Payments cost of revenue (exclusive of depreciation and amortization)	 	 	
246,155	 	
59	%   	 	
229,921	 	
56	%   	 	
16,234	 	
7	%   	
Operating expenses	 	 	
60,738	 	
15	%   	 	
42,688	 	
10	%   	 	
18,050	 	
42	%   	
Research and development	 	 	
10,040	 	
2	%   	 	
9,906	 	
2	%   	 	
134	 	
1	%   	
Depreciation	 	 	
24,805	 	
6	%   	 	
21,094	 	
5	%   	 	
3,711	 	
18	%   	
Amortization	 	 	
46,783	 	
11	%   	 	
41,427	 	
10	%   	 	
5,356	 	
13	%   	
Total costs and expenses	 	 	
409,925	 	
98	%   	 	
369,360	 	
89	%   	 	
40,565	 	
11	%   	
Operating income	 	 	
9,844	 	
2	%   	 	
44,477	 	
11	%   	 	
(34,633)	 	
(78)	%   	
Other expenses	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Interest expense, net of interest income	 	 	
49,734	 	
12	%   	 	
50,613	 	
12	%   	 	
(879)	 	
(2)	%   	
Loss on extinguishment of debt	 	 	 —	 	 —	%   	 	
12,977	 	
3	%   	 	
(12,977)	 	 —	%   	
Total other expenses	 	 	
49,734	 	
12	%   	 	
63,590	 	
15	%   	 	
(13,856)	 	
(22)	%   	
Loss before income tax	 	 	
(39,890)	 	
(10)	%   	 	
(19,113)	 	
(5)	%   	 	
(20,777)	 	
109	%   	
Income tax benefit	 	 	
(15,942)	 	
(4)	%   	 	
(6,841)	 	
(2)	%   	 	
(9,101)	 	
133	%   	
Net loss	 	$	
(23,948)	 	
(6)	%   	$	
(12,272)	 	
(3)	%   	$	
(11,676)	 	
95	%   	

*    Rounding may cause variances.
 
Revenues
 
Total revenues increased by $5.9 million, or 1%, to $419.8 million for the six months ended June 30, 2016, as compared to the same period in the prior year. This was primarily due to increased Payments revenues, partially offset by lower Games revenues.
 
Games revenues decreased by $7.5 million, or 7%, to $102.4 million for the six months ended June 30, 2016, as compared to the same period in the prior year. This was primarily due to a decrease in unit sales volume and a decrease in leased units and win per day per unit, partially offset by an increase in average sales price per unit.
 
Payments revenues increased by $13.4 million, or 4%, to $317.3 million for the six months ended June 30, 2016, as compared to the same period in the prior year. This was primarily due to higher transaction volumes from our ATM portfolio acquisitions and increased fees related to ATM cash withdrawals, partially offset by a decrease in revenues from cash advance and a decrease in unit sales of fully integrated kiosks.
 
Costs and Expenses
 
Games cost of revenues (exclusive of depreciation and amortization) decreased by $2.9 million, or 12%, to $21.4 million for the six months ended June 30, 2016, as compared to the same period in the prior year. This was primarily due to the decrease in game unit sales volume.

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Payments cost of revenues (exclusive of depreciation and amortization) increased by $16.2 million, or 7%, to $246.2 million for the six months ended June 30, 2016, as compared to the same period in the prior year. This was primarily due to the ATM portfolio acquisitions and higher commission expense on ATM revenues.
 
Operating expenses increased by $18.1 million, or 42%, to $60.7 million for the six months ended June 30, 2016, as compared to the same period in the prior year. This was primarily due to the impact of a gain contingency settlement of $14.4 million during the prior year and the write-down of a note receivable and warrant associated with Bee Cave, partially offset by a decrease in stock-based compensation expense.
 
Depreciation increased by $3.7 million, or 18%, to $24.8 million for the six months ended June 30, 2016, as compared to the same period in the prior year. This was primarily related to increased fixed assets being placed in service.
 
Amortization increased by $5.4 million, or 13%, to $46.8 million for the six months ended June 30, 2016, as compared to the same period in the prior year. This was primarily related to an increase in intangible assets being placed in service related to developed technology and software as well as certain intangible assets acquired in the third and fourth quarters of 2015.
 
Primarily as a result of the factors described above, operating income decreased by $34.6 million, or 78%, to $9.8 million for the six months ended June 30, 2016, as compared to the same period in the prior year. The operating income margin decreased from 11% for the six months ended June 30, 2015 to 2% for the six months ended June 30, 2016.
 
Interest expense, net of interest income, decreased by $0.9 million, or 2%, to $49.7 million for the six months ended June 30, 2016, as compared to the same period in the prior year. The decrease is related to lower outstanding debt balances, the lower interest rate and write-off of debt issuance costs related to our Refinanced Secured Notes offset by a higher interest rate under the Contract Cash Solutions agreement with Wells Fargo.
 
Income tax benefit increased by $9.1 million, or 133%, to a benefit of $15.9 million for the six months ended June 30, 2016, as compared to the same period in the prior year. This was primarily due to the increase in loss before income tax expense of $20.8 million. The benefit for income tax reflected an effective income tax rate benefit of 40.0% for the six months ended June 30, 2016, which was higher than the statutory federal rate of 35% primarily due to state taxes, the true-up of certain foreign losses, the lower foreign tax rate applicable to our foreign source income, and the benefit from a research credit. The provision for income tax reflected an effective income tax rate expense of 35.8% for the same period in the prior year, which was higher than the statutory federal rate of 35% primarily due to state taxes, an increase in our valuation allowance for certain foreign losses and non-cash compensation expenses related to stock options; partially offset by a lower foreign tax rate applicable to certain foreign source income.

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Games Revenues and Participation Units
 
The following tables include the revenues from our Games segment and the related participation units (amounts in thousands, except for EGMs):

 	 	Three Months Ended June 30, 2016	 	Three Months Ended June 30, 2015	 	 	 	 	
 	    	Total	    	 	 	    	% of Games	    	Total	    	 	 	    	% of Games	    	 	 	 	
 	 	EGMs	 	Revenue	 	Revenue	 	EGMs	 	Revenue	 	Revenue	 	% Variance	 	
Games revenues and participation units	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Contractual agreement	 	
5,268	 	$	
8,680	 	
16	%  	 	
5,454	 	$	
10,090	 	
18	%  	 	
(14)	%  	 	
Participation revenue	 	
7,911	 	 	
24,738	 	
45	%  	 	
7,881	 	 	
25,058	 	
46	%  	 	
(1)	%  	 	
Sales	 	 —	 	 	
15,483	 	
29	%  	 	 —	 	 	
13,517	 	
25	%  	 	
15	%  	 	
NY Lottery	 	 —	 	 	
4,680	 	
9	%  	 	 —	 	 	
4,521	 	
8	%  	 	
4	%  	 	
Other	 	 —	 	 	
683	 	
1	%  	 	
129	 	 	
1,682	 	
3	%  	 	
(59)	%  	 	
Total	 	
13,179	 	$	
54,264	 	
100	%  	 	
13,464	 	$	
54,868	 	
100	%  	 	
(1)	%  	 	

 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	Six Months Ended June 30, 2016	 	Six Months Ended June 30, 2015	 	 	 	 	
 	    	Total	    	 	 	    	% of Games	    	Total	    	 	 	    	% of Games	    	 	 	 	
 	 	EGMs	 	Revenue	 	Revenue	 	EGMs	 	Revenue	 	Revenue	 	% Variance	 	
Games revenues and participation units	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Contractual agreement	 	
5,268	 	$	
19,045	 	
19	%  	 	
5,454	 	$	
21,565	 	
20	%  	 	
(12)	%  	 	
Participation revenue	 	
7,911	 	 	
49,346	 	
48	%  	 	
7,881	 	 	
48,724	 	
44	%  	 	
1	%  	 	
Sales	 	 —	 	 	
23,923	 	
23	%  	 	 —	 	 	
28,097	 	
26	%  	 	
(15)	%  	 	
NY Lottery	 	 —	 	 	
9,194	 	
9	%  	 	 —	 	 	
8,709	 	
8	%  	 	
6	%  	 	
Other	 	 —	 	 	
934	 	
1	%  	 	
129	 	 	
2,818	 	
2	%  	 	
(67)	%  	 	
Total	 	
13,179	 	$	
102,442	 	
100	%  	 	
13,464	 	$	
109,913	 	
100	%  	 	
(7)	%  	 	
 
Critical Accounting Policies
 
The preparation of our financial statements in conformity with generally accepted accounting principles requires us to make estimates and assumptions that affect our reported amounts of assets and liabilities, revenues and expenses, and related disclosures of contingent assets and liabilities in our condensed consolidated financial statements. The SEC has defined critical accounting policies as the ones that are most important to the portrayal of the financial condition and results of operations, and which require management to make its most difficult and subjective judgments, often as a result of the need to make estimates about matters that are inherently uncertain.
 
For the three and six months ended June 30, 2016, there were no material changes to the critical accounting policies and estimates discussed in our audited Consolidated Financial Statements included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2015.
 
Recent Accounting Guidance
 
See Note 2, “Basis of Presentation and Summary of Significant Accounting Policies – Recent Accounting Guidance” to the Company's condensed consolidated financial statements included in this Quarterly Report on Form 10-Q for a description of recent accounting guidance.

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LIQUIDITY AND CAPITAL RESOURCES
 
Overview
 
The following table presents selected balance sheet information and an unaudited reconciliation of cash and cash equivalents to net cash available (in thousands):

 	 	 	 	 	 	 	 	
 	    	At June 30,	    	At December 31,	 	
 	 	2016	 	2015	 	
Balance sheet data	 	 	 	 	 	 	 	
Total assets	 	$	
1,470,360	 	$	
1,550,385	 	
Total borrowings	 	$	
1,123,545	 	$	
1,139,899	 	
Stockholders’ equity	 	$	
115,307	 	$	
137,420	 	
 	 	 	 	 	 	 	 	
Net cash available*	 	 	 	 	 	 	 	
Cash and cash equivalents	 	$	
85,104	 	$	
102,030	 	
Add: Settlement receivables	 	 	
26,873	 	 	
44,933	 	
Less: Settlement liabilities	 	 	
(101,462)	 	 	
(139,819)	 	
Total net cash available	 	$	
10,515	 	$	
7,144	 	

       Non-GAAP measure. Our cash position as measured by cash and cash equivalents depends upon changes in settlement receivables and the timing of payments related to settlement liabilities. As such, our cash and cash equivalents can change substantially based upon the timing of our receipt of payment for settlement receivables and payments we make to customers for our settlement liabilities. We define net cash available as cash and cash equivalents plus settlement receivables less settlement liabilities. In order to enhance investor understanding of our cash balance we provide a reconciliation of cash and cash equivalents to net cash available. Net cash available is not a measure of the Company’s current financial position under GAAP. Accordingly, it should not be considered in isolation or as a substitute for, and should be read in conjunction with, cash and cash equivalents prepared in accordance with GAAP. The above table is a reconciliation of the Company’s cash and cash equivalents per GAAP to net cash available.
 
Cash Resources
 
Our cash balance, cash flows and line of credit are expected to be sufficient to meet our recurring operating commitments and to fund our planned capital expenditures for the foreseeable future. Cash and cash equivalents at June 30, 2016 included cash in non-U.S. jurisdictions of approximately $15.1 million. Generally, these funds are available for operating and investment purposes within the jurisdiction in which they reside, but are subject to taxation in the U.S. upon repatriation.
 
We provide cash settlement services to our customers. These services involve the movement of funds between the various parties associated with cash access transactions. These activities result in a balance due to us at the end of each business day that we recoup over the next few business days and classify as settlement receivables. These activities also result in a balance due to our customers at the end of each business day that we remit over the next few business days and classify as settlement liabilities. As of June 30, 2016, we had $26.9 million in settlement receivables for which we generally receive payment within the next month. As of June 30, 2016, we had $101.5 million in settlement liabilities due to our customers for these settlement services that are generally paid within the next month. As the timing of cash received from settlement receivables and payment of settlement liabilities may differ, the total amount of cash held by us will fluctuate throughout the year. As of June 30, 2016 and December 31, 2015, the net cash available after considering settlement amounts was approximately $10.5 million and $7.1 million, respectively.

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Sources and Uses of Cash
 
The following table presents a summary of our cash flow activity (in thousands):

 	 	Six Months Ended June 30,	 	June 30, 2016 vs 2015	 	
 	    	2016	    	2015	    	Increase/(Decrease)	 	
Cash flow activities	 	 	 	 	 	 	 	 	 	 	
Net cash provided by operating activities	 	$	
56,412	 	$	
126,391	 	$	
(69,979)	 	
Net cash used in investing activities	 	$	
(53,034)	 	$	
(30,691)	 	$	
(22,343)	 	
Net cash used in financing activities	 	$	
(19,893)	 	$	
(19,521)	 	$	
(372)	 	
Effect of exchange rates on cash	 	$	
(411)	 	$	
(257)	 	$	
(154)	 	
 	 	 	 	 	 	 	 	 	 	 	
Cash and cash equivalents	 	 	 	 	 	 	 	 	 	 	
Net (decrease) increase for the period	 	 	
(16,926)	 	 	
75,922	 	 	
(92,848)	 	
Balance, beginning of the period	 	 	
102,030	 	 	
89,095	 	 	
12,935	 	
Balance, end of the period	 	$	
85,104	 	$	
165,017	 	$	
(79,913)	 	
 
Cash flows provided by operating activities decreased by $70.0 million for the six months ended June 30, 2016, as compared to the same period in the prior year. This was primarily related to the impact of the change in settlement liabilities and accounts payable and accrued expenses for the period compared to the prior year period. 
 
Cash flows used in investing activities increased by $22.3 million for the six months ended June 30, 2016, as compared to the same period in the prior year.  This was primarily due to an increase in capital expenditures and placement fee agreements.
 
Cash flows used in financing activities increased by $0.4 million for the six months ended June 30, 2016, as compared to the same period in the prior year. This was due to a decrease in proceeds from the exercise of stock options, partially offset by a decrease in the payment of debt issuance costs.
 
Long-Term Debt
 
The following table summarizes our indebtedness (in thousands):

 	 	At June 30,	    	At December 31,	 	
 	 	2016	 	2015	 	
Long-term debt	 	 	 	 	 	 	 	
Senior secured term loan	 	$	
470,600	 	$	
490,000	 	
Senior secured notes	 	 	
335,000	 	 	
335,000	 	
Senior unsecured notes	 	 	
350,000	 	 	
350,000	 	
Total long-term debt	 	 	
1,155,600	 	 	
1,175,000	 	
Less: original issue and warrant discount	 	 	
(32,055)	 	 	
(35,101)	 	
Total long-term debt after debt issuance costs and discount	 	 	
1,123,545	 	 	
1,139,899	 	
Less: current portion of long-term debt	 	 	
(10,000)	 	 	
(10,000)	 	
Long-term debt, less current portion	 	$	
1,113,545	 	$	
1,129,899	 	
 
We reclassified $23.7 million of debt issuance costs related to our outstanding debt from the non-current portion of other assets to contra-liabilities included in long-term debt as of December 31, 2015 in connection with our retrospective adoption of ASU No. 2015-03. The remaining debt issuance cost included in the non-current portion of other assets relates to line-of-credit arrangements and was not reclassified consistent with ASU No. 2015-15.
 
Credit Facilities
 
In December 2014, Everi Payments, as borrower, and Holdings entered into the Credit Agreement with Everi Payments, Holdings, Bank of America, N.A., as administrative agent, collateral agent, swing line lender and letter of credit issuer; Deutsche Bank Securities Inc., as syndication agent; and Merrill Lynch, Pierce, Fenner & Smith Incorporated and Deutsche

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Bank Securities, Inc., as joint lead arrangers and joint book managers (the “Credit Agreement”). The Credit Agreement consists of the $500.0 million six-year senior secured term loan facility that matures in 2020 (the “Term Loan”) and the $50.0 million, five-year senior secured revolving credit facility that matures in 2019 (the “Revolving Credit Facility” and together with the Term Loan, the “Credit Facilities”). The fees associated with the Credit Facilities included discounts of approximately $7.5 million and debt issuance costs of approximately $13.9 million. All borrowings under the Credit Facilities are subject to the satisfaction of customary conditions, including the absence of a default and compliance with representations and warranties.
 
We are required to repay the Term Loan in an amount equal to 0.50% per quarter of the initial aggregate principal with the final principal repayment installment on the maturity date.  Interest is due in arrears each March, June, September and December and at the maturity date. However, interest may be remitted within one to three months of such dates.
The Term Loan had an applicable interest rate of 6.25% as of June 30, 2016 and December 31, 2015.
 
The interest rate per annum applicable to the Revolving Credit Facility is, at our option, the base rate or London Interbank Offered Rate (“LIBOR”) plus, in each case, an applicable margin. The interest rate per annum applicable to the Term Loan is also, at our option, the base rate or LIBOR plus, in each case, an applicable margin. LIBOR will be reset at the beginning of each selected interest period based on the LIBOR rate then in effect; provided that, with respect to the Revolving Credit Facility, if LIBOR is below zero, then such rate will be equal to zero plus the applicable margin, and, with respect to the Term Loan, if LIBOR is below 1.0%, then such rate will be equal to 1.0% plus the applicable margin. The base rate is a fluctuating interest rate equal to the highest of (a) the prime lending rate announced by the administrative agent, (b) the federal funds effective rate from time to time plus 0.50%, and (c) LIBOR (after taking account of any applicable floor) applicable for an interest period of one month plus 1.00%. The applicable margins of 4.75% and 5.25% for the Revolving Credit Facility and Term Loan, respectively, are subject to adjustment based on our consolidated secured leverage ratio.
Voluntary prepayments of the Term Loan and the Revolving Credit Facility and voluntary reductions in the unused commitments are permitted in whole or in part, in minimum amounts as set forth in the Credit Agreement, with prior notice but without premium or penalty.
Subject to certain exceptions, the obligations under the Credit Facilities are secured by substantially all of the present and after acquired assets of each of Everi Payments, Holdings and the subsidiary guarantors (the “Collateral”) including: (a) a perfected first priority pledge of all the capital stock of Everi Payments and each domestic direct, wholly owned material restricted subsidiary held by Holdings, Everi Payments or any such subsidiary guarantor; and (b) a perfected first priority security interest in substantially all other tangible and intangible assets of Holdings, Everi Payments, and such subsidiary guarantors (including, but not limited to, accounts receivable, inventory, equipment, general intangibles, investment property, real property, intellectual property and the proceeds of the foregoing). Subject to certain exceptions, the Credit Facilities are unconditionally guaranteed by Holdings and such subsidiary guarantors and Everi Games Holding and its material domestic subsidiaries.
The Credit Agreement contains certain covenants that, among other things, limit Holdings’ ability, and the ability of certain of its subsidiaries, to incur additional indebtedness; sell assets or consolidate or merge with or into other companies; pay dividends or repurchase or redeem capital stock; make certain investments; issue capital stock of subsidiaries; incur liens; prepay, redeem or repurchase subordinated debt; and enter into certain types of transactions with our affiliates. The Credit Agreement also requires Holdings, together with its subsidiaries, to comply with a consolidated secured leverage ratio as well as an annual excess cash flow requirement. Based on our excess cash flow calculation at December 31, 2015, an excess cash flow payment of approximately $14.4 million was made during the three months ended June 30, 2016.
Events of default under the Credit Agreement include customary events such as a cross-default provision with respect to other material debt (which includes the Refinanced Secured Notes and the Unsecured Notes). In addition, an event of default will occur if Holdings undergoes a change of control. This is defined to include the case where Holdings ceases to own 100% of the equity interests of Everi Payments, or where any person or group acquires a percentage of the economic or voting interests of Holdings’ capital stock of 35% or more (determined on a fully diluted basis), or where a majority of the board of directors of Everi Payments ceases to consist of persons who are directors of Holdings on the closing date of the Credit Facilities or other directors whose nomination for election to the board of directors of Holdings was recommended by a majority of the then continuing directors. At June 30, 2016, we had approximately $470.6 million of borrowings outstanding under the Term Loan and no borrowings outstanding under the Revolving Credit Facility. We had

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$50.0 million of additional borrowing availability under the Revolving Credit Facility as of June 30, 2016. The weighted average interest rate on the Credit Facilities was approximately 6.25% for six months ended June 30, 2016.
We were in compliance with the terms of the Credit Facilities as of June 30, 2016 and December 31, 2015.
Senior Secured Notes and Refinance of Senior Secured Notes
In December 2014, we issued $350.0 million in aggregate principal amount of the Secured Notes. The fees associated with the Secured Notes included debt issuance costs of approximately $13.6 million. The Secured Notes were acquired by the initial purchasers pursuant to the terms of a purchase agreement. Under the terms of the purchase agreement, during a one year period following the closing and upon prior notice from the initial purchasers, the Company was required to use commercially reasonable efforts to aid the purchasers in the resale of the Secured Notes, including by preparing an updated offering memorandum and participating in reasonable marketing efforts including road shows, to the extent required therein. Alternatively, we had the ability to redeem the Secured Notes from the initial purchasers without penalty. On April 15, 2015, the Company entered into the Note Purchase Agreement, and issued $335.0 million in aggregate principal amount of the Refinanced Secured Notes to the Purchaser. With the proceeds from the issuance of the Refinanced Secured Notes, we redeemed, in full, the Company’s then outstanding Secured Notes from the initial purchasers in accordance with the terms of the indenture governing the Secured Notes. In connection with the issuance of the Refinanced Secured Notes during the second quarter of 2015, we expensed $13.0 million of related debt issuance costs and fees to loss on extinguishment of debt associated with the redeemed Secured Notes that were outstanding prior to the refinance transaction.
In connection with the issuance of the Refinanced Secured Notes and pursuant to the terms of the Note Purchase Agreement, the Company issued a warrant to purchase shares of the Company’s common stock (the “Warrant”) to the Purchaser. The Warrant expires on the sixth anniversary of the date of issuance. The number of shares issuable pursuant to the Warrant and the warrant exercise price are subject to adjustment for stock splits, reverse stock splits, stock dividends, mergers and certain other events. The Warrant was valued at $2.2 million using a modified Black-Scholes model and was accounted for as a debt discount.
Interest is due quarterly in arrears each January, April, July and October.
We were in compliance with the terms of the Refinanced Secured Notes as of June 30, 2016 and December 31, 2015.
Senior Unsecured Notes
In December 2014, we issued $350.0 million in aggregate principal amount of 10% Unsecured Notes due 2022 (the “Unsecured Notes”). The fees associated with the Unsecured Notes included original issue discounts of approximately $3.8 million and debt issuance costs of approximately $14.0 million.
Interest is due semi-annually in arrears each January and July.
The Unsecured Notes were acquired by the initial purchasers pursuant to the terms of a purchase agreement. Under the terms of the purchase agreement, during a one-year period following the closing and upon prior notice from the initial purchasers, the Company was required to use commercially reasonable efforts to aid the purchasers in the resale of the Unsecured Notes, including by preparing an updated offering memorandum and participating in reasonable marketing efforts including road shows, to the extent required therein. The Unsecured Notes were resold by the initial purchasers to third parties in the second quarter of 2015.
In connection with the issuance of the Unsecured Notes, the Company entered into a registration rights agreement pursuant to which the Company agreed, for the benefit of the initial holders of the Unsecured Notes, to file with the SEC, and use its commercially reasonable efforts to cause to become effective, a registration statement relating to an offer to exchange the Unsecured Notes for an issue of SEC-registered notes with terms identical to the Unsecured Notes. On October 23, 2015, we filed a registration statement on Form S-4 with the SEC in accordance with the registration rights agreement outlining our offer to exchange the Unsecured Notes for identical notes without transfer restrictions. The registration statement was declared effective on November 3, 2015, and the exchange offer for the Unsecured Notes was completed on December 4, 2015 with 100% percent participation.
We were in compliance with the terms of the Unsecured Notes as of June 30, 2016 and December 31, 2015.

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Contractual Obligations
 
There were no material changes in our commitments under contractual obligations to those disclosed in our Annual Report on Form 10-K for the fiscal year ended December 31, 2015.
 
Deferred Tax Asset
 
The Company recognized a deferred tax asset upon its conversion from a limited liability company to a corporation on May 14, 2004. Prior to that time, all tax attributes flowed through to the members of the limited liability company. The principal component of the deferred tax asset is a difference between our assets for financial accounting purposes and tax purposes. This difference results from a significant balance of acquired goodwill of approximately $687.4 million that was generated as part of the conversion to a corporation plus approximately $97.6 million in preexisting goodwill carried over from periods prior to the conversion. Both of these assets are recorded for tax purposes but not for accounting purposes. This asset is amortized over 15 years for tax purposes, resulting in annual pretax income being $52.3 million lower for tax purposes than for financial accounting purposes. At an estimated blended domestic statutory tax rate of 37.2%, this results in tax payments being approximately $19.5 million less than the annual provision for income taxes shown on the Condensed Consolidated Statements of Operations and Comprehensive Loss for financial accounting purposes, or the amount of the annual provision, if less. There is an expected aggregate of $55.2 million in cash savings over the remaining life of the portion of the deferred tax asset related to the conversion. This deferred tax asset may be subject to certain limitations. We believe that it is more likely than not that we will be able to utilize the deferred tax asset. However, the utilization of this tax asset is subject to many factors including our earnings, a change of control of the Company and future earnings.
 
Other Liquidity Needs and Resources
 
We need cash to support our foreign operations. For some foreign jurisdictions, such as the United Kingdom, applicable law and cross-border treaties allow us to transfer funds between our domestic and foreign operations efficiently. For other foreign jurisdictions, we must rely on the cash generated by our operations in those foreign jurisdictions, and the cost of repatriation is prohibitive. For example, Global Cash Access (Canada), Inc. (“GCA Canada”), the subsidiary through which we operate in Canada, generates cash that is sufficient to support its operations. If we expand our Payments business into new foreign jurisdictions, we must rely on treaty-favored cross-border transfers of funds, the cash generated by our operations in those foreign jurisdictions or alternate sources of working capital.
 
Off-Balance Sheet Arrangements
 
Our Contract Cash Solutions Agreement with Wells Fargo Bank, N.A. (“Wells Fargo”) allows us to use funds owned by Wells Fargo to provide the currency needed for normal operating requirements for our ATMs. For the use of these funds, we pay Wells Fargo a cash usage fee on the average daily balance of funds utilized multiplied by a contractually defined cash usage rate. These cash usage fees, reflected as interest expense within the Condensed Consolidated Statements of Loss and Comprehensive Loss, were $0.7 million and $1.6 million for the three and six months ended June 30, 2016, respectively, and $0.5 million and $1.0 million for the three and six months ended June 30, 2015, respectively. We are exposed to interest rate risk to the extent that the applicable LIBOR increases.
 
Under this agreement, all currency supplied by Wells Fargo remains the sole property of Wells Fargo at all times until it is dispensed, at which time Wells Fargo obtains an interest in the corresponding settlement receivable which is recorded on a net basis. As these funds are not our assets, supplied cash is not reflected on the Condensed Consolidated Balance Sheets. The outstanding balances of ATM cash utilized by us from Wells Fargo were $262.2 million and $364.5 million as of June 30, 2016 and December 31, 2015, respectively.
 
In June 2015, we amended the Contract Cash Solutions Agreement to decrease the maximum amount of cash to be provided to us from $500.0 million to $425.0 million and to extend the term of the agreement from November 30, 2015 to June 30, 2018. 

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We are responsible for any losses of cash in the ATMs under this agreement and we self-insure for this risk. We incurred no material losses related to this self-insurance for the three and six months ended June 30, 2016 and 2015.
 
Effects of Inflation
 
Our monetary assets, consisting primarily of cash, receivables, inventory and our non-monetary assets, consisting primarily of the deferred tax asset, goodwill and other intangible assets, are not significantly affected by inflation. We believe that replacement costs of equipment, furniture and leasehold improvements will not materially affect our operations. However, the rate of inflation affects our operating expenses, such as those for salaries and benefits, armored carrier expenses, telecommunications expenses, cost of inventory and equipment repair and maintenance services, which may not be readily recoverable in the financial terms under which we provide our Games and Payments products and services to gaming establishments and their patrons.
 
Item 3. Quantitative and Qualitative Disclosures About Market Risk. 
 
In the normal course of business, we are exposed to foreign currency exchange risk. We operate and conduct business in foreign countries and, as a result, are exposed to movements in foreign currency exchange rates. Our exposure to foreign currency exchange risk related to our foreign operations is not material to our results of operations, cash flows or financial position. At present, we do not hedge this risk, but continue to evaluate such foreign currency translation risk exposure.
 
Wells Fargo supplies us with currency needed for normal operating requirements of our domestic ATMs pursuant to the Contract Cash Solutions Agreement. Under the terms of this agreement, we pay a monthly cash usage fee based upon the product of the average daily dollars outstanding in all such ATMs multiplied by a margin that is tied to LIBOR.  We are, therefore, exposed to interest rate risk to the extent that the applicable LIBOR increases. The currency supplied by Wells Fargo was $262.2 million as of June 30, 2016. Based upon this outstanding amount of currency supplied by Wells Fargo, each 1% increase in the applicable LIBOR would have a $2.6 million impact on income before taxes over a 12-month period.  Foreign gaming establishments supply the currency needs for the ATMs located on their premises.
 
The Credit Facilities bear interest at rates that can vary over time. We have the option of having interest on the outstanding amounts under the Credit Facilities paid based on a base rate or based on LIBOR and we have historically elected to pay interest based on LIBOR, and we expect to continue to pay interest based on LIBOR of various maturities. The weighted average interest rate on the Credit Facilities was approximately 6.25% for the six months ended June 30, 2016. Based upon the outstanding balance on the Credit Facilities of $470.6 million as of June 30, 2016, each 1% increase in the applicable LIBOR would have a $4.7 million impact on interest expense over a 12 month period. The interest rates on the Refinanced Secured Notes and the Unsecured Notes are fixed and therefore an increase in LIBOR does not impact the interest expense associated with the Notes.
 
Item 4. Controls and Procedures . 
 
Evaluation of Disclosure Controls and Procedures
 
The Company’s management, including its Chief Executive Officer and Chief Financial Officer, have evaluated the effectiveness of the Company’s disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) as of June 30, 2016. Based on such evaluation, the Chief Executive Officer and Chief Financial Officer have concluded that, as of June 30, 2016, the Company’s disclosure controls and procedures are effective such that material information required to be disclosed by the Company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified by the SEC’s rules and forms and is accumulated and communicated to management, including the Company’s principal executive officer and principal financial officer, as appropriate to allow timely decisions regarding required disclosure.
 
Changes in Internal Control over Financial Reporting during the Quarter Ended June 30, 2016
 
No change in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) occurred during the second quarter ended June 30, 2016 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

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PART II. OTHER INFORMATION 
 
Item 1. Legal Proceedings. 
 
We are subject to claims and suits that arise from time to time in the ordinary course of business. We do not believe the liabilities, if any, which may ultimately result from the outcome of such matters, individually or in the aggregate, will have a material adverse impact on our financial position, liquidity or results of operations.
 
Item 1A. Risk Factors. 
 
We refer you to documents filed by us with the SEC, specifically “Item 1A. Risk Factors” in our Annual Report on Form 10-K for the fiscal year ended December 31, 2015, which identify important risk factors that could materially affect our business, financial condition and future results. We also refer you to the factors and cautionary language set forth in the section entitled “Cautionary Statements Regarding Forward-looking Statements” in “Item 2. Management’s Discussion and Analysis of Financial Conditions and Results of Operations” of this Quarterly Report on Form 10-Q. This Quarterly Report on Form 10-Q, including the accompanying condensed consolidated financial statements and related notes, should be read in conjunction with such risks and other factors for a full understanding of our operations and financial condition. The risks described in our Annual Report on Form 10-K for the fiscal year ended December 31, 2015 and herein are not the only risks facing us. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially adversely affect our business, financial condition or operating results. The risk factors included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2015 have not materially changed.
 
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds. 
 
Issuer Purchases and Withholding of Equity Securities

 	 	Total Number of	    	Average Price per	 	
 	 	Shares Purchased or	 	Share Purchased or	 	
 	 	Withheld	 	Withheld	 	
 	 	(000’s)	 	 	 	 	
Tax Withholdings	 	 	 	 	 	 	
4/1/16 - 4/30/16	 	
0.8	(1)  	$	
2.15	(2)  	
5/1/16 - 5/31/16	 	
0.7	(1)  	$	
1.51	(2)  	
6/1/16 - 6/30/16	 	
0.8	(1)  	$	
1.59	(2)  	
 	 	 	 	 	 	 	
Sub-Total	 	
2.3	(1)  	 	
1.75	(2)  	
 	 	 	 	 	 	 	
Total	 	
2.3	 	$	
1.75	 	

	(1)		Represents the shares of common stock that were withheld from restricted stock awards to satisfy the minimum applicable tax withholding obligations incident to the vesting of such awards. There are no limitations on the number of shares of the Company’s common stock that may be withheld from restricted stock awards to satisfy the minimum tax withholding obligations incident to the vesting of such awards.	
 
	(2)		Represents the average price per share of the Company’s common stock withheld from restricted stock awards on the date of withholding.	
Item 3. Defaults Upon Senior Securities. 
 
None.
Item 4. Mine Safety Disclosures. 
Not applicable.
Item 5. Other Information. 
None.

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Item 6. Exhibits 

Exhibit
Number	    	Description	

10.1 	 	First Amendment to Employment Agreement with Michael D. Rumbolz, effective as of May 10, 2016 (incorporated by reference to Exhibit 10.1 of the Company’s Current Report on Form 8-K filed with the SEC on May 10, 2016).	

10.2 	 	Form of Stock Award (Performance-Based) (Double-Trigger Acceleration) for Non-Employee Directors under the 2014 Plan (incorporated by reference to Exhibit 10.2 of the Company’s Current Report on Form 8-K filed with the SEC on May 10, 2016).	

10.3 	 	Form of Stock Award (Performance-Based) (Double-Trigger Acceleration) for Executives under the 2014 Plan (incorporated by reference to Exhibit 10.3 of the Company’s Current Report on Form 8-K filed with the SEC on May 10, 2016).	

10.4 	 	Form of Stock Award (Time-Based) (Double-Trigger Acceleration) for Non-Employee Directors under the 2014 Plan (incorporated by reference to Exhibit 10.4 of the Company’s Current Report on Form 8-K filed with the SEC on May 10, 2016).	

10.5 	 	Form of Stock Award (Time-Based) (Double-Trigger Acceleration) for Executives under the 2014 Plan (incorporated by reference to Exhibit 10.5 of the Company’s Current Report on Form 8-K filed with the SEC on May 10, 2016).	

10.6 	 	Form of Stock Award (Time-Based) (Double-Trigger Acceleration) for Employees under the 2014 Plan (incorporated by reference to Exhibit 10.6 of the Company’s Current Report on Form 8-K filed with the SEC on May 10, 2016).	

10.7 	 	Form of Stock Option Agreement under the 2014 Plan (incorporated by reference to Exhibit 10.7 of the Company’s Current Report on Form 8-K filed with the SEC on May 10, 2016).	

10.8 	 	Form of Stock Award (Performance-Based) (Double-Trigger Acceleration) for Non-Employee Directors under the 2012 Plan (incorporated by reference to Exhibit 10.8 of the Company’s Current Report on Form 8-K filed with the SEC on May 10, 2016).	

10.9 	 	Form of Stock Award (Performance-Based) (Double-Trigger Acceleration) for Executives under the 2012 Plan (incorporated by reference to Exhibit 10.9 of the Company’s Current Report on Form 8-K filed with the SEC on May 10, 2016).	

10.10 	 	Form of Stock Award (Time-Based) (Double-Trigger Acceleration) for Non-Employee Directors under the 2012 Plan (incorporated by reference to Exhibit 10.10 of the Company’s Current Report on Form 8-K filed with the SEC on May 10, 2016).	

10.11 	 	Form of Stock Award (Time-Based) (Double-Trigger Acceleration) for Executives under the 2012 Plan (incorporated by reference to Exhibit 10.11 of the Company’s Current Report on Form 8-K filed with the SEC on May 10, 2016).	

10.12 	 	Form of Stock Award (Time-Based) (Double-Trigger Acceleration) for Employees under the 2012 Plan (incorporated by reference to Exhibit 10.12 of the Company’s Current Report on Form 8-K filed with the SEC on May 10, 2016).	

10.13 	 	Form of Stock Option Agreement under the 2012 Plan (incorporated by reference to Exhibit 10.13 of the Company’s Current Report on Form 8-K filed with the SEC on May 10, 2016).	

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31.1*	 	Certification of Michael D. Rumbolz, President and Chief Executive Officer of Everi Holdings Inc. in accordance with Rules 13a-14(a) and 15d-14(a) of the Securities Exchange Act, as amended, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.	
 	 	 	
31.2*	 	Certification of Randy L. Taylor, Chief Financial Officer of Everi Holdings Inc. in accordance with Rules 13a-14(a) and 15d-14(a) of the Securities Exchange Act, as amended, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.	
 	 	 	
32.1**	 	Certification of Michael D. Rumbolz, President and Chief Executive Officer of Everi Holdings Inc. in accordance with 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.	
 	 	 	
32.2**	 	Certification of Randy L. Taylor, Chief Financial Officer of Everi Holdings Inc. in accordance with 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.	
 	 	 	
101.INS*	 	XBRL Instance Document.	
 	 	 	
101.SCH*	 	XBRL Taxonomy Extension Schema Document.	
 	 	 	
101.CAL*	 	XBRL Taxonomy Extension Calculation Linkbase Document.	
 	 	 	
101.DEF*	 	XBRL Taxonomy Extension Definition Linkbase Document.	
 	 	 	
101.LAB*	 	XBRL Taxonomy Extension Label Linkbase Document.	
 	 	 	
101.PRE*	 	XBRL Taxonomy Extension Presentation Linkbase Document.	

*    Filed herewith.
**  Furnished herewith.

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SIGNATURES 
 
Pursuant to the requirements 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.
 
August 9, 2016	 	EVERI HOLDINGS INC.	
(Date)	 	(Registrant)	

 	 	 	 	
 	 	By:	/s/ Todd A. Valli	
 	 	 	Todd A. Valli	
 	 	 	Senior Vice President, Corporate Finance and Chief Accounting Officer	
 	 	 	(For the Registrant and as Principal Accounting Officer)	

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Table of Contents
 
EXHIBIT INDEX

Exhibit
Number	    	Description	

10.1 	 	First Amendment to Employment Agreement with Michael D. Rumbolz, effective as of May 10, 2016 (incorporated by reference to Exhibit 10.1 of the Company’s Current Report on Form 8-K filed with the SEC on May 10, 2016).	

10.2 	 	Form of Stock Award (Performance-Based) (Double-Trigger Acceleration) for Non-Employee Directors under the 2014 Plan (incorporated by reference to Exhibit 10.2 of the Company’s Current Report on Form 8-K filed with the SEC on May 10, 2016).	

10.3 	 	Form of Stock Award (Performance-Based) (Double-Trigger Acceleration) for Executives under the 2014 Plan (incorporated by reference to Exhibit 10.3 of the Company’s Current Report on Form 8-K filed with the SEC on May 10, 2016).	

10.4 	 	Form of Stock Award (Time-Based) (Double-Trigger Acceleration) for Non-Employee Directors under the 2014 Plan (incorporated by reference to Exhibit 10.4 of the Company’s Current Report on Form 8-K filed with the SEC on May 10, 2016).	

10.5 	 	Form of Stock Award (Time-Based) (Double-Trigger Acceleration) for Executives under the 2014 Plan (incorporated by reference to Exhibit 10.5 of the Company’s Current Report on Form 8-K filed with the SEC on May 10, 2016).	

10.6 	 	Form of Stock Award (Time-Based) (Double-Trigger Acceleration) for Employees under the 2014 Plan (incorporated by reference to Exhibit 10.6 of the Company’s Current Report on Form 8-K filed with the SEC on May 10, 2016).	

10.7 	 	Form of Stock Option Agreement under the 2014 Plan (incorporated by reference to Exhibit 10.7 of the Company’s Current Report on Form 8-K filed with the SEC on May 10, 2016).	

10.8 	 	Form of Stock Award (Performance-Based) (Double-Trigger Acceleration) for Non-Employee Directors under the 2012 Plan (incorporated by reference to Exhibit 10.8 of the Company’s Current Report on Form 8-K filed with the SEC on May 10, 2016).	

10.9 	 	Form of Stock Award (Performance-Based) (Double-Trigger Acceleration) for Executives under the 2012 Plan (incorporated by reference to Exhibit 10.9 of the Company’s Current Report on Form 8-K filed with the SEC on May 10, 2016).	

10.10 	 	Form of Stock Award (Time-Based) (Double-Trigger Acceleration) for Non-Employee Directors under the 2012 Plan (incorporated by reference to Exhibit 10.10 of the Company’s Current Report on Form 8-K filed with the SEC on May 10, 2016).	

10.11 	 	Form of Stock Award (Time-Based) (Double-Trigger Acceleration) for Executives under the 2012 Plan (incorporated by reference to Exhibit 10.11 of the Company’s Current Report on Form 8-K filed with the SEC on May 10, 2016).	

10.12 	 	Form of Stock Award (Time-Based) (Double-Trigger Acceleration) for Employees under the 2012 Plan (incorporated by reference to Exhibit 10.12 of the Company’s Current Report on Form 8-K filed with the SEC on May 10, 2016).	

10.13 	 	Form of Stock Option Agreement under the 2012 Plan (incorporated by reference to Exhibit 10.13 of the Company’s Current Report on Form 8-K filed with the SEC on May 10, 2016).	

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31.1*	 	Certification of Michael D. Rumbolz, President and Chief Executive Officer of Everi Holdings Inc. in accordance with Rules 13a-14(a) and 15d-14(a) of the Securities Exchange Act, as amended, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.	
 	 	 	
31.2*	 	Certification of Randy L. Taylor, Chief Financial Officer of Everi Holdings Inc. in accordance with Rules 13a-14(a) and 15d-14(a) of the Securities Exchange Act, as amended, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.	
 	 	 	
32.1**	 	Certification of Michael D. Rumbolz, President and Chief Executive Officer of Everi Holdings Inc. in accordance with 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.	
 	 	 	
32.2**	 	Certification of Randy L. Taylor, Chief Financial Officer of Everi Holdings Inc. in accordance with 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.	
 	 	 	
101.INS*	 	XBRL Instance Document.	
 	 	 	
101.SCH*	 	XBRL Taxonomy Extension Schema Document.	
 	 	 	
101.CAL*	 	XBRL Taxonomy Extension Calculation Linkbase Document.	
 	 	 	
101.DEF*	 	XBRL Taxonomy Extension Definition Linkbase Document.	
 	 	 	
101.LAB*	 	XBRL Taxonomy Extension Label Linkbase Document.	
 	 	 	
101.PRE*	 	XBRL Taxonomy Extension Presentation Linkbase Document.	

*    Filed herewith.
**  Furnished herewith.

52

Exhibit 31.1
 
EVERI HOLDINGS INC.
CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER PURSUANT TO EXCHANGE ACT RULE 13 a -14( a )/15 d -14( a )
AS ADOPTED PURSUANT TO SECTION   302 OF THE SARBANES-OXLEY ACT OF 2002
 
I, Michael D. Rumbolz , certify that:
 
1.   I have reviewed this quarterly report on Form 10-Q of Everi Holdings Inc.;
 
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 the registrant as of, and for, the periods presented in this report;
 
4.  The registrant’s other certifying officer 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 the registrant, 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 the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
 
d) disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
 
5.  The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’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 the registrant’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.

Dated: August 9 , 2016	 	By:	/s/ Michael D. Rumbolz	
 	 	 	Michael D. Rumbolz	
 	 	 	President and Chief Executive Officer	

Exhibit 31.2
 
EVERI HOLDINGS INC.
CERTIFICATION OF PRINCIPAL FINANCIAL OFFICER PURSUANT TO EXCHANGE ACT RULE 13 a -14( a )/15 d -14( a )
AS ADOPTED PURSUANT TO SECTION   302 OF THE SARBANES-OXLEY ACT OF 2002

I, Randy L. Taylor, certify that:
 
1.  I have reviewed this quarterly report on Form 10-Q of Everi Holdings Inc.;
 
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 the registrant as of, and for, the periods presented in this report;
 
4.  The registrant’s other certifying officer 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 the registrant, 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 the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
 
d) disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
 
5.  The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’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 the registrant’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.

Dated: August 9 , 2016	 	By:	/s/ Randy   L .   Taylor	
 	 	 	Randy L. Taylor	
 	 	 	Chief Financial Officer	

Exhibit 32.1
 
EVERI HOLDINGS INC.
CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER PURSUANT TO 18 U.S.C. SECTION   1350
AS ADOPTED PURSUANT TO SECTION   906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the periodic report of Everi Holdings Inc. (the “Company”) on Form 10-Q for the period ended June  3 0 , 2016 as filed with the Securities and Exchange Commission (the “Report”), I, Michael D. Rumbolz ,   President and Chief Executive Officer of the Company, hereby certify as of the date hereof, solely for purposes of Title 18, Chapter 63, Section 1350 of the United States Code, that to the best of my knowledge:
 
	(1)		the Report fully complies with the requirements of Section 13(a) or 15(d), as applicable, of the Securities Exchange Act of 1934, and	
 
	(2)		the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company at the dates and for the periods indicated.	
 
This Certification has not been, and shall not be deemed, “filed” with the Securities and Exchange Commission.

Dated: August 9 , 2016	 	By:	/s/ Michael D. Rumbolz	
 	 	 	Michael D. Rumbolz	
 	 	 	President and   Chief Executive Officer	

Exhibit 32.2
 
EVERI HOLDINGS  INC.
CERTIFICATION OF PRINCIPAL FINANCIAL OFFICER PURSUANT TO 18 U.S.C. SECTION   1350
AS ADOPTED PURSUANT TO SECTION   906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the periodic report of Everi Holdings Inc. (the “Company”) on Form 10-Q for the period ended June  3 0 , 2016 as filed with the Securities and Exchange Commission (the “Report”), I, Randy L. Taylor, Chief Financial Officer of the Company, hereby certify as of the date hereof, solely for purposes of Title 18, Chapter 63, Section 1350 of the United States Code, that to the best of my knowledge:
 
	(1)		the Report fully complies with the requirements of Section 13(a) or 15(d), as applicable, of the Securities Exchange Act of 1934, and	
 
	(2)		the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company at the dates and for the periods indicated.	
 
This Certification has not been, and shall not be deemed, “filed” with the Securities and Exchange Commission.

Dated: August 9 , 2016	 	By:	/s/ Randy L. Taylor	
 	 	 	Randy L. Taylor	
 	 	 	Chief Financial Officer