Indicate by check mark whether the issuer (1) 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 issuer 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 every Interactive Data File required to be submitted 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 whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company.

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 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 is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No~~ ☒

State the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date: ~~24,253,124~~24,438,490 common shares as of ~~November 4, 2022.~~May 3, 2023.

QUARTERLY REPORT ON FORM 10-Q FOR THE THREE MONTHS ENDED ~~September 30, 2022~~MARCH 31, 2023


ASSETS	September 30, 2022			December 31, 2021			March 31, 2023			December 31, 2022
Current assets:
Cash and cash equivalents	$	19,275,180		$	16,058,714		$	16,386,461		$	18,237,513
Accounts receivable, net of allowance of $250,821 and $348,695, respectively		3,558,352			4,377,165
Inventory		924,021			770,248
Accounts receivable, net of allowance of $226,588 and $183,242, respectively								5,667,898			3,449,753
Income tax receivable		766,225			1,536,682			515,259			515,259
Prepaid expenses		893,024			1,125,777			1,125,816			1,402,824
Other current assets		8,640			21,536			574,979			588,838
Total current assets		25,425,442			23,890,122			24,270,413			24,194,187
Property and equipment, net		67,452			98,594			134,274			143,438
Operating lease right-of-use assets		1,061,140			1,167,903			943,691			1,002,749
Assets deployed at client locations, net		481,362			360,735			1,331,706			1,399,708
Goodwill		1,091,000			1,091,000			1,091,000			1,091,000
Other intangible assets, net		14,110,589			13,677,264			13,710,632			13,906,111
Other assets		245,217			167,087			359,348			273,323
Total assets	$	42,482,202		$	40,452,705		$	41,841,064		$	42,010,516
LIABILITIES AND STOCKHOLDERS’ DEFICIT
Current liabilities:
Accounts payable	$	3,399,386		$	374,323		$	2,544,127		$	1,129,869
Accrued expenses		2,982,457			2,666,073			2,362,647			3,697,504
Revenue contract liability		44,095			37,500			346			16,667
Current portion of operating lease liabilities		243,038			222,806			250,569			248,317
Current portion of long-term debt		600,000			1,100,369			813,744			940,084
Total current liabilities		7,268,976			4,401,071			5,971,433			6,032,441
Long-term operating lease liabilities		895,318			1,019,029			767,619			830,289
Long-term debt and liabilities, net		52,794,860			52,143,810			52,558,038			52,960,772
Deferred tax liabilities, net		29,000			175,218			57,107			72,401
Total liabilities		60,988,154			57,739,128			59,354,197			59,895,903
Commitments and Contingencies (See Note 8)
Commitments and Contingencies (See Note 7)
Stockholders’ deficit
Preferred stock, 10,000,000 shares authorized; $0.001 par value; 0 shares issued and outstanding		—			—			—			—
Common stock, 65,000,000 shares authorized; $0.001 par value; 24,327,426 and 23,523,969 shares issued and outstanding, respectively		24,327			23,524
Common stock, 65,000,000 shares authorized; $0.001 par value; 24,438,490 and 24,411,098 shares issued and outstanding, respectively								24,439			24,411
Additional paid-in capital		17,221,963			16,380,597			17,820,291			17,575,396
Accumulated deficit		(35,371,644	)		(33,543,351	)		(35,205,846	)		(35,316,540	)
Accumulated other comprehensive loss		(380,598	)		(147,193	)		(152,017	)		(168,654	)
Total stockholders’ deficit		(18,505,952	)		(17,286,423	)		(17,513,133	)		(17,885,387	)
Total liabilities and stockholders’ deficit	$	42,482,202		$	40,452,705		$	41,841,064		$	42,010,516

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

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS) ~~INCOME~~


	Three Months Ended						Nine Months Ended						Three Months Ended
	September 30, 2022			September 30, 2021			September 30, 2022			September 30, 2021			March 31, 2023			March 31, 2022
Revenue:
Licensing fees	$	5,906,989		$	5,281,788		$	17,501,783		$	14,314,127		$	7,422,534		$	5,918,599
Total revenue		5,906,989			5,281,788			17,501,783			14,314,127			7,422,534			5,918,599
Costs and expenses:
Cost of ancillary products and assembled components		71,363			26,310			174,392			60,212			352,010			52,590
Selling, general and administrative		3,340,691			2,740,328			9,867,968			7,984,035			3,784,657			3,043,359
Research and development		127,774			156,768			478,866			405,327			206,760			199,070
Depreciation and amortization		740,069			722,475			2,189,789			2,160,217			576,342			724,462
Share-based compensation		329,140			449,564			954,550			1,207,649			244,923			310,002
Total costs and expenses		4,609,037			4,095,445			13,665,565			11,817,440			5,164,692			4,329,483
Income from operations		1,297,952			1,186,343			3,836,218			2,496,687			2,257,842			1,589,116
Other income (expense):
Interest income		18,674			392			23,166			1,163			84,750			2,233
Interest expense		(1,896,865	)		(129,422	)		(5,281,322	)		(450,474	)		(2,203,635	)		(1,687,022	)
Share redemption consideration		—			(195,482	)		—			(586,446	)
Foreign currency exchange loss		(255,140	)		(33,781	)		(490,041	)		(31,511	)		(22,688	)		(60,263	)
Change in fair value of interest rate swap liability		—			—			—			66,009
Other non-recurring (loss) income		(18,255	)		25,000			(18,255	)		25,000
Total other expense, net		(2,151,586	)		(333,293	)		(5,766,452	)		(976,259	)		(2,141,573	)		(1,745,052	)
(Loss) income before benefit (provision) from income taxes		(853,634	)		853,050			(1,930,234	)		1,520,428
Benefit (provision) from income taxes		154,944			21,186			101,941			(7,000	)
Net (loss) income		(698,690	)		874,236			(1,828,293	)		1,513,428
Income (loss) before provision for income taxes														116,269			(155,936	)
(Provision) Benefit for income taxes														(5,575	)		141,974
Net income (loss)														110,694			(13,962	)
Foreign currency translation adjustment		(77,871	)		(81,716	)		(233,405	)		(139,716	)		16,637			(41,949	)
Comprehensive (loss) income	$	(776,561	)	$	792,520		$	(2,061,698	)	$	1,373,712
Comprehensive income (loss)													$	127,331		$	(55,911	)

Net (loss) income per share:
Net income (loss) per share:
Basic	$	(0.03	)	$	0.04		$	(0.07	)	$	0.07		$	0.00		$	0.00
Diluted	$	(0.03	)	$	0.04		$	(0.07	)	$	0.07		$	0.00		$	0.00

Weighted-average shares outstanding:
Basic		24,945,839			20,410,950			24,654,517			20,315,730			25,189,722			24,405,278
Diluted		24,945,839			22,364,694			24,654,517			22,080,338			25,437,374			24,405,278

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

CONDENSED CONSOLIDATED STATEMENTS OF ~~CHANGES IN STOCKHOLDERS’ DEFICIT~~CASH FLOWS

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

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

Other intangible assets (Note 5)4) are analyzed for potential impairment at least annually or whenever events or changes in circumstances indicate the carrying value may not be recoverable and exceeds the fair value, which is the sum of the undiscounted cash flows expected to result from the use and eventual disposition of the intangible assets. No impairment was recorded for the three ~~and nine~~ months ended ~~September 30, 2022.~~March 31, 2023.

Software relates primarily to assets where costs are capitalizable during the application development phase. External labor-related costs associated with product development are included in software.

Segment ~~information.~~Information. We define operating segments as components of our enterprise for which separate financial information is reviewed regularly by the chief operating decision-makers to evaluate performance and to make operating decisions. We currently have two operating segments (land-based gaming ("GG Core") and online ~~gaming)~~gaming ("GG Digital")) which are aggregated into one ~~reportable~~reporting segment.

Other significant accounting policies. Our significant accounting policies are described in our ~~2021~~2022 10-K. There have been no material changes to those policies.

NOTE 5.4. GOODWILL AND OTHER INTANGIBLE ASSETS

Goodwill. A goodwill balance of $1,091,000 was created as a result of a transaction completed in October 2011 with Prime Table Games, ~~LLC.~~LLC (“PTG”).

Other intangible assets, net. Other intangible assets, net consisted of the following at:


	September 30,			December 31,			March 31,			December 31,
	2022			2021			2023			2022
Patents	$	13,507,997		$	13,507,997		$	13,507,799		$	13,507,997
Customer relationships		14,040,856			14,040,856			14,040,856			14,040,856
Trademarks		2,880,967			2,880,967			2,880,967			2,880,967
Intellectual property		2,000,000			—			2,000,000			2,000,000
Non-compete agreements		660,000			660,000			660,000			660,000
Software		692,966			283,340			1,251,412			968,362
Other intangible assets, gross		33,782,786			31,373,160			34,341,034			34,058,182
Less: accumulated amortization		(19,672,197	)		(17,695,896	)		(20,630,402	)		(20,152,071	)
Other intangible assets, net	$	14,110,589		$	13,677,264		$	13,710,632		$	13,906,111

For the three ~~and nine~~ months ended ~~September 30,~~March 31, 2023 and 2022, ~~and 2021,~~ amortization expense related to other intangible assets was $~~667,913~~478,331 and $653,330, ~~and $~~respectively.~~1,976,301~~ ~~and $1,955,832, respectively.~~

In November 2011, the Company acquired certain intellectual property in exchange for contingent consideration to be paid in the future based on licensing by Galaxy of games utilizing the intellectual property. For the three months ended September 30, 2022, the contingent consideration (accounted for as royalty expense) was $~~78,631. Effective September 30, 2022, the Company paid the seller of the contract assets $2,000,000~~ ~~and terminated any obligation to pay contingent consideration after September 30, 2022. As a result of entering into the agreement, accounts payable at September 30, 2022 increased by $2,000,000. The actual payment of $2,000,000~~ ~~was made on October 4, 2022.~~

NOTE 6.5. LEASES

Lessee

We have operating leases for our corporate office, ~~and~~ two satellite facilities in the state of ~~Washington.~~Washington and for certain equipment. We account for lease components (such as rent payments) separately from the non-lease components (such as common-area maintenance costs, real estate and sales taxes and insurance costs). The discount rate represents the interest rate implicit in each lease or our incremental borrowing rate at lease commencement date.

As of ~~September 30, 2022,~~March 31, 2023, no renewal option periods were included in any estimated minimum lease term as the options were not deemed reasonably certain to be exercised. Our leases have remaining lease terms ranging from 159 months to 5448 months.

Supplemental balance sheet information related to leases is as follows:


	As of September 30, 2022				As of March 31, 2023
	Amount			Classification	Amount			Classification
Operating leases:
Operating lease right-of-use lease assets	$	1,061,140			$	943,691

Operating lease current liabilities	$	243,038		Current portion of operating lease liabilities	$	250,569		Current portion of operating lease liabilities

Operating lease long-term liabilities		895,318		Long-term operating lease liabilities		767,619		Long-term operating lease liabilities

Total operating lease liabilities	$	1,138,356			$	1,018,188

Weighted-average remaining lease term:
Operating leases		4.19				3.70

Weighted-average discount rate:
Operating leases		4.4	%			4.4	%

The components of lease expense are as follows:

Three Months Ended September 30, 2022

Amount

Classification
Operating lease cost

$
72,071

Selling, general and administrative expense

Nine Months Ended September 30, 2022

Amount

Classification
Operating lease cost

$
214,225

Selling, general and administrative expense

Supplemental cash flow information related to leases is as follows:

Nine Months Ended September 30, 2022

Three Months Ended March 31, 2023

Amount

Classification

Amount

Classification

Cash paid for amounts included in the
measurement of lease liabilities:

Operating cash flows from operating leases

209,222

Net income

72,081

Net income

Right-of-use assets obtained in exchange
for lease liabilities:

Operating leases

71,901

Supplemental cash flow information

—

Supplemental cash flow information

As of ~~September 30, 2022,~~March 31, 2023, future maturities of our operating lease liabilities are as follows:


	Amount			Amount
For the remaining three months ending December 31, 2022	$	72,080
For the remaining nine months ending December 31, 2023				$	218,796
Years ending December 31,
2023		290,877
2024		288,892		$	288,892
2025		294,507			294,507
2026		302,011			302,011
2027		2,985			2,985
Total minimum lease payments		1,251,352			1,107,191
Less: imputed interest		(112,996	)		(89,003	)
Total operating lease liability		1,138,356			1,018,188
Less: current portion		(243,038	)		(250,569	)
Long-term portion	$	895,318		$	767,619

NOTE 7.6. LONG-TERM ~~DEBT AND~~ LIABILITIES

Long-term liabilities consisted of the following at:


	September 30,			December 31,			March 31,			December 31,
	2022			2021			2023			2022
Fortress credit agreement	$	59,550,000		$	60,000,000		$	58,626,929		$	59,400,000
Insurance notes payable		—			500,369			213,744			340,084
Long-term debt and liabilities, gross		59,550,000			60,500,369			58,840,673			59,740,084
Less: Unamortized debt issuance costs		(6,155,140	)		(7,256,190	)		(5,468,891	)		(5,839,228	)
Long-term debt and liabilities, net of debt issuance costs		53,394,860			53,244,179			53,371,782			53,900,856
Less: Current portion of long-term debt		(600,000	)		(1,100,369	)		(813,744	)		(940,084	)
Long-term debt and liabilities, net	$	52,794,860		$	52,143,810		$	52,558,038		$	52,960,772

For most of 2021, our long-term liabilities consisted of term and revolving notes owed to Nevada State Bank, borrowings under the Main Street Priority Loan Program, and redemption consideration owed to Triangulum Partners LLC. All of those liabilities were paid in full from the proceeds of the Fortress Credit Agreement on November 15, 2021.

Fortress Credit Agreement. On November 15, 2021, the Company entered into a senior secured term loan agreement with Fortress Credit Corp. (“~~Fortress” and such agreement, “Fortress~~Fortress Credit Agreement”) in the amount of $6060.0 million. The proceeds of the loan were used to (i) pay approximately $39.5 million to Triangulum as full payment of the settlement amount due under the previously filed settlement agreement between Galaxy Gaming and Triangulum, as set forth above; (ii) repay approximately $11.1 million due and owing to NSB under the MSPLP and under the Amended and Restated Credit Agreement, dated as of May 13, 2021, made between Galaxy Gaming and Zions Bancorporation, N.A. dba Nevada State Bank, a Nevada state banking corporation, and (iii) approximately $4.1 million was used to pay fees and expenses. The remaining approximately $5.3 million was added to the Company’s cash on hand and used for corporate and operating purposes.

The Fortress Credit Agreement bears interest at a rate equal to, at the Company’s option, either (a) LIBOR (or a successor rate, determined in accordance with the Fortress Credit Agreement) plus 7.75%, subject to a reduction to 7.50% upon the achievement of a net leverage target or (b) a base rate determined by reference to the greatest of (i) the federal funds rate plus 0.50%, (ii) the prime rate as determined by reference to The Wall Street Journal’s “Prime Rate” and (iii) the one-month adjusted LIBOR rate plus 1.00%, plus 6.75%, subject to a reduction to 6.50% upon the achievement of a net leverage target. The Fortress Credit Agreement has a final maturity of November 13, 2026. The obligations under the Fortress Credit Agreement are guaranteed by the Company’s subsidiaries and are secured by substantially all of the assets of the Company and its subsidiaries. The Fortress Credit agreement requires, among other things, principal payments of $150,000 per quarter and includes an annual sweep of 50% of excess cash flow ~~beginning~~commencing in ~~2023.~~2023 based on results for the prior fiscal year. The

Fortress Credit Agreement contains affirmative and negative financial covenants (as defined in the Fortress Credit Agreement) and other restrictions customary for borrowings of this nature. The Company was required to maintain a Total Net Leverage Ratio of no more than ~~8.00~~6.00x for the quarter ~~ending September 30, 2022, and the Company was in compliance with that covenant. The Fortress Credit Agreement requires that bank account balances in excess of $~~1 ~~million at month end be covered by an account control agreement. From November 30, 2021 through February 28, 2022, the bank accounts held by PGP in the Isle of Man exceeded $~~1 million and did not have control agreements. The Company informed Fortress of the covenant breach, and a Consent and Waiver Agreement was executed among the Company, Fortress as Agent, and the Lenders party to the Fortress Credit Agreement onended March ~~16, 2022.~~31, 2023. As of March 31, ~~2022, and through September 30, 2022,~~2023, the Company was in compliance with the covenants ~~under~~in the Fortress Credit ~~Agreement, and maintained bank account balances within the $~~Agreement.

1 ~~million threshold.~~

In connection with entering into the Fortress Credit Agreement, the Company also issued warrants to purchase a total of up to 778,320 shares of the Company’s common stock to certain affiliates of Fortress at a price per share of $0.01 (the “Warrants”). The Warrants are exercisable at any time, subject to certain restrictions.

In response to ASU No. 2020-04, Reference Rate Reform (Topic 848), on the earlier of (i) the date that all Available Tenors of the LIBOR rate have either permanently or indefinitely ceased to be provided by the LIBOR Rate's administrator ("IBA") and (ii) the Early Option Effective Date, if the then-current Benchmark is the LIBOR Rate, the Benchmark Replacement will replace LIBOR under the

Fortress Credit Agreement. The Benchmark Replacement is (a) the sum of: (i) Term SOFR and (ii) 0.11448% for an Available Tenor of one-month's duration, 0.26161% for an Available Tenor of three-months duration, and 0.42826% for an Available Tenor of six months duration, or (b) the sum of: (i) Daily Simple SOFR and (ii) the spread adjustment selected or recommended by the Relevant Governmental Body for the replacement of the tenor of USD LIBOR with a SOFR-based rate having approximately the same length as the interest payment period.

As of ~~September 30, 2022, minimum~~March 31, 2023, future maturities of our long-term liabilities are as ~~follows (the excess cash flow sweep mechanism in the Fortress Credit Agreement may increase repayments in 2023 through 2026):~~follows:


	Total		Total
For the remaining three months ending December 31, 2022	$	150,000
Years ending December 31,
Years ended December 31,
2023		600,000	$	663,744
2024		600,000		600,000
2025		600,000		600,000
2026		57,600,000		56,976,929
Long-term liabilities, gross	$	59,550,000	$	58,840,673

NOTE 8.7. COMMITMENTS AND CONTINGENCIES

Concentration of risk. We are exposed to risks associated with clients who represent a significant portion of total revenues. For the ~~nine~~three months ended ~~September 30,~~March 31, 2023 and 2022, ~~and 2021,~~ respectively, we had the following client concentrations:


	Location	Nine Months Ended September 30, 2022 Revenue			Nine Months Ended September 30, 2021 Revenue			Accounts Receivable September 30, 2022		Accounts Receivable December 31, 2021		Location	Three Months Ended March 31, 2023 Revenue			Three Months Ended March 31, 2022 Revenue			Accounts Receivable March 31, 2023		Accounts Receivable December 31, 2022
Client A	Europe		27.5	%		27.1	%	$	529,182	$	—	Europe		23.5	%		31.0	%	$	1,206,125	$	—
Client B	North America		8.5	%		10.3	%	$	843,946	$	138,338	North America		16.0	%		1.7	%	$	1,268,250	$	132,500
Client C												North America		6.5	%		8.5	%	$	862,303	$	138,338

Legal proceedings. In the ordinary course of conducting our business, we are, from time to time, involved in various legal proceedings, administrative proceedings, regulatory government investigations and other matters, including those in which we are a plaintiff or defendant, that are complex in nature and have outcomes that are difficult to predict. There are no current or threatened legal proceedings.

Intellectual property agreements. From time to time, the Company purchases ~~and licenses~~ intellectual property from third-parties and the Company, in turn, utilizes that intellectual property in certain games ~~licensed~~sold to clients. In these purchase ~~and license~~ agreements, the Company may agree to pay the seller of the intellectual property a fee, if and when, the Company receives revenue from games containing the intellectual property.

NOTE 9.8. INCOME TAXES

Our forecasted annual effective tax rate (“AETR”) at ~~September 30, 2022~~March 31, 2023 was ~~4.3~~4.8%, as compared to ~~10.4~~6.66% at ~~September 30, 2021.~~March 31, 2022. This decrease was primarily due to ~~excess tax benefits reduced~~changes in foreign rate differential, ~~reduced Subpart F inclusion~~adjustments in foreign derived intangible income and a change in valuation allowance ~~because~~as a result of changes in estimates of current-year ordinary income considered in determining the forecasted AETR.

For the ~~nine~~three months ended ~~September 30,~~March 31, 2023 and 2022, ~~and 2021,~~ our effective tax rate (“ETR”) was ~~5.2~~4.8% and ~~0.5~~143.35%, respectively. The ~~increase~~decrease in the ETR for the ~~nine~~three months ended ~~September 30, 2022~~March 31, 2023 is a result of ~~increased~~ favorable discrete items related to excess tax benefits from stock-based compensation in the prior quarter that were ~~greater than~~not present in the ~~previous comparable period, in addition to changes in valuation allowance as the result of changes in estimates of current-year ordinary income.~~current quarter.

1514

~~NOTE 10. SUBSEQUENT EVENTS~~

On November 11, 2022, the Board of Directors reauthorized repurchases of the Company's common stock of up to $750,000, subject to the Company remaining in compliance with the provisions of the Fortress Credit Agreement and, in particular, the $750,000 restricted payments basket.

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

The following is a discussion and analysis of our financial condition, results of operations and liquidity and capital resources as of and for the three ~~and nine~~ months ended ~~September 30, 2022~~March 31, 2023 and ~~2021.~~2022. This discussion should be read together with our audited consolidated financial statements and related notes included in Item 8 Financial Statements and Supplementary Financial Information included in our 2021 10-K. 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 casino floors and on legal internet gaming sites. Our products and services primarily relate to licensed casino operators’ table games activities and focus on either increasing their profitability and productivity or expanding their gaming entertainment offerings in the form of proprietary table games, electronically enhanced table game platforms, ~~table game display products~~fully-automated electronic tables and other ancillary equipment. In addition, we license intellectual property to legal internet gaming operators. ~~We refer to the licensure of our products in land-based casinos as “Galaxy Core” and to the licensure of our products in online casinos as “Galaxy Digital”.~~ 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 three months ended ~~September 30, 2022~~March 31, 2023 and ~~2021.~~2022. For the three months ended ~~September 30, 2022,~~March 31, 2023, we generated revenues of ~~$5,906,989~~$7,422,534 compared to ~~$5,281,788~~$5,918,599 for the comparable prior-year period, representing an increase of ~~$625,201,~~$1,503,935, or ~~11.8%~~25.4%. Net revenues in our GG Core operating segment increased 35.2% from $3,825,989 to $5,171,880. This increase was attributable primarily to ~~the continued recovery~~shipment of perpetual right to use gaming systems to a single customer. Net revenues in our ~~land-based customers~~GG Digital operating segment increased 7.6% from ~~the effects of the COVID-19 crisis, particularly in the United Kingdom.~~$2,092,610 to $2,250,654. Our online gaming revenues increased due to ~~increased revenue earned by~~ our ~~iGaming clients, reflecting continued~~online customers' growth in their ~~non-U.S.~~traditional markets and ~~significantly increased revenue in existing or newly-opened U.S.~~their entry into new markets. However, revenue in both Galaxy Core and Galaxy Digital were adversely affected by the strengthening of the U.S. Dollar versus the Euro and UK Pound. In local currency, revenues in Galaxy Core increased 10.3% and revenues in Galaxy Digital increased 31.3%.

Selling, general and administrative expenses for the three months ended ~~September 30, 2022~~March 31, 2023 were ~~$3,340,691~~$3,784,657 compared to ~~$2,740,328~~$3,043,359 for the comparable prior-year period, representing an increase of ~~$600,363,~~$741,298, or ~~21.9%~~24.4%. This increase was due to higher cost of ancillary products and assembled components, internal labor and related expenses ~~due to both an increase in the number of employees~~(base salary, commissions, payroll-related taxes, bonus accrual and ~~an increase in compensation for continuing employees. In addition, we experienced increases in travel~~travel), increased information technology expenses, and ~~increase in marketing expenses related to our attendance at~~increased trade ~~shows that were not held in 2021. Finally, we incurred significant outside consulting expenses in the current quarter related to enhancing our financial reporting systems.~~show expenses.

Research and development expenses for the three months ended ~~September 30, 2022~~March 31, 2023 were ~~$127,774,~~$206,760, compared to ~~$156,768~~$199,070 for the comparable prior-year period, representing an ~~decrease~~increase of ~~$28,994,~~$7,690, or ~~18.5%~~3.9%. ~~This decrease was primarily due to higher internal labor and related expenses.~~

Share-based compensation expenses for the three months ended ~~September 30, 2022~~March 31, 2023 were ~~$329,140,~~$244,923, as compared to ~~$449,564~~$310,002 for the comparable prior-year period, representing a decrease of ~~$120,424,~~$65,079, or ~~26.8%~~20.6%. The decrease was due primarily to a change in the level and the composition of fees paid to members of our Board of Directors in ~~2022.~~2023 and lower share-based compensation for officers and consultants.

As a result of the changes described above, income from operations increased ~~$111,609~~$668,726 or ~~9.4%~~FALSE to ~~$1,297,952~~$2,257,842 for the three months ended ~~September 30, 2022,~~March 31, 2023, compared to income from operations of ~~$1,186,343~~$1,589,116 for the comparable prior-year period.

Total interest expense increased ~~$1,767,443~~$516,613, or 30.6%, to ~~$1,896,865~~$(2,203,635) for the three months ended ~~September 30, 2022,~~March 31, 2023, compared to ~~$129,422~~$(1,687,022) for the comparable prior-year period. The increase was attributable to ~~a larger balance of debt outstanding in the current period as compared to the prior year, and~~ higher rates of interest on the current borrowings.

~~No share redemption consideration~~Income tax expense was $(5,575) for the three months ended ~~September 30, 2022, compared to $195,482 in the comparable prior-year period. The reduction is due to the payment in full of the Triangulum Redemption Consideration Obligation in November 2021.~~

~~Income tax benefit was $154,944 for the three months ended September 30, 2022,~~March 31, 2023, compared to income tax benefit of ~~$21,186~~$141,974 for the comparable prior-year period. The ~~increase~~decrease in benefit is primarily the result of increased favorable discrete items related to excess tax benefits from stock-based compensation ~~and changes in valuation allowance against deferred tax attributes because of changes in estimates of current-year ordinary income.~~

~~Results of operations for the nine months ended September 30, 2022 and 2021.~~ ~~For the nine months ended September 30, 2022, we~~

generated revenues of $17,501,783 compared to $14,314,127 for the comparable prior-year period, representing an increase of $3,187,656, or 22.3%. This increase was attributable to the continued recovery of Galaxy Core from the effects of the COVID-19 crisis, particularly in the United Kingdom. Our online gaming revenues increased due to increased revenue earned by our iGaming clients, reflecting continued growth in their non-U.S. markets and significantly increased revenue in existing or newly-opened U.S. markets. However, revenue in both Galaxy Core and Galaxy Digital were adversely affected by the strengthening of the U.S. Dollar versus the Euro and UK Pound. In local currency, revenues in Galaxy Core increased 17.7% and revenues in Galaxy Digital increased 37.2%.

~~Selling, general and administrative expenses for the nine months ended September 30, 2022 were $9,867,968 compared to $7,984,035 for the comparable prior-year~~prior period representing an increase of $1,883,933, or 23.6%. This increase was due to higher internal labor and related expenses due to both an increase in the number of employees and an increase in compensation for continuing employees. In addition, we experienced increases in travel expenses and increase in marketing expenses related to our attendance at trade shows that ~~were~~did not ~~held in 2021. A decrease in legal fees related to the Triangulum litigation and settlement was almost entirely offset by legal and other expenses related to the contested proxy solicitation.~~

Research and development expenses for the nine months ended September 30, 2022 were $478,866, compared to $405,327 for the comparable prior-year period, representing an increase of $73,539, or 18.1%. This increase was primarily due to higher internal labor and related expenses (base salary, payroll-related taxes, commissions and bonus accrual).

Share-based compensation expenses for the nine months ended September 30, 2022 were $954,550, as compared to $1,207,649 for the comparable prior-year period, representing a decrease of $253,099, or 21.0%. The decrease was due primarily to a change in the level and the composition of fees paid to members of our Board in 2022.

As a result of the changes described above, income from operations increased $1,339,531 or 53.7% to $3,836,218 for the nine months ended September 30, 2022, compared to income from operations of $2,496,687 for the comparable prior-year period.

Total interest expense increased $4,830,848 to $5,281,322 for the nine months ended September 30, 2022, compared to $450,474 for the comparable prior-year period. The increase was attributable to a larger balance of debt outstandingoccur in the current ~~period as compared to the prior year, and higher rates of interest on the current borrowings.~~period.

There was no share redemption consideration for the nine months ended September 30, 2022, compared to $586,446 in the comparable prior-year period. The reduction is due to the payment in full of the Triangulum Redemption Consideration Obligation in November 2021.

Income tax benefit was $101,941 for the nine months ended September 30, 2022, compared to income tax expense of $7,000 for the comparable prior-year period. The increase in benefit is primarily the result of increased favorable discrete items related to excess tax benefits from stock-based compensation and changes in valuation allowance against deferred tax attributes because of changes in estimates of current-year ordinary income.

1815

Adjusted EBITDA. Adjusted EBITDA includes adjustments to net income to exclude interest, income taxes, depreciation, amortization, share-based compensation, foreign currency exchange loss (gain)~~, change in fair value of interest rate swap liability~~ and severance and other expenses related to litigation. Adjusted EBITDA is not a measure of performance defined in accordance with U.S. 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 to Adjusted EBITDA is as follows:


	Three Months Ended September 30,						Nine Months Ended September 30,						Quarter ended March 31,
Adjusted EBITDA Reconciliation:	2022			2021			2022			2021			2023			2022
Net (loss) income	$	(698,690	)	$	874,236		$	(1,828,293	)	$	1,513,428
Net income (loss)													$	110,694		$	(13,962	)
Interest expense		1,896,865			129,422			5,281,322			450,474			2,203,635			1,687,022
Share redemption consideration		—			195,482			—			586,446
Interest income		(18,674	)		(392	)		(23,166	)		(1,163	)		(84,750	)		(2,233	)
Depreciation and amortization		740,069			722,475			2,189,789			2,160,217			576,342			724,462
Share-based compensation		329,140			449,564			954,550			1,207,649			244,923			310,002
Foreign currency exchange loss (gain)		255,140			33,781			490,041			31,511			22,688			60,263
Change in fair value of interest rate swap liability		—			—			—			(66,009	)
Provision (benefit) for income taxes		(154,944	)		(21,186	)		(101,941	)		7,000			5,575			(141,974	)
Other non-recurring income		18,255			(25,000	)		18,255			(25,000	)
Severance expense		—			8,846			28,477			12,596			—			21,727
Special project expense (benefit) - Triangulum		—			116,798			(86,959	)		413,024			—			(86,959	)
Special project expense - Other		(17,000	)		(20,904	)		459,904			12,516			5,321			115,083
Adjusted EBITDA	$	2,350,161		$	2,463,122		$	7,381,979		$	6,302,689		$	3,084,428		$	2,673,431

Liquidity and capital resources. We have generally been able to fund our continuing operations, our investments, and the interest expense and principal amortization under our existing borrowings through cash flow from operations. We may require additional capital to undertake acquisitions or to repay in full our indebtedness. Our ability to access capital for these activities will depend on conditions in the capital markets and investors’ perceptions of our business prospects and such conditions and perceptions may not always favor us.

As of ~~September 30, 2022,~~March 31, 2023, we had total current assets of ~~$25,425,442~~$24,270,413 and total assets of ~~$42,482,202.~~$41,841,064. This compares to ~~$23,890,122~~$24,194,187 and ~~$40,452,705,~~$42,010,516, respectively, as of December 31, ~~2021.~~2022. The increase in total current assets at ~~September 30, 2022~~March 31, 2023 was due primarily to ~~higher revenues~~payments of accrued royalties and debt principal payments in the ~~2022~~2023 period. The ~~increase~~decrease in total assets was primarily due to the ~~addition~~decrease in current assets and amortization of ~~$2,000,000 in intangibles through the exercise of an option in a contract pursuant to which we terminated the obligation to pay any consideration to a party from whom we acquired game assets in 2011.~~other intangibles.

Our total current liabilities as of ~~September 30, 2022 increased~~March 31, 2023 decreased to ~~$7,268,976~~$5,971,433 from ~~$4,401,071~~$6,032,441 as of December 31, ~~2021,~~2022, primarily due to ~~an increase in~~the payment of accrued royalties, ~~in our online gaming business~~accrued bonuses, and ~~an increase in federal income tax payable.~~payments against D&O insurance liabilities.

~~Our business was cash-flow positive from operations as of September 30, 2022.~~ Based on our current forecast of operations, we believe we will have sufficient liquidity to fund our operations for at least the next 12 months and to meet the obligations under our financing arrangements as they come due.

We continue to file 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~~used cash of ~~$4,502,477~~$(652,218) for the ~~nine~~three months ended ~~September 30, 2022,~~March 31, 2023, compared to ~~cash~~$1,476,946 provided ~~of $3,220,319 in~~for the comparable prior period. The ~~increase in~~negative operating cash flow was primarily due to ~~higher income from operations, partially offset by~~an increase in receivables, a decrease in payables, and higher interest expense.

~~Cash~~Investing activities used ~~in investing activities during~~cash of ($303,894) for the ~~nine~~three months ended ~~September 30, 2022 was $434,576,~~March 31, 2023, compared to cash used of ~~$84,969 in~~($176,457) for the comparable prior period. This increase in cash used was primarily due to ~~an increase~~the investment in internally developed software in the 2023 period, partially offset by a decrease in the acquisition of ~~certain software tools~~assemblies in ~~2022.~~process.

Cash used in financing activities during the ~~nine~~three months ended ~~September 30, 2022~~March 31, 2023 was ~~$421,307, compared~~($906,239). This compares to ($120,480) cash used ~~of $1,654,182 in~~by financing activities for the comparable prior period. ~~This~~The decrease was due to higher principal payments on our borrowings in ~~2022, offset by~~ the ~~proceeds from stock option exercised.~~2023 period.

Critical accounting policies. Our significant accounting policies are described in our ~~2021~~2022 10-K. There have been no material changes to those policies.

Off-balance sheet arrangements. As of ~~September 30, 2022,~~March 31, 2023, there were no off-balance sheet arrangements.

Recently issued accounting pronouncements. We do not expect the adoption of recently issued accounting pronouncements to have a significant impact on our results of operations, financial position or cash flow.

2017

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

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

ITEM 4. CONTROLS AND PROCEDURES

Disclosure controls and procedures

Disclosure controls and procedures are controls and other procedures that are designed to ensure that information required to be disclosed in our reports filed or submitted under the Exchange Act are recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed in our reports filed submitted under the Exchange Act is accumulated and communicated to management including our Chief Executive Officer and Chief Financial Officer, to allow timely decisions regarding required disclosure.

We carried out an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) as of the end of the period covered by this Quarterly Report. This evaluation was carried out under the supervision and with the participation of our Chief Executive Officer and our Chief Financial Officer. Based upon that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that, as of ~~September 30, 2022,~~March 31, 2023, our disclosure controls and procedures were effective.

No change in our internal control over financial reporting occurred during our last fiscal quarter that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

Limitations on the effectiveness of internal controls

Our management does not expect that our disclosure controls and procedures or our internal control over financial reporting will necessarily prevent all fraud and material error. Our disclosure controls and procedures are designed to provide reasonable assurance of achieving our objectives, and our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures are effective at that reasonable assurance level. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within the Company have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdowns can occur because of simple ~~errors~~error or ~~mistakes.~~mistake. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the internal control. The design of any system of controls also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Over time, controls may become inadequate because of changes in conditions, or the degree of compliance with the policies or procedures may deteriorate.

2118

PART II – OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

We have been named in and have brought lawsuits in the normal course of business. See Note ~~8 to condensed consolidated financial statements included in Item 1 in this Form 10-Q,~~7 above and Note 1110 to our audited financial statements included in Item 8 “Financial Statements and Supplementary Financial Information” in our ~~2021~~2022 10-K.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

On ~~September 30, 2022, 29,175~~March 16, 2023, 20,000 restricted shares of our common stock valued at ~~$80,523~~$50,000 were issued to ~~members of our Board in partial consideration for their service in Q3 2022.~~Todd Cravens, President and Chief Executive Officer. These shares ~~were fully vested upon issuance.~~vest one year from issuance date. These 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.

On March 31, 2023, 27,392 restricted shares of our common stock valued at $70,124 were issued to members of our Board of Directors in partial consideration for their service in Q1 2023. These shares were fully vested upon issuance. These securities were issued pursuant to the Securities Act and rules and regulations promulgated thereunder.

Our reliance upon Section 4(a)(2) of the Securities Act in granting the aforementioned options to purchase shares of our common stock was based in part upon the following factors: (a) each of the issuances of the securities was in connection with an isolated private transaction which did not involve any public offering; (b) there were a limited number of offerees; (c) there were no subsequent or contemporaneous public offerings of the securities by us; and (d) the negotiations for the issuance of the securities took place directly between the offeree and us.

2219

ITEM 6. EXHIBITS


Exhibit Number	Description	Form	File No.	Exhibit	Filing Date	Filed Herewith

10.1	Amended and Restated Credit Agreement dated March 29, 2021 with Zions Bancorporation, N.A. dba Nevada State Bank	8-K	000-30653	10.1	March 31, 2021

10.2	Forbearance to Amended and Restated Credit Agreement dated March 29, 2021 with Zions Bancorporation, N.A. dba Nevada State Bank	8-K	000-30653	10.1	May 17, 2021

10.3	Settlement Agreement with former Chairman and Chief Executive Officer, Robert Saucier and Triangulum Partners LLC dated October 7, 2021	8-K	000-30653	10.1	October 8, 2021

10.4	Credit Agreement dated November 15, 2021, with Fortress Credit Corp.	8-K	000-30653	10.1	November 17, 2021

10.5	Consent and Waiver to Term Loan Credit Agreement, dated November 15, 2021, by among Galaxy Gaming, Inc., a Nevada corporation, the lenders from time to time party and Fortress Credit Corp., as administrative agent and Collateral agent	8-K	000-30653	10.1	March 22, 2022

10.6	Cooperation Agreement, dated April 20, 2022, by and between the Company and Tice Brown	8-K	000-30653	10.1	April 25, 2022

10.7	Amendment #3 to the Employment Agreement between the Company and Todd Cravens	8-K	000-30653	10.1	June 21, 2022

10.8	Board of Directors Service Agreement with Meredith Brill, Director	8-K	000-30653	10.1	July 15, 2022

10.9	First Amendment to Board of Directors Service Agreement with Meredith Brill, Director	8-K	000-30653	10.1	July 26, 2022

10.10	Changes to Board Compensation	8-K	000-30653	10.1	January 27, 2023

10.11	Press Release Announcing the Date of Virtual Annual Meeting of Stockholders to be Held on June 14, 2023	8-K	000-30653	99.1	March 20, 2023

10.12	Press Release Announcing the Date of Virtual Annual Meeting of Stockholders to be Held on June 14, 2023	8-K/A	000-30653	99.1	March 22, 2023

31.1	Certification of Chief Executive Officer pursuant to Securities Exchange Act Rule 13a-14(a)/15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002					X

31.2	Certification of Chief Financial Officer pursuant to Securities Exchange Act Rule 13a-14(a)/15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002					X

32.1	Certification of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002					X

Exhibit
Number

Description

Form

File No.

Exhibit

Filing Date

Filed
Herewith

10.1

Amended and Restated Credit Agreement dated March 29, 2021 with Zions Bancorporation, N.A. dba Nevada State Bank

8-K

000-30653

10.1

March 31, 2021

10.2

Forbearance to Amended and Restated Credit Agreement dated March 29, 2021 with Zions Bancorporation, N.A. dba Nevada State Bank

8-K

000-30653

10.1

May 17, 2021

10.3

Settlement Agreement with former Chairman and Chief Executive Officer, Robert Saucier and Triangulum Partners LLC dated October 6, 2021

8-K

000-30653

10.1

October 8, 2021

10.4

Credit Agreement dated November 15, 2021, with Fortress Credit Corp.

8-K

000-30653

10.1

November 17, 2021

10.5

Consent and Waiver to Term Loan Credit Agreement, dated November 15, 2021, by among Galaxy Gaming, Inc., a Nevada corporation, the lenders from time to time party and Fortress Credit Corp., as administrative agent and Collateral agent

8-K

000-30653

10.1

March 22, 2022

10.6

Amendment #3 to the Employment Agreement between the Company and Todd Cravens

8-K

000-30653

10.1

June 21, 2022

10.7

Board of Directors Service Agreement with Meredith Brill, Director

8-K

000-30653

10.1

July 15, 2022

10.8

First Amendment to Board of Directors Service Agreement with Meredith Brill, Director

8-K

000-30653

10.1

July 26, 2022

31.1

Certification of Chief Executive Officer pursuant to Securities Exchange Act Rule 13a-14(a)/15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

X

31.2

Certification of Chief Financial Officer pursuant to Securities Exchange Act Rule 13a-14(a)/15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

X

32.1

Certification of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

X

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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.


	Galaxy Gaming, Inc.

Date:	~~November 14, 2022~~May 15, 2023

	By:	/s/ TODD P. CRAVENS
		Todd P. Cravens
		President and Chief Executive Officer (Principal Executive Officer)

	Galaxy Gaming, Inc.

Date:	~~November 14, 2022~~May 15, 2023

	By:	/s/ HARRY C. HAGERTY
		Harry C. Hagerty
		Chief Financial Officer (Principal Accounting Officer)

2422


Nevada		20-8143439
(State or other jurisdiction of incorporation or organization)		(IRS Employer Identification No.)

6480 Cameron Street Ste. 305 – Las Vegas, NV 89118
(Address of principal executive offices)

(702) 939-3254
(Issuer’s telephone number)


Title of each class	Trading symbol	Name of exchange on which registered
Common stock	GLXZ	OTCQB marketplace


	PART I
Item 1:	Financial Statements (unaudited)	3
Item 2:	Management’s Discussion and Analysis of Financial Condition and Results of Operations	1715
Item 3:	Quantitative and Qualitative Disclosures About Market Risk	2118
Item 4:	Controls and Procedures	2118
	PART II
Item 1:	Legal Proceedings	2219
Item 2:	Unregistered Sales of Equity Securities and Use of Proceeds	2219
Item 6:	Exhibits	2320


Condensed Consolidated Balance Sheets as of ~~September 30, 2022~~March 31, 2023 and December 31, ~~2021~~2022 (unaudited)	4
Condensed Consolidated Statements of Operations and Comprehensive Income (Loss) ~~Income~~ for the three ~~and nine~~ months ended ~~September 30,~~March 31, 2023 and 2022 ~~and 2021~~ (unaudited)	5
Condensed Consolidated Statements of Changes in Stockholders’ Deficit for the three ~~and nine~~ months ended ~~September 30,~~March 31, 2023 and 2022 ~~and 2021~~ (unaudited)	6
Condensed Consolidated Statements of Cash Flows for the ~~nine~~three months ended ~~September 30,~~March 31, 2023 and 2022 ~~and 2021~~ (unaudited)	87
Notes to Condensed Consolidated Financial Statements (unaudited)	98


	Common Stock				Additional Paid-in		Accumulated			Accumulated Other Comprehensive			Total Stockholders'
	Shares		Amount		Capital		Deficit			Loss			Deficit
Beginning balance, December 31, 2020		21,970,638	$	21,971	$	10,798,536	$	(35,655,163	)	$	37,691		$	(24,796,965	)
Net income		—		—		—		88,737			—			88,737
Foreign currency translation loss		—		—		—		—			(79,207	)		(79,207	)
Stock options exercised		50,000		50		10,949		—			—			10,999
Share-based compensation		55,000		55		316,585		—			—			316,640
Balance, March 31, 2021		22,075,638	$	22,076	$	11,126,070	$	(35,566,426	)	$	(41,516	)	$	(24,459,796	)
Net income		—		—		—		550,455			—			550,455
Foreign currency translation gain		—		—		—		—			21,207			21,207
Stock options exercised		50,000		50		15,451		—			—			15,501
Share-based compensation		55,000		55		441,389		—			—			441,444
Balance, June 30, 2021		22,180,638	$	22,181	$	11,582,910	$	(35,015,971	)	$	(20,309	)	$	(23,431,189	)
Net income		—		—		—		874,236			—			874,236
Foreign currency translation loss		—		—		—		—			(81,716	)		(81,716	)
Stock options exercised		119,166		119		62,697		—			—			62,816
Share-based compensation		—		—		345,305		—			—			345,305
Balance, September 30, 2021		22,299,804	$	22,300	$	11,990,912	$	(34,141,735	)	$	(102,025	)	$	(22,230,548	)


☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934


☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934


Patents		4 - 20 years
~~Client~~Customer relationships		9 - 22 years
Trademarks		20 - 30 years
Intellectual property		12 years
Non-compete agreements		9 years
Software		3 years


	Three Months Ended September 30,				Nine Months Ended September 30,				Three Months Ended March 31,
	2022		2021		2022		2021		2023		2022
North America and Caribbean	$	2,602,001	$	2,476,619	$	7,577,670	$	7,394,096
The Americas									$	4,471,631	$	3,045,365
Europe, Middle East and Africa		3,304,988		2,805,169		9,924,113		6,920,031		2,950,903		2,873,234
Total revenue	$	5,906,989	$	5,281,788	$	17,501,783	$	14,314,127	$	7,422,534	$	5,918,599


	Three Months Ended September 30, 2022
	Amount		Classification
Operating lease cost	$	72,071	Selling, general and administrative expense

	Nine Months Ended September 30, 2022
	Amount		Classification
Operating lease cost	$	214,225	Selling, general and administrative expense


	September 30,		December 31,
	2022		2021
Raw materials and component parts	$	541,611	$	413,320
Finished goods		382,410		356,928
Inventory	$	924,021	$	770,248

Three Months Ended March 31, 2023

Classification

Operating lease cost

Selling, general and administrative expense