@Jete062 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

For the fiscal year ended December 31, 20182020

For the transition period from       to

Commission file number: 000-30653

Galaxy Gaming, Inc.

(Exact name of registrantsmall business issuer as specified in its charter)

Securities registered under Section 12(b) of the Exchange Act:

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.    Yes  ☐    No  ☑

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.     Yes  ☐    No  ☑

Indicate by checkmark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  ☑    No  ☐

Indicate by check mark whether the issuer has submitted electronically 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 such files).     Yes  ☑    No  ☐

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§ 232.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.     Yes  ☐    No  ☑

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer ☐ Accelerated filer ☐ Non-accelerated filer ☐ Smaller reporting company ☑Emerging growth Company☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standard provided pursuant to Section 13(a) of the Exchange Act.  ☐

Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report.  ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes  ☐    No  ☑

If an emerging growth company, indicate by check mark ifState the registrant has elected not to use the extended transition period

for complying with any new or revised financial accounting standard provided pursuant to Section 13(a) of the Exchange Act.     Yes  ☐     No  ☐

The aggregate market value of the voting and non-voting common equity held by non-affiliates computed by reference to the price at which the common equity was last sold, or the average bid and asked price of such common equity, as of the last business day of the registrant’s second fiscal quarter was $18,371,330. Sharesquarter. $21,069,348.

Indicate the number of shares outstanding of each of the registrant’s classes of common stock, held by each officer and each person known to the registrant to own 10% or moreas of the outstanding voting securities of the registrant were excluded in that such persons may be deemed to be affiliates.  This determination of affiliation status is not a determination for other purposes.  The registrant has one class of securities, itslatest practicable date: 21,970,638 common stock.

Asshares as of March 26, 2019, the registrant had 40,411,590 shares of common stock outstanding. 

2021. 

GALAXY GAMING, INC.

ANNUALANNUAL REPORT ON FORM 10-K FOR THE YEAR ENDED DecemberDECEMBER 31, 20182020

TABLE OF CONTENTS

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Unless the context indicates otherwise, references to “Galaxy Gaming,” “we,” “us,” “our” or the “Company,” refer to Galaxy Gaming, Inc., a Nevada corporation, the company filing this report.

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

This report contains statements that do not relate to historical or current facts but are “forward-looking” statements. These statements relate to analyses and other information based on forecasts of future results and estimates of amounts not yet determinable. These statements may also relate to future events or trends, our future prospects and proposed new products, services, developments or business strategies, among other things. These statements can generally (although not always) be identified by their use of terms and phrases such as anticipate, appear, believe, could, would, estimate, expect, indicate, intent, may, plan, predict, project, pursue, will continue and other similar terms and phrases, as well as the use of the future tense.

Actual results could differ materially from those expressed or implied in our forward-looking statements. Our future financial condition and results of operations, as well as any forward-looking statements, are subject to change and to inherent known and unknown risks and uncertainties. You should not assume at any point in the future that the forward-looking statements in this report are still valid. We do not intend, and undertake no obligation, to update our forward-looking statements to reflect future events or circumstances.

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PART I

ITEM 1. BUSINESS

BUSINESS

Unless the context indicates otherwise, references to “Galaxy Gaming, Inc.,” “we,” “us,” “our,” or the “Company,” refer to Galaxy Gaming, Inc., a Nevada corporation (“Galaxy Gaming”).

We are an established global gaming company specializing in the design, development, acquisition, assembly, marketing and acquisitionlicensing of proprietary casino table games enhanced table systems,and associated technology, platforms and platforms, expert consultation and other services.  Our products and services are designed to enhance the player’s experience and increase the profitability of our clients. Our clients include land-based and riverboat gaming companies located in North America, the Caribbean, Central America, the British Isles, Europe and Africa and cruise ship companies and legal internet gaming sites worldwide.

History and Development of Galaxy Gaming

In 1997, Galaxy Gaming Corporation (“GGCORP”) was formed and distributed a side betsystems for the game of blackjack known as Horseshoe Blackjack.  GGCORP later modified the invention, changed its name to Lucky Ladies and filed for a patent, which was later granted.

In 2002, Galaxy Gaming, LLC (“GGLLC”) acquired the business and assets of GGCORP.  Lucky Ladies remained GGLLC’s only product until late 2002, when it debuted a new casino poker game called Texas Shootout.  This game quickly became popular with casinos and their customers.  GGLLC later increased its sales force, expanded its distribution channels and introduced new products and services using reinvested earnings.

Galaxy Gaming, Inc. (“GGINC”) was formed in 2006 and subsequently acquired the assets and business operations of GGLLC.

In 2009, GGINC executed a share exchange and reverse merger with Secured Diversified Investment, Ltd. (“SDI”).  After the reverse merger, SDI merged with its wholly-owned subsidiary, GGINC, pursuant to Nevada Revised Statutes 92A.180 and changed the name of the company formerly known as SDI to “Galaxy Gaming, Inc.” which remains the operating company as of the date of this report.

Products and Services

gaming industry. Casinos use our proprietary products and services to enhance their gaming floor operations and improve their profitability, productivity and security, as well as to offer popular cutting-edge gaming entertainment content and technology to their players. We currently serve approximately 600 casinos that use our enhancements on approximately 7,000 gaming tables.  Additional information regardingmarket our products and services may be found onto online casinos worldwide and to land-based casino gaming companies in North America, the Caribbean, Central America, the United Kingdom, Europe and Africa and to cruise ship companies. We license our website, www.galaxygaming.com.  Information found on the website should not be considered part of this report.products and services for use solely in legalized gaming markets.

Products and Services

Proprietary Table Games. Casinos use Proprietary Table Games together with or in lieu of other games in the public domain (e.g. Blackjack, Craps, Roulette, etc.) because of their popularity with players and to increase profitability. Typically, Proprietary Table Games are grouped into two product types referred to as “Side Bets” and “Premium Games.” Side Bets are proprietary features and wagering options typically added to public domain games such as poker, baccarat, pai gow poker, craps and blackjack table games. Examples of our Side Bets include 21+3, Lucky Ladies, 21+3 and Bonus Craps. Premium Games are unique stand-alone games with their own unique set of rules and strategies. Examples of our Premium Games include Heads Up Hold ’em, High Card Flush,, Cajun Stud and Three Card Poker and Texas Shootout. Generally, Premium Games generate higher revenue per table placement than the Side Bet games. At December 31, 2020, our games were being played on 5,073 tables in 586 physical casinos in the markets listed above.

Enhanced Table Systems. Enhanced Table Systems are electronic enhancements used on casino table games to add to player appeal and to enhance game security. An example in this category is our Bonus Jackpot System (“BJS”), an advanced electronic system installed on gaming tables designed to collect data by detecting player wagers and other game activities. This information is processed and used to improve casino operations by evaluating game play, to improve dealer efficiency and to reward players through the offering of jackpots and other bonusing mechanisms. Typically, the BJS system includes an electronic video display, known as TableVision, which shows game information designed to generate player interest and to promote various aspects of the game. The BJS system can also be used to network numerous gaming tables together into a common system either within a casino or through the interconnection of multiple casinos, which we refer to as our Inter-Casino JackpotLink System.

ThroughiGaming. On August 2018,21, 2020, we hadcompleted the acquisition of 100% of the member interests in Progressive Games Partners, LLC (“PGP”). PGP holds the exclusive worldwide rights (excluding one international territoryto a number of games titles (including ours) for relicensing to operators of online gaming systems principally in Europe, the United Kingdom, and, two U.S. states)more recently, the United States. Prior to the TableMAX e-Table system, a fully automated, dealer-less, multi-player electronic table game platform through an operating and license agreement executed in 2011 (the “TMAX Agreement”) with TableMAX Gaming, Inc. (“TMAX”). Effective December 29, 2017, we entered into a First Amendmentacquisition, PGP had been the exclusive distributor of our games to the TMAX Agreement (the First Amendment”) to, amongonline gaming sector; by making the acquisition of PGP, we effectively eliminated the distributor fee that PGP charged us and we now also receive the revenue PGP earns on the content of other things, allow us to retain all net profits generated after the date of the First Amendment and terminate the TMAX Agreement effective uponlicensors (to whom we pay a royalty fee). At December 31, 2018. The parties also executed a related settlement2020, PGP had contracts to license 14 games from 8 licensors, as well as our own content, and release agreement (the “Settlement and Release Agreement”).had contracts with 16 online operators for the use of that content. In January 2018, in connectionmany cases, these online operators provide “white label” gaming infrastructure for many separate online casino brands with the First Amendment andresult that the Settlement and Release Agreement, we paid $774,645content that PGP licenses can appear on hundreds of online gaming sites. PGP’s contracts with online operators prohibit those operators from deploying the content in markets where it is not legal to an assignee of TMAX. In August 2018, the TMAX Agreement was terminated.do so.

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Significant 2018 Business Developments

On November 5, 2018, we issued a press release and filed a related Form 8-K announcing that (i) Robert B. Saucier submitted his resignation as a member of our Board effective immediately and his resignation as Executive Vice President of Business Development effective on December 31, 2018; and (ii) that we had retained Macquarie Capital (USA) Inc. (“Macquarie”) to assist us in evaluating strategic alternatives, including the potential sale of the shares of our common stock held by Triangulum Partners LLC (“Triangulum”), an entity controlled by Mr. Saucier. See “Note 15 – Subsequent Events” to our audited financial statements included in Item 8 “Financial Statements and Supplementary Data” for further details on 2019 developments related to the strategic alternatives.

Recurring Revenue and Gross MarginsProfit

A majority of our clients contract with us to use our products and services on a month-to-month basis with typically a 30 – 30–45 day termination notice requirement. We invoice our clients monthly, either in advance for unlimited use or in arrears for actual use, depending on the product or contract terms. Such recurring revenues accounted for over 99%substantially all of our total revenues in 20182020 and generally2019. Our license revenues have few direct costs thereby generating high gross profit margins. We do not report “gross profit” in our statements of operations included in this report. Instead, gross profit would be comparable to “revenues” minus “cost of ancillary products and assembled components,” both of which are presented in our statements of operations.

For more information about our revenues, operating income and assets, see “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations” and “Item 8. Financial Statements and Supplementary Data”Financial Information” included in this report.

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STRATEGY

We believe that entertaining casino games enhance players’ experiences and generate brand loyalty, resulting in increased profits for our casino clients.  We continue to expand our product offering by focusing on innovative products and services.  As we continue to develop and enhance our brand and reputation, we anticipate adding new product lines and services that complement our overall strategy and enhance our market presence.

Our long-term business strategy focuses on increasing our value to casino clients by offering them enhanced services and support, and by producing innovative products and game play methodologies that their players enjoy. We believe that by increasing the value of our products and services to clients, we can continue to build our recurring revenues in both existing and new markets. To achieve this objective, we employ the following strategies:

Expand our portfolio of services, products and technologies. Our strategy is to be an important vendor to casino operators by offering a complete and comprehensive portfolio of services, games, products, systems, technologies and methodologies for casino table games. We continuously develop and/or seek to acquire new proprietary table games to complement our existing offerings and to extend our penetration of proprietary table games on the casino floor.  

Increase our revenue per unit price point by leveraging our Enhanced Table Systems. Our Enhanced Table Systems provide us with the opportunity to increase the amount of recurring revenueare placed on tables where we receive from each tablealready have our side bet or premium game placement.  Accordingly, our goal is to concentrate on installing new game placements using one or more ofcontent deployed. By adding our Enhanced Table Systems, and to convert our existing Proprietary Table Game placementswe significantly increase the revenue we earn from that currently do not incorporate ourtable. Gaming operators deploy the Enhanced Table Systems.  We have modified mostSystems because they generally increase the win for the casino by an amount that significantly exceeds the cost to license the system from us. Our product strategy includes making Electronic Table Systems that support a multitude of our Premium Table Gamesside bets and many of our Side Bets to benefit from the economics this new system affords us.  In the future, we intend to be able to offer this platform for all games.premium games across several casino game segments (e.g., blackjack, craps, roulette, baccarat, etc.).

Expand the number of markets we serve. There are table games markets in North America that we do not serve or in which we cannot offer our full suite of products and services. In general, this is because we are not licensed to serve casinos in that market or the license we have limits the products and services we can provide. Consequently, we are seeking to increase the number of jurisdictions in which we are licensed and to upgrade those licenses that limit our product and service offering. We intend to expandbelieve that the redemption transaction we undertook in 2019 (discussed below in the “Significant 2019 Business Developments” section) will help us with our licensing activities in new markets, including table games markets outside of North America.  Finally, we aim to expand by offeringthe United States.

Grow our productsiGaming content and services in markets beyond traditional table games.  To this end, wepartner base. We have been active in deploying our game content into the legal online gaming market as well as makinglicensed our content available on electronic gaming machines.to the iGaming segment for several years through our distributor, PGP. In 2020, we acquired PGP in order to improve our financial results from the iGaming segment by eliminating the distribution fee to PGP and by adding the revenue that PGP earns from licensing the content owned by itself and others. The COVID pandemic has resulted in a significant increase in jurisdictions considering legalizing iGaming, in many cases in concert with legalizing sports wagering. We intend to increase our revenues from iGaming in several ways. First, we expect that our existing licensees will see growth in their current markets while adding new markets in the U.S. and elsewhere. Second, we intend to add new licensees in the iGaming segment. And finally, we intend to add to the number of games that we license to both existing and new licensees.

COMPETITION

We compete with several companies that develop and provide proprietary table games, electronic gaming platforms, game enhancements and related services. We believe that the principal competitive factors in our market include products and services that appeal to casinos and players, jurisdictional approvals and a well-developed sales and distribution network.

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We believe that our success will depend upon our ability to remain competitive in our field. Competition can be based on price, brand recognition, player appeal and the strength of underlying intellectual property.property and superior customer service. Larger competitors may have longer operating histories, greater brand recognition, more firmly established supply relationships, superior capital resources, distribution and product inventory than we do. Smaller competitors may be more able to participate in developing and marketing table games, compared to other gaming products, because of the lower cost and complexity associated with the development of these products and a generally less stringent regulatory environment. We compete with others in efforts to obtain or create innovative products, obtain financing, acquire other gaming companies, and license and distribute products. We compete on these bases, as well as on the strength of our sales, service and distribution channels.

Our competitors include, but are not limited to, Scientific Games Corporation; Play AGS, Inc.; TCS/John Huxley; and Masque Publishing. Moreover,Most of these competitors are larger than we are, have more financial resources than we do, and have more business segments than we do. In addition, we expect additional competitors to emerge in the future. There can be no assurances that we will be able to compete effectively in the future and failure to compete successfully in the market could have a material adverse effect on our business.

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SUPPLIERS

We own outright the content for most of our Side Bets and Premium Games and therefore do not depend on suppliers for the majority of our revenues from these games. However, there are some games that we have licensed from others and to whom we pay royalty fees when we license those games to others (including in the online gaming sector).We generally have multi-year licensing agreements for this content. With respect to our Enhanced Table Systems, we obtain most of the parts for our products from third party suppliers, including both off-the-shelf items as well as components manufactured to our specifications. We also assemble a small number of parts in-house that are used both for product assembly and for servicing existing products. We generally perform warehousing, quality control, final assembly and shipping functions from our facilities in Las Vegas, Nevada, although small inventories are maintained, and repairs are performed by our field service employees. We believe that our sources of supply for components and raw materials are adequate and that alternative sources of materials are available.

RESEARCH AND DEVELOPMENT

We striveseek to develop and maintain a robust pipeline of new products and services to bring to market. We employ a staff of hardware and software engineers, graphic artists and game developers at our corporate offices to support, improve and upgrade our products and to develop and explore other potential table game products, technologies, methodologies and services. We also will use contracted third party developers and engineers.

We incurred $926,474 and $488,829 inoutside services for research and development expenditures during 2018 and 2017, respectively. The increase in 2018 was primarily attributablefrom time to our increased focus on development of new products and services.time.

INTELLECTUAL PROPERTY

Our products and the intellectual property associated with them are typically protected by patents, trademarks, copyrights and non-compete agreements. However, there can be no assurance that the steps we have taken to protect our intellectual property will be sufficient. Further, in the United States certain court rulings may make it difficult to enforce patents around the math relating to casino games, which makes us more dependent on copyrights and trademarks for protection. In addition, the laws of some foreign countries do not protect intellectual property to the same extent as the laws of the United States, which could increase the likelihood of infringement. Furthermore, other companies could develop similar or superior products without violating our intellectual property rights. If we resort to legal proceedings to enforce our intellectual property rights, the proceedings could be burdensome, disruptive and expensive, and distract the attention of management, and there can be no assurance that we would prevail.

We have been subject to litigation claiming that we have infringed the rights of others and/or that certain of our patents and other intellectual property are invalid or unenforceable. We have also brought actions against others to protect our rights.  

GOVERNMENT REGULATION

We are subject to regulation by governmental authorities in most jurisdictions in which we offer our products. The development and distribution of casino games, gaming equipment, systems technology and related services, as well as the operation of casinos, are all subject to regulation by a variety of federal, state, international, tribal, and local agencies with the majority of oversight provided by individual state gaming control boards. While the regulatory requirements vary by jurisdiction, most require:

Gaming regulatory requirements vary from jurisdiction to jurisdiction, and obtaining licenses, registrations, findings of suitability for our officers, directors, and principal stockholders and other required approvals with respect to us, our personnel and our products are time consuming and expensive. Generally, gaming regulatory authorities have broad discretionary powers and may deny applications for or revoke approvals on any basis they deem reasonable. We have approvals that enable us to conduct our business in numerous jurisdictions, subject in each case to the conditions of the particular approvals. These conditions may include limitations as to the type

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of game or product we may sell or lease, as well as limitations on the type of facility, such as riverboats, and the territory within which we may operate, such as tribal nations. Gaming laws and regulations serve to protect the public interest and ensure gambling related activity is conducted honestly, competitively and free of corruption. Regulatory oversight additionally ensures that the local authorities receive the appropriate amount of gaming tax revenues. As such, our financial systems and reporting functions must demonstrate high levels of detail and integrity.

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We also have authorizations with certain Native American tribes throughout the United States that have compacts with the states in which their tribal dominions are located or operate or propose to operate casinos. These tribes generally require suppliers of gaming and gaming-related equipment to obtain authorizations. Gaming on Native American lands within the United States is governed by the Federal Indian Gaming Regulatory Act of 1988 (“IGRA”) and specific tribal ordinances and regulations. Class III gaming (table games and slot machines, for example), as defined under IGRA, also requires a Tribal-State Compact, which is a written agreement between a specific tribe and the respective state. This compact authorizes the type of Class III gaming activity and the standards, procedures and controls under which the Class III gaming activity must be conducted. The National Indian Gaming Commission (“NIGC”) has oversight authority over gaming on Native American lands and generally monitors tribal gaming, including the establishment and enforcement of required minimum internal control standards. Each tribe is sovereign and must have a tribal gaming commission or office established to regulate tribal gaming activity to ensure compliance with IGRA, NIGC, and its Tribal-State Compact. We have complied with each of the numerous vendor licensing, specific product approvals and shipping notification requirements imposed by Tribal-State Compacts and enforced by tribal and/or state gaming agencies under IGRA in the Native American lands in which we do business.

The nature of the industry and our worldwide operations make the license application process very time consuming and require extensive resources. We engage legal resources familiar with local customs in certain jurisdictions to assist in keeping us compliant with applicable regulations worldwide. Through this process, we seek to assure both regulators and investors that all our operations maintain the highest levels of integrity and avoid any appearance of impropriety.

We have obtained or applied for all required government licenses, permits, registrations, findings of suitability and approvals necessary to develop and distribute gaming products in all jurisdictions where we directly operate. Although many regulations at each level are similar or overlapping, we must satisfy all conditions individually for each jurisdiction. Additionally, in certain jurisdictions we license our products through distributors authorized to do business in those jurisdictions.

In addition to what may be required of our officers, board members, key employees and substantial interest holders, any of our stakeholders, including but not limited to investors, may be subject to regulatory requests and suitability findings. Failure to comply with regulatory requirements or obtaining a finding of unsuitability by a regulatory body could result in a substantial or total loss of investment.

In the future, we intend to seek the necessary registrations, licenses, approvals, and findings of suitability for us, our products, and our personnel in other jurisdictions throughout the world. However, we may be unable to obtain such necessary items, or if such items are obtained, may be revoked, suspended, or conditioned. In addition, we may be unable to obtain on a timely basis, or to obtain at all, the necessary approvals of our future products as they are developed, even in those jurisdictions in which we already have existing products licensed or approved. If the necessary registrations are not sought after or the required approvals not received, we may be prohibited from selling our products in that jurisdiction or may be required to sell our products through other licensed entities at a reduced profit.

EMPLOYEES

We have 4030 full-time employees, including executive officers, management personnel, accounting personnel, office staff, sales staff, service technicians and research and development personnel. As needed, we also employ part-time and temporary employees and pay for the services of independent contractors.

Significant 2020 Business Developments

Share Redemption. On May 6, 2019, we redeemed all 23,271,667 shares of our common stock held by Triangulum Partners, LLC (“Triangulum”), an entity controlled by Robert B. Saucier (“Saucier”), Galaxy Gaming's founder, and, prior to the redemption, the holder of a majority of our outstanding common stock. Our Articles of Incorporation (the “Articles”) provide that if certain events occur in relation to a stockholder that is required to undergo a gaming suitability review or similar investigative process, we have the option to purchase all or any part of such stockholder’s shares at a price per share that is equal to the average closing share price over the thirty calendar days preceding the purchase. The average closing share price over the thirty calendar days preceding the redemption was $1.68 per share.

The consideration owed to Triangulum for the redemption is $39,096,401 (the “Redemption Consideration Obligation”). See Note 10 to our audited financial statements included in Item 8 “Financial Statements and Supplementary Financial Information” for further details.

There is ongoing litigation between the Company and Triangulum related to the redemption and other matters. See Note 11 to our audited financial statements included in Item 8 “Financial Statements and Supplementary Financial Information” for further details.

Membership Interest Purchase Agreement. On February 25, 2020, Galaxy Gaming entered into a Membership Interest Purchase Agreement, dated February 25, 2020 (the “Purchase Agreement”), between the Company and the membership interest holders of PGP.

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On August 21, 2020, the Company entered into a First Amendment to the Purchase Agreement between the Company and the membership interest holders of PGP. The First Amendment, among other things, fixed the cash portion of the purchase price at $6.425 million and established that the stock portion would be satisfied through the issuance of 3,141,361 shares of the Company’s common stock with a value of $1.27 per share on the date of the acquisition.

On August 21, 2020, the Company completed the acquisition of 100% of the member interests in PGP. The entirety of the purchase price ($10,414,528) has been allocated to customer relationships and is included in Other intangible assets, net, on the Company’s balance sheet. See Note 7 to our audited financial statements included in Item 8 “Financial Statements and Supplementary Financial Information” for further details. The Company also acquired certain receivables and payables in the net amount of $581,885, which was to be remitted to the sellers of PGP as the receivables and payables were settled. As of December 31, 2020, the remaining balance owed to the sellers was $36,663.

COVID-19. On March 11, 2020, the World Health Organization declared a pandemic related to the COVID-19 outbreak, which led to a global health emergency. The public-health impact of the outbreak continues to remain largely unknown and still evolving. The related health crisis could continue to adversely affect the global economy, resulting in continued economic downturn that could impact demand for our products.

On March 17, 2020, the Company announced that it suspended billing to customers who had closed their doors due to the COVID-19 outbreak. As a result, we did not earn revenue for the use of our games by our physical casino customers during the time that they were closed. In general, the online gaming customers who license our games through our distributor remained and continue to remain in operation in spite of the COVID-19 crisis. We earned revenue from them during the crisis and expect to continue to do so, but potentially at levels that may be lower than we previously received.

As of the date of this filing, many land-based casinos have begun to re-open with significantly reduced occupancy and other limitations. As they reopen, it will take additional time for their operations to return to pre-crisis levels. Given the uncertainties around casino re-openings, we instituted a phased billing approach for our clients through fiscal year 2020, which resulted in us realizing substantially less revenue than we might otherwise expect. In addition, because of COVID-19-related financial pressures on our physical casino customers, there can be no assurance that our accounts receivable will be paid timely for revenues earned prior to the shutdowns. Finally, the Company was notified by some of the land-based casinos that they would be extending their payment terms.

We also rely on third-party suppliers and manufacturers in China, many of whom were shut down or severely cut back production during the shutdown. Although this has not had a material effect on our supply chain, any future disruption of our suppliers and their contract manufacturers may impact our sales and operating results going forward.

Because of the uncertainties of COVID-19, the Company drew on its Revolving Loan in the amount of $1,000,000 on March 12, 2020. Also, on April 17, 2020, the Company obtained an unsecured loan of $835,300 through Zions Bancorporation, N.A. dba Nevada State Bank under the Paycheck Protection Program (the “PPP Loan”) pursuant to the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”) and the Paycheck Protection Program Flexibility Act (the “Flexibility Act”). On July 16, 2020, the Company filed an application and supporting documentation for forgiveness in full of the PPP Loan. On November 21, 2020, the Company received notification the PPP Loan had been forgiven in full. Pursuant to the CARES Act, the Federal Reserve created the Main Street Priority Loan Program (“MSPLP”) to provide financing for small and medium-sized businesses. On October 26, 2020, the Company borrowed $4 million from Zions Bancorporation N.A., dba Nevada State Bank under this program. See Note 10 to our audited financial statements included in Item 8 “Financial Statements and Supplementary Financial Information” for further details.

As of the date of this filing, the Company believes that it has adequate liquidity to meet its short-term obligations. If the effects of the COVID-19 crisis endure or there is another period of casino closures, we may be required to reassess our obligations, including our ability to pay employee compensation and benefits.

The COVID-19 crisis may change the behavior of gaming patrons. Most of our clients operate places of public accommodation, and their patrons may reduce visitation and play as a precaution. Further, governmental authorities may continue to impose reduced hours of operation or limit the capacity of such places of public accommodation. A long-term reduction in play could have a material adverse impact on our results of operations. Depending on the length and severity of any such adverse impact, we may fail to comply with our obligations, including covenants in our credit agreement, and we may need to reassess the carrying value of our assets.

Credit Agreement Amendments. See Note 10 to our audited financial statements included in Item 8 “Financial Statements and Supplementary Financial Information” for further details of amendments made to the Company’s credit agreement.

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ITEM 1A. RISK FACTORS.FACTORS

A smaller reporting company is not required to provide the information required by this Item.

ITEM 1B. UNRESOLVED STAFF COMMENTS

None.A smaller reporting company is not required to provide the information required by this Item.

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ITEMITEM 2. PROPERTIES

We do not own any real property used in the operation of our current business. We maintain our corporate office at 6767 Spencer6480 Cameron Street, Suite 305, Las Vegas, Nevada, where we currently occupy approximately 24,00014,000 square feet of combined office and warehouse space and pay approximately $19,000 in monthly rent to a third party pursuant to a lease entered into effective in 2014.space. We also maintain a small warehouse and service facility in Kent, Washington and a small office in Richland, Washington. See Note 119 to our audited financial statements included in Item 8 “Financial Statements and Supplementary Data”Financial Information” for further details.

ITEM 3. LEGAL PROCEEDINGS

We have been named in and have brought lawsuits in the normal course of business. See Note 11 to our audited financial statements included in Item 8 “Financial Statements and Supplementary Data”Financial Information” for further details.

ITEM 4. MINE SAFETY DISCLOSURES

Not applicable.A smaller reporting company is not required to provide the information required by this Item.

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PART II

ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

Our common stock is quoted on the OTCQB marketplace (“OTCQB”) under the ticker symbol GLXZ.

The following table sets forth the range of high and low closing sale prices for our common stock for each of the periods indicated as reported by the OTCQB.

The Securities and Exchange Commission (the “SEC”) has adopted rules that regulate broker-dealer practices in connection with transactions in penny stocks. Penny stocks are generally equity securities with a market price of less than $5.00, other than securities registered on certain national securities exchanges or quoted on the NASDAQ system, provided that current price and volume information with respect to transactions in such securities is provided by the exchange or system. The penny stock rules require a broker-dealer, prior to a transaction in a penny stock, to deliver a standardized risk disclosure document prepared by the SEC, that: (a) contains a description of the nature and level of risk in the market for penny stocks in both public offerings and secondary trading; (b) contains a description of the broker’s or dealer’s duties to the customer and of the rights and remedies available to the customer with respect to a violation of such duties or other requirements of the securities laws; (c) contains a brief, clear, narrative description of a dealer market, including bid and ask prices for penny stocks and the significance of the spread between the bid and ask price; (d) contains a toll-free telephone number for inquiries on disciplinary actions; (e) defines significant terms in the disclosure document or in the conduct of trading in penny stocks; and (f) contains such other information and is in such form, including language, type size and format, as the SEC shall require by rule or regulation.

The broker-dealer also must provide, prior to effecting any transaction in a penny stock, the customer with (a) bid and offer quotations for the penny stock; (b) the compensation of the broker-dealer and its salesperson in the transaction; (c) the number of shares to which such bid and ask prices apply, or other comparable information relating to the depth and liquidity of the market for such stock; and (d) a monthly account statement showing the market value of each penny stock held in the customer’s account.

In addition, the penny stock rules require that prior to a transaction in a penny stock not otherwise exempt from those rules, the broker-dealer must make a special written determination that the penny stock is a suitable investment for the purchaser and receive the purchaser’s written acknowledgment of the receipt of a risk disclosure statement, a written agreement as to transactions involving penny stocks, and a signed and dated copy of a written suitability statement.

These disclosure requirements may have the effect of reducing the trading activity for our common stock. Therefore, stockholders may have difficulty buying or selling our securities.

HOLDERS OF OUR COMMON STOCK

As of March 26, 2019,2021, we had 40,411,59021,970,638 shares of our common stock issued and outstanding and 4835 shareholders of record.

DIVIDEND POLICY

There are no restrictions in our articles of incorporation or bylaws that prevent us from declaring dividends. The Nevada Revised Statutes, however, do prohibit us from declaring dividends where after giving effect to the distribution of the dividend:

We have not declared any dividends, and we do not plan to declare any dividends in the foreseeable future. We are prohibited from paying dividends while our MSPLP is outstanding and for one year thereafter. See Note 10.

TRANSFER AGENT

Our stock transfer agent and registrar is ColonialPhiladelphia Stock Transfer, Company, Inc. located at 66 Exchange Place, 1^st Floor, Salt Lake City, UT 84111.2320 Haverford Street, Ardmore, PA 19003. Their telephone number is (801) 355-5740.(484) 416-3124.

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RECENT SALES OF UNREGISTERED SECURITIES

On May 10, 2018, the Board ratified and confirmed the 2014 Equity Incentive Plan (the “2014 Plan”). During the three months ended December 31, 2018, we issued 13,000 restricted shares of our common stock valued at $18,330, to each of Messrs. Norm DesRosiers, Bryan Waters and William Zender, who are members of our Board of Directors (the “Board”), In each of the transactions listed above, the securities were issued pursuant to Section 4(a)(2) of the Securities Act of 1933, as amended (the “Securities Act”), and rules and regulations promulgated thereunder.  None of the transactions involved a public offering.

ITEM 6. SELECTED FINANCIAL DATA

A smaller reporting company is not required to provide the information required by this Item.

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ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following is a discussion and analysis of our financial condition, results of operations and liquidity and capital resources as of and for the years ended December 31, 20182020 and 2017.2019. This discussion should be read together with our audited consolidated financial statements and related notes included in Item 8. Financial Statements and Supplementary Data.Financial Information. Some of the information contained in this discussion includes forward-looking statements that involve risks and uncertainties; therefore our “Special Note Regarding Forward-Looking Statements” should be reviewed for a discussion of important factors that could cause actual results to differ materially from the results described in, or implied by, such forward-looking statements.

OVERVIEW

We develop, acquire, assemble and market technology and entertainment-based products and services for the gaming industry for placement on the casino floor and legal internet gaming sites. Our products and services primarily relate to licensed casino operators’ table games activities and focus on either increasing their profitability, productivity and security or expanding their gaming entertainment offerings in the form of proprietary table games, electronically enhanced table game platforms, fully-automated electronic tables and other ancillary equipment. In addition, we license intellectual property to legal internet gaming sites.operators. Our products and services are offered in highly regulated markets throughout the world. Our products are assembled at our headquarters in Las Vegas, Nevada, as well as outsourced for certain sub-assemblies in the United States.

Results of operations for the years ended December 31, 20182020 and 20172019. For the year ended December 31, 2018,2020, we generated gross revenues of $18,560,668$10,230,316 compared to $14,855,576$21,300,996 in 2017,2019, representing an increasea decrease of $3,705,092,$11,070,680, or 24.9%52.0%. This increasedecrease was primarily attributable to higher revenue from: (i) Bonus Jackpot System due to additional game placements; (ii) internet-based gaming activities; (iii) Premium Games such as Heads Up Hold ’em, High Card Flush, andPlayer’s Edge, which command a higher price point per unit. In addition, the adoption of Accounting Standards Update (“ASU”) No. 2014-09 (Topic 606),Revenue from Contracts with Customers (“ASC 606”)the COVID-19 crisis, as many of our land-based casino customers remained closed through the end of 2020, and those that were open had reduced capacity or realized reduced visitation which, in turn, resulted in $986,637us realizing no revenue from those that were closed and reduced revenue from those that were open. We continued to realize revenue from licensing our game content to the online gaming market through the end of additional revenue and distributor expense for2020. With the year ended December 31, 2018, whereas distributor expense was offset against related revenuePGP acquisition in the prior years. Sincethird quarter, we electedbegan to adopt ASC 606 usingrecognize revenue from licensing the modified retrospective approach, no changes were madenewly-acquired game content of others to our previously issued financial statements, including the statement of operations for the year ended December 31, 2017. Excluding the impact of the adoption of ASC 606, gross revenue for the year ended December 31, 2018 would have been $17,574,031, an increase of 18.3% over the prior year.online gaming market.

Selling, general and administrative expenses were $10,903,623$8,964,930 in 20182020 compared to $9,057,025$13,295,475 in 2017,2019, representing an increasea decrease of $1,846,598,$4,330,545, or 20.4%32.6%. This decrease was primarily due to a decrease in compensation-related expenses directly related to the COVID-19 crisis (reduction in workforce, removal of bonuses and lower commissions and distributor fees). Lower legal fees contributed to the decrease as well. Prior year legal expenses included expenses associated with our strategic review, the Triangulum Lawsuit and the related contested proxy campaign. Current year legal expenses were comprised mainly of expenses related to the Triangulum Lawsuit. Also, the decrease in expenses related to travel and entertainment, royalty expenses and advertising and marketing were directly related to the COVID-19 crisis. In 2020, the Company incurred $652,198 in expenses associated with the Triangulum Lawsuit and $20,058 of severance expense. Excluding the impact of the adoption of ASC 606, these costs, selling, general and administrative expenses for the year ended December 31, 2018 would have been $9,916,986, an increase of 9.5% over the prior year. This increase was primarily due to higher compensation and related expense as a resultpercentage of highergross revenue and our continued investmentwas 81.1% in personnel and attract new talent.2020, compared to 53.8% in 2019.  

Research and development expenses were $926,474$487,679 in 20182020 compared to $488,829$821,127 in 2017.2019, representing a decrease of $333,448, or 40.6%. This increasedecrease was primarily due to increased costs associated with testing our products currentlylower payroll and related expenses as a result of the departure of the former Chief Technology Officer in development.July 2019. Also, consulting expenses decreased due to the Company no longer using certain third-party research and development firms.

IncomeShare-based compensation expenses were $737,991 in 2020 compared to $927,696 in 2019, representing a decrease of $189,705, or 20.4%. This decrease was mainly due to fewer restricted shares issued and at a lower stock price than the comparable prior-year period.

As a result of the changes described above, loss from operations increased $1,468,223, or 58.6%, to $3,971,847was $2,255,010 in 20182020 compared to $2,503,624income from operations of $4,072,676 in 2017. This2019, a decrease of $6,327,686, or 155.4%.

Total interest expense was $683,357 in 2020 compared to $679,201 in 2019, an increase of $4,156, or 0.6%. The increase was mainly attributable to lower interest on our Term Loan due to lower balances, offset by interest expense on our Revolving Loan (which was undrawn in 2019).

Share redemption consideration was $781,928 in 2020 compared to $510,775 in 2019, an increase of $271,153, or 53.1%. The increase was attributable to the Triangulum Redemption Consideration Obligation, which was outstanding for only a portion of the prior-year period.

On November 21, 2020, the Company received notification the PPP Loan had been forgiven in full, including the original loan amount of $835,300 plus $4,943 in accrued interest.

The benefit for income taxes was ($605,936) in 2020 based on an effective rate of 17.42 percent compared to the provision of $10,018 in 2019 based on an effective rate of 0.3 percent. The 17.42 percent effective tax rate for 2020 differed from the statutory federal income

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tax rate of 21.0 percent and was primarily attributable to higher revenue, partially offset by higher selling, general and administrative and research and development expenses.

Total interest expense decreased $697,095, or 41.1% to $999,642 for 2018 compared to $1,696,737 in 2017. The decrease was mainly attributable to a lower interest rate on(i) the NSB Term Loan and the NSB Revolver as compared to the Breakaway Term Loan previously entered into with Breakaway Capital Management, LLC in August 2016 and paid off on April 25, 2018 (the “Breakaway Term Loan”) and a reduction in the interest rate on the Breakaway Term Loan between October 1, 2017 and April 24, 2018 due to the achievementincome tax benefit of a specified leverage ratio.

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Loss on extinguishment of debt was $1,349,271 in 2018approximately $1.2 million as a result of an early redemption premium paid in connection with the payoffnet operating loss carryback provisions of the Breakaway Term LoanCARES Act and (ii) the write-off of unamortized debt issuance costs previously issued in connection with the Breakaway Term Loan.

In 2018, there was no change in estimated fair value of the warrants issued in connection with the Breakaway Term Loan (the “Warrants”), as compared to other expense of $409,717 in 2017. The Warrants were repurchased on April 24, 2018 in connection with the payoff of the Breakaway Term Loan.

The income tax provision was $196,798 in 2018 compared to $564,573 in 2017.  This decrease was primarily attributable to (1) a reduction in the federal statutory rateof approximately $560,000 as a result of a valuation allowance placed against the Tax Cuts and Jobs Act signed in December 2017; (2) a reduction in unfavorable permanent book-to-tax difference generated by changes in the estimated fair value of the warrant liability for the year ended December 31, 2017. There were no changes in the estimated fair value of the warrant liability for the year ended December 31, 2018; The decreases were partially offset by (3) the increase in income before provision for income taxes.Company's certain deferred tax assets.

Adjusted EBITDA. Adjusted EBITDA includes adjustments to net (loss) income to exclude interest, income taxes, depreciation, amortization, share based compensation, lossgain on extinguishment of debt, foreign currency exchange loss (gain), change in estimated fair value of warrant liability, change in estimated fair value of interest rate swap liability and severance and other non-recurring losses and non-cash charges.expenses related to litigation. Adjusted EBITDA is not a measure of performance defined in accordance with U.S. generally accepted accounting principles ("in the United States of America (“U.S. GAAP"GAAP”). However, Adjusted EBITDA is used by management to evaluate our operating performance. Management believes that disclosure of the Adjusted EBITDA metric offers investors, regulators and other stakeholders a view of our operations in the same manner management evaluates our performance. When combined with U.S. GAAP results, management believes Adjusted EBITDA provides a comprehensive understanding of our financial results. Adjusted EBITDA should not be considered as an alternative to net income or to net cash provided by operating activities as a measure of operating results or of liquidity. It may not be comparable to similarly titled measures used by other companies, and it excludes financial information that some may consider important in evaluating our performance. A reconciliation of U.S. GAAP net income(loss)income to Adjusted EBITDA is as follows:

Liquidity and capital resources.resources. We intendhave generally been able to fund our continuing operations, our investments and the obligations under our existing borrowings through increased sales and cash flow.flow from operations. However, the COVID-19 crisis resulted in negative cash provided by operations for the year ended December 31, 2020. But based on our forecast of a gradual recovery in the casino gaming industry from the lows of Q2 2020, combined with the $3.92 million in cash we received from the MSPLP, we believe we have adequate liquidity to meet our short-term obligations. However, if COVID-19 continues to force casino closures or if the recovery from the closures is slower than we anticipate, the issuance of debt or equity financing arrangements may be required to fund future expenditures or other cash requirements. There can be no assurance that we will be successful in raising additional funding, if necessary, and even if we are successful, it may not be on advantageous terms to us. If we are not able to secure additional funding, the implementation of our business plan could be negatively affected. In addition, we may incur higher capital expenditures in the future to expand our operations. We may from time to time acquire products and businesses complementary to our business. We may also incur significant expenses when applying for new licenses or in complying with current jurisdictional requirements. As a public entity, we may issue shares of our common stock and preferred stock in private or public offerings to obtain financing, capital or to acquire other businesses that can improve our performance and growth. To the extent that we seek to acquire other businesses in exchange for our common stock, fluctuations in our stock price could have a material adverse effect on our ability to complete acquisitions.

As of December 31, 2018,2020, we had total current assets of $10,206,844$11,562,833 and total assets of $21,193,725. $30,574,594. This compares to $6,770,189$13,208,837 and $19,114,163,$22,987,053, respectively, as of December 31, 2017.2019. The increasedecrease in current assets as of December 31, 20182020 was primarily attributabledue to the Company closing on the Purchase Agreement in August 2020, resulting in a decrease in our cash balance. The increase in total assets as of December 31, 2020 was primarily due to an increase in cash and cash equivalents, accounts receivable, net and prepaid expense and other assets. Cash increased primarily due to cash flows from operating activities generated during 2018.  our Intangibles balance of $10.4 million, as a result of acquiring customer agreements in connection with the closing on the Purchase Agreement.

Our total current liabilities increased slightly from $4,869,335 as of December 31, 2017 to $4,990,615 as of December 31, 2018. Our2020 increased to $4,201,095 from $4,157,841, primarily due the Company drawing down on its $1,000,000 Revolving Loan on March 12, 2020.

Despite the COVID-19 crisis, our business model continues to bewas profitable and wein Q1 2020. However, our business was not profitable for the remainder of 2020. We do have sufficient working capital and other options to ensure we are able to meet our short-term and long-term obligations.  At December 31, 2018, we had $1.0 million available under the NSB Revolver. However, obligations as they become due. Further, we do not have any letterscurrently believe that the recent temporary casino closures in the both the United Kingdom and United States will result in an impairment of creditour assets or written or oral commitments from officers or shareholders to provide us with loans or advances to supporta default under our operations or fund potential acquisitions.loan agreements.

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We have undertaken certain growth initiativescontinue to expand our recurring revenue base. As such we have made investments in personnel and research related to the development of our enhanced table systems. Additionally, we increased our sales and marketing budget and spent funds on regulatory efforts for the purpose of expanding the jurisdictions in which we can operate in. We have filedfile applications for new or enhanced licenses in several jurisdictions, which may result in significant future legal and regulatory expenses. A significant increase in such expenses may require us to postpone growth initiatives or investments in personnel, inventory and research and development of our products. It is our intention to continue such initiatives and investments. However, to the extent we are not able to achieve our growth objectives or raise additional capital, we will need to evaluate the reduction of operating expenses.

Our operating activities provided $4,292,625used $1,586,247 in cash for the year ended December 31, 2018,2020, compared to $2,836,351cash provided of $4,890,595 for the year ended December 31, 2017.2019. The increasedecrease in operating cash flow was primarily due to (1) increases inthe net income and (2) increases in non-cash addbacks mostly due to loss on extinguishmentfor the period as a result of debt recorded in 2018, partially offset by lower addback in connection with change in estimated fair value of warrant liability in 2018, as compared to 2017.the COVID-19 crisis.

Additionally, investingInvesting activities used cash of $102,841$6,456,714 for the year December 31, 2018,2020, compared to $100,617$163,351 for the year ended December 31, 2017.  2019. This was due to closing of the Purchase Agreement in August 2020.

Cash used inprovided by financing activities during the year ended December 31, 2018 was $1,440,272 compared to $1,664,445 for the year ended December 31, 2017.  Cash2020 was $4,389,234, which resulted from the $1,000,000 draw on our Revolving Loan on March 12, 2020, $835,300 from the PPP Loan and $3,920,000 from the MSPLP (net of debt issuance costs), offset by an increase in principal payments on our long-term debt. This compares to $1,363,047 cash used in financing activities consisted of principal payments towards long-term debt and capital leases and payments of debt issuance costs, partially offset by proceeds from debt issued and the proceeds received from stock option exercises.

Furthermore, we transferred $298,826 and $282,797 from inventory to assets deployed at client locations for the year ended December 31, 2018 and December 31, 2017, respectively.  These amounts represent the value of our enhanced table systems that were newly installed at our casino clients’ premises during the years presented but are not reflected as cash flows used in investing activities.comparable prior period.

Critical Accounting Policies. The discussion of ourOur consolidated financial condition and results of operations is based upon our financial statements which have been prepared in accordance with U.S. GAAP. CriticalWe consider the following accounting policies are those policies that, in management's view, areto be the most important to understanding and evaluating our financial results:

Revenue recognition. We account for our revenue in accordance with Accounting Standards Codification Topic 606, Revenue from Contracts with Customers. We generate revenue primarily from the licensing of our intellectual property. We recognize revenue under recurring fee license contracts monthly as we satisfy our performance obligation, which consists of granting the customer the right to use our intellectual property. Amounts billed are determined based on flat rates or usage rates stipulated in the portrayalcustomer contract.

Goodwill and other intangible assets. Goodwill and other intangible assets are assessed for impairment at least annually or at other times during the year if events or circumstances indicate that it is more likely than not that the fair value of a reporting asset is below the carrying amount. If found to be impaired, the carrying amounts will be reduced, and an impairment loss will be recognized.

Long-term liabilities. The Company issued a promissory note in the face amount of $39,096,401 to Triangulum on May 6, 2019 in connection with the share redemption disclosed in Note 1. The promissory note has not been given accounting effect in the Company’s financial statements. The Company has instead recorded a long-term obligation payable to Triangulum, based on the redemption value specified in our financial condition and resultsArticles of operations. See Note 3Incorporation. The obligation is classified as long-term because we do not expect that a final agreement with respect to our financial statements includedthe litigation will be reached between the parties in Item 8. “Financial Statements and Supplementary Data” for further detail on these critical accounting policies.the next twelve months.

Off balance sheet arrangements. As of December 31, 2018,2020, there were no off-balance sheet arrangements.

Significant equipment.Recently issued accounting pronouncements. While we anticipate additional purchases of furniture and equipment in conjunction with our personnel expansion, weWe do not anticipate such purchasesexpect the adoption of recently issued accounting pronouncements to be material.have a significant impact on our results of operations, financial position or cash flow.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

A smaller reporting company is not required to provide the information required by this Item.

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ITEMITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATAFINANCIAL INFORMATION

INDEX TO FINANCIAL STATEMENTS

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REPORT OF INDEPENDENT REGISTEREDREGISTERED PUBLIC ACCOUNTING FIRM

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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

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GALAXY GAMING, INC.

CONSOLIDATED BALANCE SHEETS

DECEMBER 31, 20182020 AND 20172019

The accompanying notes are an integral part of the consolidated financial statements.

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GALAXY GAMING, INC.

STATEMENTSCONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME

YEARS ENDED DECEMBER 31, 20182020 AND 20172019

The accompanying notes are an integral part of the consolidated financial statements.

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GALAXY GAMING, INC.

STATEMENTCONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITYDEFICIT

YEARS ENDED DECEMBER 31, 20182020 AND 20172019

The accompanying notes are an integral part of the consolidated financial statements.

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GALAXY GAMING, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

YEARS ENDED December 31, 20182020 AND 20172019