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. ☐

State the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date: ~~18,281,277~~18,336,277 common shares as of ~~June 23,~~August 12, 2020.

QUARTERLY REPORT ON FORM 10-Q FOR THE THREE MONTHS ENDED ~~MARCH 31,~~JUNE 30, 2020

ASSETS	March 31, 2020			December 31, 2019			June 30, 2020			December 31, 2019
Current assets:	(Unaudited)						(Unaudited)
Cash, cash equivalents and restricted cash	$	11,051,143		$	9,686,698
Accounts receivable, net of allowance of $122,354 and $77,433, respectively		2,564,271			3,099,586
Cash and cash equivalents							$	9,641,392		$	9,686,698
Accounts receivable, net of allowance of $125,973 and $77,433, respectively								1,013,548			3,099,586
Inventory, net		726,483			665,654			725,297			665,654
Income tax receivable		224,385			260,347			272,347			260,347
Prepaid expense and other current assets		958,216			761,650			875,497			761,650
Total current assets		15,524,498			14,473,935			12,528,081			14,473,935
Property and equipment, net		123,363			144,909			122,073			144,909
Operating lease right-of-use assets		237,559			37,689			168,559			306,859
Assets deployed at client locations, net		367,266			405,522			307,583			405,522
Goodwill		1,091,000			1,091,000			1,091,000			1,091,000
Other intangible assets, net		7,048,144			7,430,643			6,674,225			7,430,643
Deferred tax assets, net		399,283			399,283			1,025,798			399,283
Total assets	$	24,791,113		$	23,982,981		$	21,917,319		$	24,252,151
LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT)
Current liabilities:
Accounts payable	$	775,088		$	766,305		$	1,199,450		$	766,305
Accrued expenses		1,085,368			1,450,879			411,291			1,450,879
Revenue contract liability		1,298,451			1,294,265			371,256			1,294,265
Current portion of long-term debt		1,599,103			1,634,527			2,564,812			1,634,527
Current portion of operating lease liabilities		214,012			19,140			151,330			276,963
Total current liabilities		4,972,022			5,165,116			4,698,139			5,422,939
Long-term operating lease liabilities		23,972			18,978			17,650			30,325
Long-term debt, net		46,929,382			46,291,014
Long-term liabilities, net								46,377,926			46,291,014
Interest rate swap liability		216,658			140,495			174,175			140,495
Total liabilities		52,142,034			51,615,603			51,267,890			51,884,773
Commitments and Contingencies (See Note 11)
Stockholders’ equity (deficit)
Preferred stock, 10,000,000 shares authorized, $0.001 par value; 0 shares issued and outstanding, respectively		—			—			—			—
Common stock, 65,000,000 shares authorized; $0.001 par value; 18,106,277 and 18,017,944 shares issued and outstanding, respectively		18,106			18,018
Common stock, 65,000,000 shares authorized; $0.001 par value; 18,336,277 and 18,017,944 shares issued and outstanding, respectively								18,336			18,018
Additional paid-in capital		5,960,644			5,795,636			6,167,346			5,795,636
Accumulated deficit		(33,329,671	)		(33,446,276	)		(35,536,253	)		(33,446,276	)
Total stockholders’ deficit		(27,350,921	)		(27,632,622	)		(29,350,571	)		(27,632,622	)
Total liabilities and stockholders’ deficit	$	24,791,113		$	23,982,981		$	21,917,319		$	24,252,151

	Three Months Ended						Three Months Ended						Six Months Ended
	March 31, 2020			March 31, 2019			June 30, 2020			June 30, 2019			June 30, 2020			June 30, 2019
Revenue:
Product leases, royalties and other	$	4,494,318		$	5,346,751		$	663,972		$	5,399,186		$	5,158,289		$	10,745,938
Total revenue		4,494,318			5,346,751			663,972			5,399,186			5,158,289			10,745,938
Costs and expenses:
Cost of ancillary products and assembled components		21,812			82,391			7,902			46,945			29,713			129,336
Selling, general and administrative		2,992,052			3,540,870			2,438,635			2,939,841			5,430,688			6,480,710
Research and development		155,653			299,180			138,599			178,259			294,252			477,440
Depreciation and amortization		469,805			482,064			454,485			481,044			924,291			963,108
Share-based compensation		157,596			223,604			176,669			212,578			334,265			436,182
Total costs and expenses		3,796,918			4,628,109			3,216,290			3,858,667			7,013,209			8,486,776
Income from operations		697,400			718,642
Income (loss) from operations								(2,552,318	)		1,540,519			(1,854,920	)		2,259,162
Other income (expense):
Interest income		21,774			715			2,126			19,850			23,900			20,565
Interest expense		(363,153	)		(168,013	)		(177,170	)		(169,541	)		(344,841	)		(337,555	)
Share redemption consideration								(195,482	)		(119,812	)		(390,964	)		(119,812	)
Foreign currency exchange (loss) gain		(127,291	)		36,476			11,302			(24,305	)		(115,989	)		12,171
Change in estimated fair value of interest rate swap liability		(76,163	)		(26,142	)		42,483			(65,459	)		(33,680	)		(91,601	)
Total other expense		(544,833	)		(156,964	)		(316,741	)		(359,267	)		(861,574	)		(516,232	)
Income before provision for income taxes		152,567			561,678
Provision for income taxes		(35,962	)		(101,014	)
Net income	$	116,605		$	460,664
Income before benefit (provision) for income taxes								(2,869,059	)		1,181,252			(2,716,494	)		1,742,930
Benefit (provision) for income taxes								662,477			(126,309	)		626,515			(227,323	)
Net income (loss)							$	(2,206,582	)	$	1,054,943		$	(2,089,979	)	$	1,515,607

Net income per share:
Net income (loss) per share:
Basic	$	0.01		$	0.01		$	(0.12	)	$	0.04		$	(0.12	)	$	0.05
Diluted	$	0.01		$	0.01		$	(0.12	)	$	0.04		$	(0.11	)	$	0.04

Weighted-average shares outstanding:
Basic		18,022,761			40,370,338			18,247,266			26,354,946			18,135,013			33,323,925
Diluted		19,239,294			42,242,557			19,003,252			27,963,426			19,044,402			34,981,345

	Common Stock				Additional Paid in		Accumulated Earnings			Total Shareholders'			Common Stock				Additional Paid in		Accumulated Earnings			Total Shareholders'
	Shares		Amount		Capital		(Deficit)			Equity (Deficit)			Shares		Amount		Capital		(Deficit)			Equity (Deficit)
Beginning balance, December 31, 2019		18,017,944	$	18,018	$	5,795,636	$	(33,446,276	)	$	(27,632,622	)		18,017,944	$	18,018	$	5,795,636	$	(33,446,276	)	$	(27,632,622	)
Net income		—		—		—		116,605			116,605			—		—		—		116,605			116,605
Stock options exercised		25,000		25		7,475		—			7,500			25,000		25		7,475		—			7,500
Share-based compensation		63,333		63		157,533		—			157,596			63,333		63		157,533		—			157,596
Balance, March 31, 2020		18,106,277	$	18,106	$	5,960,644	$	(33,329,671	)	$	(27,350,921	)		18,106,277	$	18,106	$	5,960,644	$	(33,329,671	)	$	(27,350,921	)
Net loss														—		—		—		(2,206,582	)		(2,206,582	)
Stock options exercised														150,000		150		30,113		—			30,263
Share based compensation														80,000		80		176,589		—			176,669
Balance, June 30, 2020														18,336,277	$	18,336	$	6,167,346	$	(35,536,253	)	$	(29,350,571	)

	Common Stock				Additional Paid in		Accumulated Earnings		Total Shareholders'		Common Stock						Additional Paid in		Accumulated Earnings			Total Shareholders'
	Shares		Amount		Capital		(Deficit)		Equity (Deficit)		Shares			Amount			Capital		(Deficit)			Equity (Deficit)
Beginning balance, December 31, 2018		39,921,591	$	39,922	$	4,733,701	$	2,683,478	$	7,457,101		39,921,591		$	39,922		$	4,733,701	$	2,683,478		$	7,457,101
Net income		—		—		—		460,664		460,664		—			—			—		460,664			460,664
Stock options exercised		98,332		98		36,134		—		36,232		98,332			98			36,134		—			36,232
Share based compensation expense		470,200		470		223,134		—		223,604
Share-based compensation												470,200			470			223,134		—			223,604
Balance, March 31, 2019		40,490,123	$	40,490	$	4,992,969	$	3,144,142	$	8,177,601		40,490,123		$	40,490		$	4,992,969	$	3,144,142		$	8,177,601
Common Stock Redemption												(23,271,667	)		(23,271	)		—		(39,073,130	)		(39,096,401	)
Net income												—			—			—		1,054,943			1,054,943
Stock options exercised												457,888			458			59,917		—			60,375
Share based compensation												76,400			76			212,502		—			212,578
Balance, June 30, 2019												17,752,744		$	17,753		$	5,265,388	$	(34,874,045	)	$	(29,590,904	)

	Three Months Ended						Six Months Ended
	March 31, 2020			March 31, 2019			June 30, 2020			June 30, 2019
Cash flows from operating activities:
Net income	$	116,605		$	460,664
Adjustments to reconcile net income to net cash provided by operating activities:
Net income (loss)							$	(2,089,979	)	$	1,515,607
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:
Depreciation and amortization of intangible assets		469,805			473,493			924,291			948,823
Amortization of lease right-of-use assets		69,301			69,711
Non-cash lease expense								138,300			137,599
Amortization of debt issuance costs and debt discount		9,159			9,776			18,121			17,954
Bad debt expense		166,002			31,762			166,003			34,923
Change in estimated fair value of interest rate swap liability		76,163			26,142			33,680			91,601
Deferred income tax benefit								(626,515	)		—
Share-based compensation		157,596			223,604			334,265			436,182
Unrealized foreign exchange loss (gain) on cash, cash equivalents and restricted cash		77,557			(29,296	)
Unrealized foreign exchange loss (gain)								101,301			(15,389	)
Changes in operating assets and liabilities:
Accounts receivable		369,313			(158,003	)		1,895,310			(306,073	)
Inventory		(86,885	)		(148,120	)		(84,260	)		(313,337	)
Income tax receivable		35,962			101,014
Income tax receivable/payable								(12,000	)		(120,878	)
Prepaid expenses and other current assets		(197,283	)		(32,274	)		(115,281	)		(13,535	)
Accounts payable		8,784			385,259			433,405			653,028
Accrued expenses		(365,512	)		(656,817	)		(1,039,786	)		(273,130	)
Revenue contract liability		4,186			(82,656	)		(923,009	)		(115,722	)
Operating lease liabilities		(69,305	)		(65,376	)		(138,308	)		(130,397	)
Other current liabilities		—			(7,455	)		—			(71,435	)
Net cash provided by operating activities		841,448			601,428
Net cash provided by (used in) operating activities								(984,462	)		2,475,821
Cash flows from investing activities:
Investment in intangible assets		—			(12,250	)		—			(27,401	)
Acquisition of property and equipment		(1,448	)		(6,940	)		(22,480	)		(10,455	)
Net cash used in investing activities		(1,448	)		(19,190	)		(22,480	)		(37,856	)
Cash flows from financing activities:
Proceeds from draw on revolving loan		1,000,000			—			1,000,000			—
Proceeds from Paycheck Protection Program								835,300			—
Proceeds from stock option exercises		7,500			36,232			37,763			160,732
Payments of debt issuance costs								—			(5,736	)
Principal payments on finance lease obligations		—			(8,481	)		—			(14,198	)
Principal payments on long-term debt		(405,498	)		(356,623	)		(834,790	)		(735,561	)
Net cash provided by (used in) financing activities		602,002			(328,872	)		1,038,273			(594,763	)
Effect of exchange rate changes on cash		(77,557	)		29,296			(76,637	)		16,986
Net increase in cash, cash equivalents and restricted cash		1,364,445			282,662
Cash, cash equivalents and restricted cash – beginning of period		9,686,698			6,311,563
Cash, cash equivalents and restricted cash – end of period	$	11,051,143		$	6,594,225
Net increase (decrease) in cash and cash equivalents								(45,306	)		1,860,188
Cash and cash equivalents – beginning of period								9,686,698			6,311,563
Cash and cash equivalents – end of period							$	9,641,392		$	8,171,751
Supplemental cash flow information:
Cash paid for interest	$	152,949		$	160,557		$	311,467		$	321,350
Cash paid for income taxes							$	—		$	348,200
Supplemental schedule of non-cash activities:
Common stock redemption in exchange for share redemption consideration obligation							$	—		$	39,096,401
Right-of-use assets obtained in exchange for lease liabilities	$	269,171		$	293,350		$	—		$	299,902
Inventory transferred to assets deployed at client locations	$	26,056		$	58,016		$	24,617		$	109,725

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, assembly, marketing and acquisition of proprietary casino table games and associated technology, platforms and systems for the casino 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 market our products and services to online casinos worldwide and to land-based ~~and riverboat~~casino gaming companies ~~located~~ in North America, the Caribbean, Central America, the British Isles, Europe and Africa and to cruise ship ~~companies~~companies. We license our products and ~~internet~~services for use solely in legalized gaming ~~sites worldwide.~~markets.

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, Galaxy Gaming's founder, and, prior to the redemption, the holder of a majority of our outstanding common stock. ~~The redemption of Triangulum’s shares was given effect pursuant to our~~Our Articles of Incorporation (the “Articles”)~~, which expressly~~ 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 ~~we issued a promissory note payable to Triangulum in the face amount of~~is $39,096,401 (the ~~“Triangulum Promissory Note”~~“Redemption Consideration”). See Note 10.

There is ongoing litigation between the Company and Triangulum related to the redemption and other matters. See Note 11.

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 Progressive Games Partners LLC (“PGP”). Pursuant to the Purchase Agreement, the Company will pay $12.425 million to acquire all of the issued equity ~~interest~~interests of PGP. Of the consideration, at least $6.425 million, but no more than $10.425 million will be paid in cash, with the balance of the consideration being paid in newly issued shares of the Company’s common stock valued at $1.91 per share. Completion of the purchase is subject to various customary closing conditions, including but not limited to (i) further due diligence by Galaxy, (ii) any necessary gaming approvals having been obtained from the relevant gaming authorities, (iii) no material adverse effect or other specified adverse events occurring with respect to Galaxy or PGP, (iv) subject to certain exceptions, the accuracy of the representations and warranties of the parties, and (v) performance and compliance in all material respects with agreements and covenants contained in the Purchase Agreement.

~~Coronavirus~~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 will result 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 we will be paid timely (or at all) for revenues earned prior to the shutdowns. Finally, some of our casino clients have notified vendors (including us) that they will lengthen payment terms for a period of time after reopening as they attempt to preserve their own liquidity.

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. ~~This did~~Although this has not ~~have~~had a material effect on our supply ~~chain. However,~~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”). See Note 10. As of the date of this filing, the Company believes that it has adequate liquidity to meet its near-term obligations. ~~Further, we do not currently believe that the recent casino closures will result in an impairment of our assets or a default under our loan agreements.~~ If the effects of the COVID-19 crisis endure or there is a second 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.

Basis of presentation. The accompanying condensed financial statements have been prepared in accordance with generally accepted accounting principles in the United States of America (“U.S. GAAP”) and the rules of the Securities and Exchange Commission (“SEC”). In the opinion of management, the accompanying unaudited interim condensed financial statements contain all necessary adjustments (including all those of a recurring nature and those necessary in order for the financial statements to be not misleading) and all disclosures to present fairly our financial position and the results of our operations and cash flows for the periods presented. As permitted by the rules and regulations of the SEC, certain information and footnote disclosures normally included in financial statements prepared in accordance with U.S. GAAP have been condensed or omitted pursuant to those rules and regulations.

These unaudited interim condensed financial statements should be read in conjunction with the financial statements and the related notes thereto included in our Form 10-K for the fiscal year ended December 31, 2019, filed with the SEC on March 30, 2020 (the “2019 10-K”).

The operating results for interim periods are not necessarily indicative of results that may be expected for any other interim period or for the full year.

Basis of accounting. The financial statements have been prepared on the accrual basis of accounting in conformity with U.S. GAAP. Revenues are recognized as income when earned and expenses are recognized when they are incurred. We do not have significant categories of cost of revenues. Expenses such as wages, consulting expenses, legal, regulatory and professional fees and rent are recorded when the expense is incurred.

Use of estimates and assumptions. We are required to make estimates, judgments and assumptions that we believe are reasonable based on our historical experience, contract terms, observance of known trends in our Company and the industry as a whole, and information available from other outside sources. Our estimates affect reported amounts for assets, liabilities, revenues, expenses and related disclosures. Actual results may differ from initial estimates.

Impairment considerations. We ~~concluded that~~considered whether the impact of the current COVID-19 pandemic on operations and financial results is an indicator that impairment may exist related to the Company’s inventory (Note 4), property and equipment (Note 5), assets deployed at client locations (Note 6) and intangible assets (Note 7). ~~Accordingly, management conducted an assessment of the values of these assets.~~ As a result of its impairment assessments, management has determined that its assets are not currently impaired. We considered the following:

Inventory. We considered whether additional write-offs or reserves were necessary to our inventory balance as a result of the impact of COVID-19. The vast majority of our Inventory is not sold to customers but, rather, is used to support new installations and repairs of our electronic table game systems which we account for as Assets Deployed at Client Locations. Based on our assessment, we determined additional write-offs and reserves were not required. We are in the process of developing a new generation of electronic table game systems and, once that new generation of system is available for customer installation, we will review inventory to determine how much of existing Inventory can be used in the next generation of systems. To the extent that there is Inventory that 1) cannot be used in the new generation of systems and 2) is in excess of what we might expect to need for repair of older generation systems that we expect to remain in the field, we may incur an impairment charge with respect to Inventory that is obsolete.

Long-lived assets. Our long-lived assets include property and equipment, assets deployed at client locations, and intangible assets. We assessed whether there was an indication of impairment of each asset group due to COVID-19 noting that based on the current contracts, including the lengthened payment terms noted above, the carrying value of our long-lived asset groups were recoverable.

Goodwill. We performed a qualitative assessment and determined that it was not more likely than not that the carrying value of the reporting unit was impaired. As part of our qualitative assessment, we considered our previous forecasts and assumptions based on our current projections, which are subject to various risks and uncertainties, including projected revenue, projected operating income, terminal growth rates, and the cost of capital.

Reclassifications. Certain accounts and financial statement captions in the prior periods have been reclassified to conform to the current period financial statement presentations.

Correction of immaterial errors in previously issued financial statements. During the preparation of the Company’s financial statements as of and for the three and six months ended June 30, 2020, it was discovered the Company incorrectly accounted for two lease amendments in the fourth quarter of 2019. As a result of the error, at December 31, 2019, Operating Lease Right-of-Use Assets, Current Portion of Operating Lease Liabilities and Long-term Operating Lease Liabilities were understated by $269,171, $257,823 and $11,348, respectively. In accordance with Staff Accounting Bulletin (“SAB”) No. 99, Materiality, and SAB No. 108, Considering the Effects of Prior Year Misstatements when Quantifying Misstatements in Current Year Financial Statements, the Company evaluated the error and determined that the related impact was not material to results of operations or financial position for any prior annual or interim period. However, to correctly present the Operating Lease Right-of-Use Assets, Current Portion of Operating Lease Liabilities and Long-term Operating Lease Liabilities in the appropriate periods, management has corrected the consolidated balance sheet as of December 31, 2019.

Other significant accounting policies. SeeSee Note 2 in Item 8. “Financial Statements and Supplementary Financial Information” included in our 2019 10-K.

Fair Value Measurement. In August 2018, the FASB issued ASU No. 2018-13, Fair Value Measurement (Topic 820): Disclosure Framework – Changes to the Disclosure Requirements for Fair Value Measurement. ASU 2018-13 addresses the required disclosures around fair value measurement, removes certain disclosure requirements related to the fair value hierarchy, modifies existing disclosure requirements related to measurement uncertainty and adds new disclosure requirements. The new disclosure requirements include disclosing the changes in unrealized gains and losses for the period included in other comprehensive income for recurring Level 3 fair value measurements held at the end of the reporting period and the range and weighted average of significant unobservable inputs used to develop Level 3 fair value measurements. We have adopted the new standard effective January 1, 2020, which did not have a material effect on our financial statements or related disclosures.

Financial Instruments – Credit Losses. In February 2020, the FASB issued ASU No. 2020-02, Financial Instruments – Credit Losses (Topic 326). ASU 2020-02 provides updated guidance on how an entity should measure credit losses on financial instruments and delayed the effective date of Topic 326 for certain ~~small public companies and other private~~smaller reporting companies until fiscal years beginning after December 5,15, 2022. Early adoption is permitted. We do not believe the adoption of this guidance will have a material impact on our financial statements or related disclosures.

Revenue recognition. We generate revenue primarily from the licensing of our intellectual property. We also, occasionally, receive a one-time sale of certain products and/or reimbursement of our equipment.

License fees. We derive product lease and royalty revenue from negotiated recurring fee license agreements and the performance of our products. We account for these agreements as month-to-month contracts and recognize revenue each month as we satisfy our performance ~~obligations by granting access to intellectual property to our clients.~~obligations. In addition, revenue associated with performance-based agreements is recognized during the month that the usage of the product or intellectual property occurs.

Some of our intellectual property requires the installation of certain equipment and both the intellectual property and the related equipment are licensed in one bundled package. We have determined that the equipment is not distinct from the intellectual property and, therefore, we have only one performance obligation. As a result, the allocation of the transaction price to different performance obligations is not necessary.

Product sales. Occasionally, we sell certain incidental products or receive reimbursement of our equipment after the commencement of the new license agreement. Revenue from such sales is recognized as a separate performance obligation when we ship the items.

The following table disaggregates our revenue by geographic location for the following periods:

	Three Months Ended March 31,				Three Months Ended June 30,				Six Months Ended June 30,
	2020		2019		2020		2019		2020		2019
North America and Caribbean	$	3,130,465	$	3,844,525	$	159,085	$	3,907,953	$	3,291,260	$	7,752,478
Europe, Middle East and Africa		1,363,853		1,502,226		504,887		1,491,233		1,867,029		2,993,460
Total revenue	$	4,494,318	$	5,346,751	$	663,972	$	5,399,186	$	5,158,289	$	10,745,938

For a portion of our business, we invoice our clients monthly in advance for unlimited use of our intellectual property licenses and recognize a revenue contract liability that represents such advanced billing to our clients for unsatisfied performance. We reduce the revenue contract liability and recognize revenue when we transfer those goods or services and, therefore, satisfy our performance obligation.

The table below summarizes changes in the revenue contract liability during the ~~three~~six months ended ~~March 31,~~June 30, 2020:

Beginning balance – January 1, 2020	$	1,294,265		$	1,294,265
Increase (advanced billings)		3,817,076			5,704,713
Decrease (revenue recognition)		(3,812,890	)		(6,627,722	)
Ending balance – March 31, 2020	$	1,298,451
Ending balance – June 30, 2020				$	371,256

Revenue recognized during the three months ended ~~March 31,~~June 30, 2020 that was included in the beginning balance of revenue contract liability was $6,250. Revenue recognized during the six months ended June 30, 2020 that was included in the beginning balance of revenue contract liability above was ~~$1,279,682.~~$1,285,932.

	March 31,			December 31,			June 30,			December 31,
	2020			2019			2020			2019
Raw materials and component parts	$	394,479		$	359,349		$	385,790		$	359,349
Finished goods		371,793			343,305			400,561			343,305
Inventory, gross		766,272			702,654			786,351			702,654
Less: inventory reserve		(39,789	)		(37,000	)		(61,054	)		(37,000	)
Inventory, net	$	726,483		$	665,654		$	725,297		$	665,654

	March 31,			December 31,			June 30,			December 31,
	2020			2019			2020			2019
Furniture and fixtures	$	312,639		$	312,639		$	312,639		$	312,639
Automotive vehicles		215,127			215,127			215,127			215,127
Office and computer equipment		303,744			302,296			324,777			302,296
Leasehold improvements		6,843			6,843			6,843			6,843
Property and equipment, gross		838,353			836,905			859,386			836,905
Less: accumulated depreciation		(714,990	)		(691,996	)		(737,313	)		(691,996	)
Property and equipment, net	$	123,363		$	144,909		$	122,073		$	144,909

For the three months ended ~~March 31,~~June 30, 2020 and 2019, depreciation expense related to property and equipment was ~~$22,994~~$22,322 and ~~$27,140,~~$26,838, respectively. For the six months ended June 30, 2020 and 2019, depreciation expense related to property and equipment was $45,316 and $53,978, respectively.

	March 31,			December 31,			June 30,			December 31,
	2020			2019			2020			2019
Enhanced table systems	$	1,009,427		$	993,127		$	942,960		$	993,127
Less: accumulated depreciation		(642,161	)		(587,605	)		(635,377	)		(587,605	)
Assets deployed at client locations, net	$	367,266		$	405,522		$	307,583		$	405,522

For the three months ended ~~March 31,~~June 30, 2020 and 2019, depreciation expense related to assets deployed at client locations was $58,244 and $70,447, respectively. For the six months ended June 30, 2020 and 2019, depreciation expense related to assets deployed at client locations was ~~$64,312~~ $122,556 and ~~$69,137,~~$139,584, respectively.

Goodwill. A goodwill balance of $1,091,000 was created as a result of ~~an asset acquisition~~a business combination completed in October 2011 from Prime Table Games, ~~LLC.~~LLC (“PTG”).

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

	March 31,			December 31,			June 30,			December 31,
	2020			2019			2020			2019
Patents	$	13,485,000		$	13,485,000		$	13,485,000		$	13,485,000
Customer relationships		3,400,000			3,400,000			3,400,000			3,400,000
Trademarks		2,880,967			2,880,967			2,880,967			2,880,967
Non-compete agreements		660,000			660,000			660,000			660,000
Internally-developed software		183,415			183,415			183,415			183,415
Other intangible assets, gross		20,609,382			20,609,382			20,609,382			20,609,382
Less: accumulated amortization		(13,561,238	)		(13,178,739	)		(13,935,157	)		(13,178,739	)
Other intangible assets, net	$	7,048,144		$	7,430,643		$	6,674,225		$	7,430,643

For the three months ended ~~March 31,~~June 30, 2020 and 2019, amortization expense related to other intangibles was $373,919 and $378,045, respectively. For the six months ended June 30, 2020 and 2019, amortization expense related to the other intangible assets was ~~$382,499~~$756,418 and ~~$377,216,~~$755,260, respectively.

Twelve Months Ending March 31,	Total
Twelve Months Ending June 30,			Total
2021	$	1,457,258	$	1,438,174
2022		1,415,500		1,412,297
2023		829,535		541,135
2024		252,930		252,930
2025		252,930		252,930
Thereafter		2,839,991		2,776,759
Total amortization	$	7,048,144	$	6,674,225

	March 31,		December 31,		June 30,		December 31,
	2020		2019		2020		2019
Payroll and related	$	209,831	$	747,458	$	162,696	$	747,458
Interest		721,716		520,671		25,148		9,895
Share redemption consideration						119,812		510,776
Commissions and royalties		35,186		78,528		32,688		78,528
Income tax payable		64,832		64,832		64,832		64,832
Other		53,803		39,390		6,115		39,390
Total accrued expenses	$	1,085,368	$	1,450,879	$	411,291	$	1,450,879

We have operating leases for our corporate office, two satellite facilities in the state of 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.

On December 31, 2019, we executed a second amendment to the corporate office lease to amend the lease expiration date from December 31, 2019 to December 31, 2020, with monthly base rents of $21,123 from January 1, 2020 to December 31, 2020. As a result of the amendment, we recorded a $246,998 increase to operating lease right-of-use assets and operating lease liabilities.

On September 24, 2019, we executed a third amendment to one of our satellite facilities to amend the lease expiration date from December 31, 2019 to December 31, 2021, with monthly base rents of $975.00 from January 1, 2020 to December 31, 2021. As a result of the amendment, we recorded a $22,173 increase to operating lease right-of-use assets and operating lease liabilities.

As of ~~March 31,~~June 30, 2020, our leases have remaining lease terms ranging from ~~two~~zero months to 2724 months. ~~Gross right-of-use assets recorded under operating leases was $560,047, respectively, and the related accumulated amortization was $322,488.~~

	As of March 31, 2020				As of June 30, 2020
	Amount			Classification	Amount			Classification
Operating leases:
Operating lease right-of-use lease assets	$	237,559			$	168,559

Operating lease current liabilities	$	214,012		Current portion of operating lease liabilities	$	151,330		Current portion of operating lease liabilities

Operating lease long-term liabilities		23,972		Long-term operating lease liabilities		17,650		Long-term operating lease liabilities

Total operating lease liabilities	$	237,984			$	168,980

Weighted-average remaining lease term:
Operating leases	1 year				0.8 years

Weighted-average discount rate:
Operating leases		5.7	%			5.6	%

As of ~~March 31,~~June 30, 2020, future maturities of our operating lease liabilities are as follows:

Twelve Months Ending March 31,	Amount
Twelve Months Ending June 30,			Amount
2021	$	214,013	$	151,330
2022		21,584		17,650
2023		2,387		—
Total lease liabilities	$	237,984	$	168,980

~~Our agreements with the casino clients~~On July 3, 2020 we entered into a new 75-month lease for ~~the license of~~ ~~proprietary tables games are outside of the scope of ASC 842 as such agreements are related~~our corporate headquarters in Las Vegas. Pursuant to the ~~license~~new lease, we will occupy approximately 14,000 square feet of ~~intellectual property.~~office and warehouse space. The lease commences on October 1, 2020, with rent abated through the remainder of 2020. Beginning in January 2021, we will commence paying rent and common area charges in an amount that is approximately equal to what we are paying pursuant to our current lease.

~~Our BJS agreements with clients convey to them the rights to use equipment. However,~~ 13

~~these agreements~~ are month-to-month and there is no penalty for either party to terminate the agreements without permission from the other party. As a result, these agreements are not considered leases and, therefore, are outside of the scope of ~~ASC 842 as well.~~

	March 31,			December 31,			June 30,			December 31,
	2020			2019			2020			2019
Nevada State Bank credit agreement	$	9,358,799		$	8,699,900		$	8,994,300		$	8,699,900
Triangulum promissory note		39,096,401			39,096,401
Paycheck Protection Program borrowing								835,300			—
Share redemption consideration obligation								39,096,401			39,096,401
Vehicle notes payable		39,021			44,490			33,526			44,490
Insurance notes payable		118,966			177,894			59,668			177,894
Long-term debt, gross		48,613,187			48,018,685			49,019,195			48,018,685
Less: Unamortized debt issuance costs		(84,702	)		(93,144	)		(76,457	)		(93,144	)
Long-term debt, net		48,528,485			47,925,541			48,942,738			47,925,541
Less: Current portion		(1,599,103	)		(1,634,527	)		(2,564,812	)		(1,634,527	)
Long-term debt, long-term portion	$	46,929,382		$	46,291,014		$	46,377,926		$	46,291,014

Nevada State Bank (“NSB”) Credit Agreement. The Company ~~entered into~~is party to a Credit Agreement with ZB, N.A. dba Nevada State Bank (as amended, the “Credit Agreement”), which was last amended on October 14, 2019. The Credit Agreement provided for a Term Loan in the initial amount of $11,000,000 and a Revolving Loan in the amount of $1,000,000.

Under the Credit Agreement, outstanding balances accrue interest based on one-month US dollar London interbank offered rate (“LIBOR”) plus an Applicable Margin of 3.50% or 4.00%, depending on our Total Leverage Ratio (as defined in the amended Credit Agreement). Effective December 31, 2021, LIBOR will no longer serve as a reference rate for bank loans, among other investment classes. The Fourth Amendment to the Credit Agreement stipulates that an alternative reference rate will be selected and used in lieu of LIBOR.

The Credit Agreement contains affirmative and negative financial covenants and other restrictions customary for borrowings of this nature. In particular, we are required to maintain (i) a minimum trailing-four-quarters Fixed Charge Coverage Ratio (as defined in the Credit Agreement) of 1.25x; (ii) a maximum Total Leverage Ratio (as defined in the Credit Agreement) of 7.25x (with semi-annual step-downs of 0.25x every six months, commencing June 30, 2020 through December 31, 2022 (the current required Total Leverage Ratio is 7.00x) and (iii) a maximum Senior Leverage Ratio (as defined in the Credit Agreement) of 2.00x. We were in compliance with the Fixed Charge Coverage Ratio and Senior Leverage Ratio as of June 30, 2020. However, our Total Leverage Ratio exceeded the maximum threshold as of June 30, 2020. Furthermore, because the impact of the COVID-19 crisis on our trailing-four-quarters Adjusted EBITDA into 2021, we think it is likely that we will not be in compliance with one or more of the Fixed Charge Coverage Ratio, Total Leverage Ratio and Senior Leverage Ratio through the first quarter of 2021. In view of that, the Company and NSB entered into a Forbearance and Fifth Amendment to Credit Agreement dated August 14, 2020 (the “Fifth Amendment”). In the Fifth Amendment, NSB agreed to forbear from exercising any of its rights or remedies that result from the aforementioned covenant breaches during the aforementioned period. The Fifth Amendment also imposes a new Minimum EBITDA covenant pursuant to which the Company must demonstrate trailing-four-quarter EBITDA of $2.4 million for the each of the quarters ended September 30 and December 31, 2020, and $3.0 million for the quarter ended March 31, 2021, and thereafter.

On March ~~17,~~12, 2020, the Company drew down $1,000,000 on the Revolving Loan component of the Credit Agreement. At ~~March 31,~~June 30, 2020, the principal amount outstanding under the Term Loan component of the Credit Agreement was ~~$8,358,799,~~$7,994,300, bringing the total amount outstanding under the Credit Agreement at ~~March 31,~~June 30, 2020, to ~~$9,358,799.~~$8,994,300.

~~Triangulum Promissory Note~~Paycheck Protection Program Borrowings. 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 pursuant to the CARES Act and the Flexibility Act. The Paycheck Protection Program is administered by the United States Small Business Administration. In accordance with the requirements of the CARES Act, the Company used proceeds from the PPP Loan primarily for payroll costs. Under the terms of the CARES and Flexibility Acts, PPP Loan recipients can apply for and be granted forgiveness for all or a portion of loans granted under the Paycheck Protection Program. Such forgiveness will be determined, subject to limitations, based on the use of loan proceeds for payroll costs and mortgage interest, rent and utility costs.

On July 16, 2020, the Company filed an application and supporting documentation for forgiveness in full of the PPP Loan. The review of the Company’s forgiveness application could take as long as five months, and there is no assurance that the PPP Loan will be forgiven in full or in any amount. The application for these funds required the Company to, in good faith, certify that the current economic uncertainty made the loan request necessary to support the ongoing operations of the Company. This certification further requires the Company to take into account our current business activity and our ability to access other sources of liquidity sufficient to

support ongoing operations in a manner that is not significantly detrimental to the business. The receipt of these funds, and the pending application for forgiveness of the loan attendant to these funds, is dependent on the Company having initially qualified for the loan and qualifying for the forgiveness of such loan based on our adherence to the forgiveness criteria.

Share Redemption Consideration Obligation. On May 6, 2019, we issued ~~the Triangulum Promissory Note~~a promissory note in the face amount of ~~$39,096,401.~~$39,096,401 to Triangulum in connection with the share redemption disclosed in Note 1. In the litigation that followed the share redemption (Note 11), Triangulum is disputing, among other things, the validity of the note and has not accepted its terms. Since no agreement on terms exists between the Company and Triangulum, 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, ~~Promissory Note has~~based on the redemption value specified in our Articles of Incorporation. The obligation is classified as long-term because we do not expect that a final agreement with respect to the litigation will be reached between the parties in the next twelve months. We may repay the Redemption Consideration Obligation at any time but no ~~mandatory amortization,~~later than May 6, 2029; however, there can be no assurance that Triangulum will accept such payments. Additional share redemption consideration is ~~scheduled to mature~~being accrued at 2% on the redemption obligation, and we paid the first annual payment on May 5, ~~2029, and bears interest at 2% per annum, with accrued interest payable annually~~2020 in ~~arrears. It~~the amount of $781,928, which was accepted by Triangulum. The share redemption consideration obligation is unsecured and is subordinated to our existing and future ~~indebtedness in accordance with its terms. We may prepay principal and any accrued interest in full or in part at any time.~~indebtedness.

As of ~~March 31,~~June 30, 2020, future maturities of our long-term debt ~~obligations~~liabilities are as follows:

Twelve Months Ending March 31,	Total
Twelve Months Ending June 30,				Total
2021	$	1,599,103		$	2,564,812
2022		2,574,483			2,430,882
2023		1,664,400			4,927,100
2024		3,678,800			—
2025		—			—
Thereafter		39,096,401			39,096,401
Long-term debt, gross		48,613,187			49,019,195
Less:
Unamortized debt issuance costs		(84,702	)		(76,457	)
Long-term debt, net	$	48,528,485		$	48,942,738

Concentration of risk. We are exposed to risks associated with clients who represent a significant portion of total revenues. For the ~~three~~six months ended ~~March 31,~~June 30, 2020 and 2019, respectively, we had the following client revenue concentration:

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.

As discussed in Note 1, we redeemed the shares of our common stock held by Triangulum, an entity controlled by Robert B. Saucier, Galaxy Gaming's founder, and, prior to the redemption, the holder of a majority of our outstanding common stock. On May 6, 2019, we filed a lawsuit seeking (i) a declaratory judgment that we acted lawfully and in full compliance with the Articles when we redeemed the Triangulum shares and (ii) certain remedies for breach of fiduciary duty and breach of contract by Triangulum and its Managing Member, Mr. Saucier (the “Triangulum Lawsuit”). The suit alleges that the redemption and the other relief sought by us are appropriate and in accordance with the Articles.

The defendants to that lawsuit responded to the complaint, and Triangulum filed counterclaims. Triangulum also filed a Motion seeking the redeemed shares be held in a constructive trust. On July 11, 2019, the Court denied Triangulum’s Motion. On September 6, 2019, Triangulum appealed the denial of the Motion to the Nevada Supreme Court. We submitted our brief in opposition, and Triangulum filed its reply brief on June 17, 2020. Separately, Triangulum filed amended counterclaims, which we moved to dismiss on a number of legal grounds. The Court denied the motion. The Company filed a writ petition challenging the ruling, which the Supreme Court denied on January 23, 2020.

On October 18, 2019, Saucier also filed counterclaims, including a claim of breach of contract alleging Galaxy Gaming was obligated to pay Saucier his year-end bonuses, despite his resignation. We filed an answer disputing these claims.

As a result of the effects of Coronavirus, the Court issued a revised Scheduling Order extending time frames for discovery and setting a new trial date in April of 2021.

On May 19, 2020, Saucier commenced a separate action in Nevada district court, by filing a complaint he verified as true, seeking advancement of indemnification fees to which he claims an entitlement under the Bylaws and an Indemnification Agreement The Company filed its opposition on June 4, 2020. Saucier’s Motion was denied in a hearing that occurred on June 24, 2020. Saucier filed a notice of his appeal of the decision to the Nevada Supreme Court on August 10, 2020.

We are in the discovery phase of the Triangulum Lawsuit, with discovery set to close on December 31, 2020.

In September 2018, we were served with a complaint by TableMax Corporation (“TMAX”) regarding the TMAX Agreement. We filed an answer denying the allegations and filed a partial motion for summary judgment seeking dismissal of the plaintiff’s claims. The suit was dismissed, subject to the right of the plaintiff to file an amended complaint on or before March 20, 2019. The plaintiff did not file an amended complaint within the time period set by the Judge. After that time, the Company considered the matter closed. TMAX filed a Motion for Leave to Amend their Complaint, which was granted by the Judge on May 11, 2020. On May 26, 2020 TMAX filed an Amended Complaint against the Company and other Co-Defendants. The Company will respond to the Amended Complaint denying the allegations.

An unexpected adverse judgment in any pending litigation could cause a material impact on our business operations, intellectual property, results of operations or financial position. Unless otherwise expressly stated, we believe costs associated with litigation will not have a material impact on our financial position or liquidity but may be material to the results of operations in any given period and accordingly, no provision for loss has been reflected in the accompanying financial statements related to these matters.

During the ~~three~~six months ended ~~March 31,~~June 30, 2020,, we issued an aggregate of ~~63,333~~118,333 restricted shares of our common stock valued at ~~$54,086,~~$127,786, to our board members in consideration of their service on the Board. These shares vested immediately on the grant date.

Our forecasted annual effective tax rate (“AETR”) at ~~March 31,~~June 30, 2020 was ~~23.6%~~22.2%, as compared to ~~22.7%~~22.3% at ~~March 31,~~June 30, 2019. The slight ~~increase~~decrease was primarily due to changes in permanent book-to-tax differences for the ~~three~~six months ended ~~March 31,~~June 30, 2020.

For the ~~three~~six months ended ~~March 31,~~June 30, 2020 and 2019, our ~~ETR~~effective tax rate (“ETR”) was ~~23.6%~~23.1% and ~~18.0%~~13.0%, respectively. The increase in the ~~effective tax rate~~ETR for the ~~three~~six months ~~ending March 31,~~ended June 30, 2020 is a result of favorable discrete items from the comparable prior-year period that are not recurring in the current period.

On May 10, 2018, the Board ratified and confirmed the 2014 Equity Incentive Plan (the “2014 Plan”). The 2014 Plan is a broad-based plan under which shares of our common stock are authorized for issuance for awards, including stock options, stock appreciation rights, restricted stock, and cash incentive awards to members of our Board, executive officers, employees and independent contractors. As of ~~March 31,~~June 30, 2020, a total of 6,550,750 shares of our common stock were authorized for issuance. As of ~~March 31,~~June 30, 2020, ~~606,701~~651,701 shares remained available for issuance as new awards under the 2014 Plan.

Stock options. During the ~~three~~six months ended ~~March 31,~~June 30, 2020 and 2019, we issued 225,000 and ~~150,000~~195,000 options to purchase our common stock, respectively, to members of our Board, executive officers, employees and independent contractors. The fair value of all stock options granted for the ~~three~~six months ended ~~March 31,~~June 30, 2020 and 2019 was determined to be $255,017 and ~~$171,985,~~$366,900, respectively, using the Black-Scholes option pricing model with the following assumptions:

	Options Issued 2020			Options Issued 2019			Options Issued 2020			Options Issued 2019
Dividend yield		0	%		0	%		0	%		0	%
Expected volatility		70.98	%		72.00	%		70.98	%		72.00	%
Risk free interest rate		1.39	%		2.51	%		1.39	%	1.83% - 2.51%
Expected life (years)		5.00			5.00			5.00			5.00

On February 21, 2019, we amended the employment agreement between the Company and Todd Cravens, our President and Chief Executive Officer (“Mr. Cravens”). Among other things, this amendment grants Mr. Cravens an option to purchase 150,000 shares of our common stock (the “2020 Option”). The 2020 Option, which vests on August 1, 2020 so long as Mr. Cravens remains a full-time employee of the Company on August 1, 2020, has an exercise price equal to the price per share of our common stock as reported on OTC Markets on August 1, 2020 (or the nearest trading date thereafter). If Mr. Cravens is terminated as a result of a change of control of the Company prior to August 1, 2020, the 2020 Option vests in full upon his termination at an exercise price of $1.90 per share, ~~(our common stock closing price~~which vested on ~~February 19, 2019).~~August 1, 2020.

On February 17, 2020, we entered into Amendment No. #2 to the employment agreement with Mr. Cravens. Among other things, Amendment No. #2 provides that Mr. Cravens receive a grant of 225,000 options at a strike price of $1.93 and vest as follows: 88,000 shares on July 26, 2021, 87,000 shares on July 26, 2022 and 50,000 shares on July 26, 2023.

	Common Stock Options			Weighted- Average Exercise Price		Aggregate Intrinsic Value			Weighted- Average Remaining Contractual Term (Years)		Common Stock Options			Weighted- Average Exercise Price		Aggregate Intrinsic Value		Weighted- Average Remaining Contractual Term (Years)
Outstanding – December 31, 2019		3,175,000		$	0.92	$	2,692,025			2.79		3,175,000		$	0.92	$	2,692,025		2.79
Issued		225,000			1.93		—			—		225,000			1.93		—		—
Exercised		(25,000	)		0.30		—			—		(175,000	)		0.22		—		—
Forfeited		—			—		—			—		(100,000	)		1.57		—		—
Outstanding – March 31, 2020		3,375,000		$	0.99	$	(469,850	)		2.71
Exercisable – March 31, 2020		2,096,667		$	0.67	$	379,217			2.00
Outstanding – June 30, 2020												3,125,000		$	1.01	$	1,036,150		2.52
Exercisable – June 30, 2020												2,136,667		$	0.71	$	1,339,800		1.90

	Common Stock Options		Weighted- Average Exercise Price		Aggregate Intrinsic Value			Weighted- Average Remaining Contractual Term (Years)		Common Stock Options			Weighted- Average Exercise Price		Aggregate Intrinsic Value			Weighted- Average Remaining Contractual Term (Years)
Unvested – December 31, 2019		1,053,333	$	1.43	$	357,734			3.92		1,053,333		$	1.43	$	357,734			3.92
Granted		225,000		1.93		—			—		225,000			1.93		—			—
Vested		—		—		—			—		(190,000	)		0.37		—			—
Forfeited		—		—		—			—		(100,000	)		1.57		—			—
Unvested – March 31, 2020		1,278,333	$	1.51	$	(849,066	)		3.88
Unvested – June 30, 2020											988,333		$	1.65	$	(303,650	)		3.87

As of ~~March 31,~~June 30, 2020, our unrecognized share-based compensation expense associated with the stock options issued was ~~$797,761,~~$624,479, which will be amortized over a weighted-average of ~~2.41~~2.25 years.

We estimate fair value for financial assets and liabilities in accordance with Accounting Standards Codification (“ASC”) Topic 820, Fair Value Measurement (“ASC 820”). ASC 820 defines fair value, provides guidance for measuring fair value, requires certain disclosures and discusses valuation techniques, such as the market approach (comparable market prices), the income approach (present value of future income or cash flow) and the cost approach (cost to replace the service capacity of an asset or replacement cost). ASC 820 utilizes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value into three broad levels:

The estimated fair value of cash equivalents, ~~restricted cash,~~ accounts receivable and accounts payable approximates their carrying amount due to their short-term nature. The estimated fair value of our long-term debt and lease obligations approximates their carrying value based upon our expected borrowing rate for debt with similar remaining maturities and comparable risk. As of ~~March 31,~~June 30, 2020, the interest rate swap agreement was the only financial instrument measured at estimated fair value on a recurring basis based on valuation reports provided by counterparties, which are classified as level 2 inputs.

We evaluate subsequent events through the date of issuance of the financial statements. There have been no subsequent events that occurred during such period that would require adjustment to or disclosure in the financial statements as of and for the quarter ended ~~March 31,~~June 30, 2020 except as disclosed in ~~Note~~Notes 1, 9 and ~~as follows:~~10.

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”) administered by the United States Small Business Administration. In accordance with the requirements of the CARES Act, the Company will use proceeds from the PPP Loan primarily for payroll costs.Under the terms of the CARES Act, PPP Loan recipients can apply for and be granted forgiveness for all or a portion of loans granted under the PPP. Such forgiveness will be determined, subject to limitations, based on the use of loan proceeds for payroll costs and mortgage interest, rent and utility costs. No assurance is provided that the Company will apply for and obtain forgiveness of the PPP Loan in whole or in part.

On April 23, 2020, the Company filed a Registration Statement on Form S-8 (the “Registration Statement”). The Registration Statement was filed relating to 6,550,750 shares of its common stock, par value $0.001 per shares, to be issued pursuant to the Company’s 2014 Equity Incentive Plan.

On May 13, 2020, the Company filed a Form 8-K relating to extending its filing deadline for its first quarter ended March 31, 2020. In light of the circumstances and uncertainty surrounding the effects of the Coronavirus (COVID-19) pandemic on the business, employees, consultants and service providers of Galaxy, the Company’s Board of Directors and management determined that it would delay the filing of its report on Form 10-Q for the first quarter ended March 31, 2020, relying on an order issued by the Securities and Exchange Commission on March 25, 2020 (which extended and superseded a prior order issued on March 4, 2020) pursuant to Section 36 of the Securities Exchange Act of 1934, as amended (Release No. 34-88318), regarding exemptions granted to certain public companies.

ITEM 2. 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 three and six months ended ~~March 31,~~June 30, 2020 and 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. 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.

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. 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 ~~March 31,~~June 30, 2020 and 2019. For the three months ended ~~March 31,~~June 30, 2020, we generated total revenues of ~~$4,494,318~~$663,972 compared to ~~$5,346,751~~$5,399,186 for the comparable prior-year period, representing a decrease of ~~$852,433,~~$4,735,214, or ~~15.9%~~87.7%. This decrease was ~~primarily~~ attributable to the ~~closing of a majority~~COVID-19 crisis which resulted in almost all of our land-based casino customers being closed for most of the second quarter and therefore our inability to invoice them for the use of our products in ~~mid-March of 2020 due~~that period. We continued to realize revenue from licensing our game content to the ~~COVID-19 virus~~online gaming market in the second quarter of 2020.

Selling, general and administrative expenses for the three months ended ~~March 31,~~June 30, 2020 were ~~$2,989,552~~$2,438,635 compared to ~~$3,540,870~~$2,939,841 for the comparable prior-year period, representing a decrease of ~~$551,318,~~$501,206, or ~~15.6%~~17.0%. This decrease was primarily due to a decrease in travel and entertainment-related expenses, consulting expenses and expenses that are driven by revenue, such as bonuses, commissions, distributor fees and royalties.

Research and development expenses for the three months ended ~~March 31,~~June 30, 2020 were ~~$155,653,~~$138,599, compared to ~~$299,180~~$178,259 for the comparable prior-year period, representing a decrease of ~~$143,527,~~$39,660, or ~~48.0%~~22.2%. This decrease was primarily due to a reduction in ~~headcount~~consulting expenses related to a third-party research and ~~other compensation-related expenses.~~development firm no longer used by the Company.

Share-based compensation expenses for the three months ended ~~March 31,~~June 30, 2020 ~~was $157,596,~~were $176,669, as compared to ~~$223,604~~$212,578 for the comparable prior-year period, representing a decrease of ~~$66,008,~~$35,909, or ~~29.5%~~16.9%. This decrease was mainly due to ~~final vesting of~~fewer restricted shares issued and at a ~~three-year grant that occurred in~~lower stock price than the ~~first quarter of 2019 that did not recur in the first quarter of 2020.~~comparable prior-year period.

As a result of the changes described above, income from operations decreased ~~$18,742~~$4,092,837 or ~~2.6%~~265.7% to ~~$699,900~~a loss of $2,552,318 for the three months ended ~~March 31,~~June 30, 2020, compared to ~~$718,642~~$1,540,519 for the comparable prior-year period.

Total interest expense increased ~~$195,140,~~$7,629, or ~~116.1%~~4.5%, to ~~$363,153~~$177,170 for the three months ended ~~March 31,~~June 30, 2020, compared to ~~$168,013~~$169,541 for the comparable prior-year period. The increase was ~~mainly~~ attributable to interest ~~accrued~~ on the $1,000,000 outstanding balance on the Revolving Loan, which was drawn on March 12, 2020.

Share redemption consideration increased $75,670, or 63.2%, to $195,482 for the three months ended June 30, 2020, compared to $119,812 for the comparable prior-year period. The increase was attributable to the Triangulum ~~Promissory Note.~~share redemption consideration obligation, which was outstanding for only a portion of the prior-year period.

Income tax ~~expense~~benefit was ~~$35,962~~$662,477 for the three months ended ~~March 31,~~June 30, 2020, compared to income tax provision of ~~$101,014~~$126,309 for the comparable prior-year period. The decrease in income tax expense was primarily attributable to the decrease in pre-tax book income from ~~$561,677~~$1,181,252 in the comparable prior-year period to ~~$152,567~~a loss of $2,869,059 in the current period.

Adjusted EBITDA (as defined below) was ~~$1,500,572~~$(1,420,278) for the three months ended ~~March 31,~~June 30, 2020, compared to ~~$2,019,865~~$2,404,557 for the comparable prior-year period, representing a decrease of ~~$519,293,~~$3,824,835, or ~~25.7%~~159.1%. This decrease was primarily attributable the significant decrease in revenue in the quarter not being fully offset by the decreased amount of expenses.

Results of operations for the six months ended June 30, 2020 and 2019. For the six months ended June 30, 2020, we generated total revenues of $5,158,289 compared to $10,745,938 for the comparable prior-year period, representing a decrease of $5,587,649, or 52.0%. This decrease was attributable to the COVID-19 crisis which resulted in almost all of our land-based casino customers being closed beginning in March and continuing to the end of the second quarter and therefore our inability to invoice them for the use of our products in that period. We continued to realize revenue from licensing our game content to the online gaming market in the first half of 2020.

Selling, general and administrative expenses for the six months ended June 30, 2020 were $5,430,688 compared to $6,480,710 for the comparable prior-year period, representing a decrease of $1,050,022, or 16.2%. This decrease was primarily due to a decrease in travel and entertainment-related expenses, consulting expenses and expenses that are driven by revenue, such as bonuses, commissions, distributor fees and royalties. This decrease was offset by an increase in bad debt expense taken in Q1 of this year, resulting from the write-off of receivable balances deemed to be uncollectible.

Research and development expenses for the six months ended June 30, 2020 were $294,252, compared to $477,440 for the comparable prior-year period, representing a decrease of $183,188, or 38.4%. This decrease was primarily due to a reduction in consulting expenses related to a third-party research and development firm no longer used by the Company.

Share-based compensation expenses for the six months ended June 30, 2020 were $334,265, as compared to $436,182 for the comparable prior-year period, representing a decrease of $101,917, or 23.4%. 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, income from operations decreased $4,114,082 or 182.1% to a loss of $1,854,920 for the three months ended June 30, 2020, compared to $2,259,162 for the comparable prior-year period.

Total interest expense increased $7,286, or 2.2%, to $344,841 for the six months ended June 30, 2020, compared to $337,555 for the comparable prior-year period. The increase was attributable to interest on the $1,000,000 outstanding balance on the Revolving Loan, which was drawn on March 12, 2020.

Share redemption consideration increased $271,152, or 226.3%, to $390,964 for the six months ended June 30, 2020, compared to $119,812 for the comparable prior-year period. The increase was attributable to the Triangulum share redemption consideration obligation, which was outstanding for only a portion of the prior-year period.

Income tax benefit was $626,515 for the six months ended June 30, 2020, compared to income tax provision of $227,323 for the comparable prior-year period. The decrease in income tax expense was primarily attributable to the decrease in pre-tax book income from $1,742,930 in the comparable prior-year period to a loss of $2,716,494 in the current period.

Adjusted EBITDA (as defined below) was $80,293 for the six months ended June 30, 2020, compared to $4,424,422 for the comparable prior-year period, representing a decrease of $4,344,129, or 98.2%. This decrease was primarily attributable to ~~lower~~the net ~~income~~loss for the period as a result of the COVID-19 ~~crisis and lower adjustments~~crisis. This decrease was primarily attributable the significant decrease in ~~share-based compensation and special project expense, partially~~revenue in the period not being fully offset by ~~larger adjustments related to interest expense.~~the decreased amount of expenses.

Adjusted EBITDA. Adjusted EBITDA includes adjustments to net income to exclude interest, taxes, depreciation, amortization, share based compensation, loss on extinguishment of debt, foreign currency exchange gains, ~~change~~changes in ~~estimated fair value of warrant liability, change in~~the estimated fair value of interest rate swap liability, and other non-recurring losses and non-cash charges. Adjusted EBITDA is not a measure of performance defined in accordance with ~~U.S.~~ 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 from operations to Adjusted EBITDA is as follows:

	Three Months Ended March 31,						Three Months Ended June 30,						Six Months Ended June 30,
Adjusted EBITDA Reconciliation:	2020			2019			2020			2019			2020			2019
Net income	$	116,605		$	460,664
Net income (loss)							$	(2,206,582	)	$	1,054,943		$	(2,089,979	)	$	1,515,607
Interest expense		363,153			168,013			177,170			169,541			344,841			337,555
Share redemption consideration								195,482			119,812			390,964			119,812
Interest income		(21,774	)		(715	)		(2,126	)		(19,850	)		(23,900	)		(20,565	)
Depreciation and amortization		469,805			482,064			454,485			481,044			924,291			963,108
Share-based compensation		157,596			223,604			176,669			212,578			334,265			436,182
Foreign currency exchange (gain) loss		127,291			(36,476	)		(11,302	)		24,305			115,989			(12,171	)
Change in estimated fair value of interest rate swap liability		76,163			26,142			(42,483	)		65,459			33,680			91,601
Income tax provision		35,962			101,014
Non-recurring severance expense		2,500			—
Non-recurring special project expense⁽¹⁾		173,271			595,555
(Benefit) provision for income taxes								(662,477	)		126,309			(626,515	)		227,323
Severance expense								20,801			—			23,301			—
Special project expense⁽¹⁾								480,085			170,416			653,356			765,970
Adjusted EBITDA	$	1,500,572		$	2,019,865		$	(1,420,278	)	$	2,404,557		$	80,293		$	4,424,422

Liquidity and capital resources. We have generally been able to fund our continuing operations, our investments, and the obligations under our existing borrowings through cash flow from operations. However, the COVID-19 crisis resulted in negative cash provided by operations and will cause us to have negative cash from operations in ~~Q2 and~~Q3 (and potentially longer in ~~2020.~~2020). In addition, we will have a significant use of cash associated with the closing of the PGP Purchase Agreement ~~(see Note~~(Note 1). ~~The~~We currently believe that we have adequate liquidity to continue our current operations for the next twelve months. However, if COVID-19 forces a second round of casino closures or if the recovery from the first round of 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 ~~March 31,~~June 30, 2020, we had total current assets of ~~$15,524,498~~$12,528,081 and total assets of ~~$24,791,113.~~$21,917,319. This compares to $14,473,935 and ~~$23,982,981,~~$24,252,151, respectively, as of December 31, 2019. The ~~increase~~decrease in current and total assets as of ~~March 31,~~June 30, 2020 was primarily due to ~~an increase~~a decrease in ~~cash, cash equivalents and restricted cash.~~ our Accounts Receivable balance, resulting from the COVID-19 shutdown in Q1 of this year.

Our total current liabilities as of ~~March 31,~~June 30, 2020 ~~increased~~decreased to ~~$5,972,022~~$4,698,139 from ~~$5,165,116~~$5,422,939 as of December 31, 2019, primarily due to ~~an increase~~a decrease in ~~current portion of long-term debt related to~~Accrued Expenses and our Revenue Contract Liability, offset by the Company drawing down on its $1,000,000 Revolving Loan on March ~~17,~~12, 2020.

~~Our~~Despite the COVID-19 crisis, our business was profitable in ~~Q1, but~~Q1. However, our business was not profitable in Q2, and we expect losses in ~~Q2 and potentially longer in 2020.~~Q3 as well. We have sufficient working capital to meet our short-term obligations but may require additional sources of cash to meet longer-term obligations. Further, we do not currently believe that the recent casino closures will result in an impairment of our assets or a default under our loan agreements.

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 $841,448~~used $984,462 in cash for the ~~three~~six months ended ~~March 31,~~June 30, 2020, compared to ~~$601,428~~cash provided of $2,475,821 for the comparable prior period. The ~~increase~~decrease in operating cash flow was primarily due to the net loss for the period as a result of the COVID-19 crisis. This decrease was partially offset by changes in ~~accounts receivable.~~operating assets and liabilities, Accounts Receivable and Revenue Contract Liability, as a result of the COVID-19 crisis.

Investing activities used cash of ~~$1,448~~$22,480 for the ~~three~~six months ended ~~March 31,~~June 30, 2020, compared to ~~$19,190~~$37,856 for the comparable prior period. In both periods, the investments were in intangible assets and ~~acquisition of~~ property and equipment.

Cash provided inby financing activities during the ~~three~~six months ended ~~March 31,~~June 30, 2020 was ~~$602,002,~~ $1,038,273, which resulted from the $1,000,000 draw on our Revolving Loan on March 12, 2020, and $835,300 from the PPP Loan, offset by principal payments on long-term debt. This compares to ~~$328,872~~$594,763 cash used in financing activities for the comparable prior period.

Critical accounting policies. The discussion of our financial condition and results of operations is based upon our financial statements, which have been prepared in accordance with U.S. GAAP. Critical accounting policies are those policies that, in management's view, are most important in the portrayal of our financial condition and results of operations. See Note 3~~of our financial statements included~~2 in Item 8. “Financial Statements and Supplementary ~~Data” of~~Financial Information” included in our 2019 10-K for further detail on these critical accounting policies.

Off-balance sheet arrangements. As of ~~March 31,~~June 30, 2020, 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.

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

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 SEC'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 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 ~~March 31,~~June 30, 2020 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.

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 error or 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.

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, that are complex in nature and have outcomes that are difficult to predict. In accordance with topic ASC Topic 450, Contingencies, we record accruals for such contingencies to the extent that we conclude that it is probable that a liability will be incurred and the amount of the related loss can be reasonably estimated. Our assessment of each matter may change based on future unexpected events. An unexpected adverse judgment in any pending litigation could cause a material impact on our business operations, intellectual property, results of operations or financial position. Unless otherwise expressly stated, we believe costs associated with litigation will not have a material impact on our financial position or liquidity but may be material to the results of operations in any given period. We assume no obligation to update the status of pending litigation, except as may be required by GAAP, applicable law, statute or regulation.

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, Galaxy Gaming's founder, and, prior to the redemption, the holder of a majority of our outstanding common stock. The redemption of Triangulum’s shares was given effect pursuant to ~~our~~the Articles, ~~of Incorporation (the “Articles”),~~ which expressly 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.

As consideration for the redemption, we issued a promissory note payable to Triangulum in the face amount of $39,096,401, ~~(the “Triangulum Promissory Note”).~~which due to the resulting litigation discussed below, has not been given accounting effect in the Company’s financial statements. The Company has instead recorded a long-term share redemption consideration obligation payable to Triangulum, based on the redemption value specified in our Articles of Incorporation. See Note 10. The Triangulum Promissory Note has no mandatory amortization, matures on May 5, 2029, and bears interest at a rate of 2% per annum, with accrued interest payable annually in arrears. It is unsecured and is subordinated to our existing and future indebtedness in accordance with its terms. We may prepay principal and any accrued interest in full or in part at any time. We timely made the first payment under the Triangulum Promissory Note on May 6, 2020.

On May 6, 2019 we filed a lawsuit seeking (i) a declaratory judgment that we acted lawfully and in full compliance with the Articles when we redeemed the Triangulum shares and (ii) certain remedies for breach of fiduciary duty and breach of contract by Triangulum and its Managing Member, Mr. ~~Saucier (the “Triangulum Lawsuit”).~~Saucier. The ~~suit~~Triangulum Lawsuit alleges that the redemption and the other relief sought by us are appropriate and in accordance with the Articles ~~of Incorporation~~ (Galaxy Gaming, Inc. v. Triangulum Partners, LLC, Robert B. Saucier, Clark County, Nevada district court (Case No. A-19-794293-B)). We are in the discovery phase of the Triangulum Lawsuit.

The defendants to that lawsuit responded to the complaint, and Triangulum filed counterclaims based on a theory of wrongful redemption by us. Triangulum also filed a Motion for Preliminary Injunction seeking the redeemed shares be held in a constructive trust. On July 11, 2019, the Court denied Triangulum’s Motion for Preliminary Injunction and all related relief. On September 6, 2019, Triangulum appealed the denial of the Motion for Preliminary Injunction to the Nevada Supreme Court. We submitted our brief in opposition, and Triangulum’s reply brief is due on June 17, 2020. Separately, Triangulum filed amended counterclaims, which we moved to dismiss on a number of legal grounds. The Court denied the motion, stating that the amended complaint was sufficiently plead. The Company filed a Petition for a Writ of Mandamus challenging the ruling, which the Supreme Court denied on January 23, 2020.

On October 18, 2019, Saucier also filed counterclaims centered similarly on a theory of wrongful redemption, and also claims that for breach of contract and quantum meruit, alleging Galaxy Gaming was obligated to pay Saucier his year-end bonuses, despite his resignation. We filed an answer disputing these claims.

As a result of the effects of Coronavirus on the Nevada District court, the Court issued a revised Scheduling Order extending time frames for discovery and setting a new trial date in February of 2021.

On May 6, 2020, Saucier made a demand of the Company under our Bylaws and an Indemnity Agreement between Saucier and the Company, for indemnity and advancement of funds seeking repayment of his lawyer’s fees and expenses he allegedly incurred in connection with the Company’s claims against him in the Triangulum Lawsuit. Saucier asserts that he is entitled to indemnity and advancement as a result of his tenure as an officer, director, and fiduciary of the Company, which he claims triggers his rights of indemnity and advancement. The Company rejected his demand. ~~Thereafter,~~Pursuant to the Indemnity Agreement, an Independent Counsel was agreed to by the parties to hear the dispute. The Independent Counsel generally agreed with the Company but awarded Saucier a small amount of indemnity funds related to the time he was employed by the Company.

Also on May 19, 2020, Saucier commenced a separate action, filed a verified complaint seeking advancement and filed a pleading styled “Motion For Declaratory Judgement On Verified Complaint For Advancement” (Robert B. Saucier v. Galaxy Gaming, Inc. (Clark County, Nevada district court (Case No. A-20-81590-B)) (“the Motion For Declaratory Judgement”). The Company filed its opposition on June 4, 2020. Saucier’s Motion For Declaratory Judgement was denied in a hearing that occurred on June 24, 2020.

As has been previously reported by the Company, in September 2018, we were served with a complaint by ~~TableMax (“TMAX”)~~TMAX regarding the TMAX Agreement. We filed an answer denying the allegations and counterclaiming for breach of contract, abuse of process and fraud in the inducement, among other counterclaims. We also filed a partial motion for summary judgment seeking dismissal of the plaintiff’s claims. Pursuant to a motion to dismiss brought by the co-defendant and former CEO of TMAX, the suit was dismissed, subject to the right of the plaintiff to file an amended complaint on or before March 20, 2019.

The plaintiff did not file an amended complaint within the time period set by the Judge. After that time, the Company considered the matter closed. Despite not filing an Amended complaint within the allotted time, thereafter TMAX filed a Motion for Leave to Amend their Complaint, which was granted by the Judge on May 11, 2020. On May 26, 2020 TMAX filed an Amended Complaint against the Company and other Co-Defendants. In the Amended Complaint, TMAX asserted a claim against the Company for conversion of personal property. The Company will respond to the Amended Complaint denying the allegations.

On ~~March 31,~~June 30, 2020, we issued an aggregate of ~~63,333~~55,000 restricted shares of our common stock valued at ~~$54,086~~$73,700 to Messrs. Lipparelli, ~~DesRosiers,~~ Isaacs, Waters, and Zender, in consideration of their service on the Board during the three months ended ~~March 31,~~June 30, 2020. These shares vested immediately on the grant date. 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.

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.

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.

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

6767 Spencer Street, Las Vegas, NV 89119
(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	1819
Item 3:	Quantitative and Qualitative Disclosures About Market Risk	2022
Item 4:	Controls and Procedures	2022
	PART II
Item 1:	Legal Proceedings	2123
Item 2:	Unregistered Sales of Equity Securities and Use of Proceeds	2224
Item 6:	Exhibits	2224

Condensed Balance Sheets as of ~~March 31,~~June 30, 2020 ~~(unaudited)~~ and December 31, 2019 (unaudited)	4
Condensed Statements of ~~Income~~Operations for the three and six months ended ~~March 31,~~June 30, 2020 and 2019 (unaudited)	5
Condensed Statements of Changes in Stockholders’ Equity (Deficit) for the three and six months ended ~~March 31,~~June 30, 2020 ~~(unaudited)~~ and 2019 (unaudited)	6
Condensed Statements of Cash Flows for the ~~three~~six months ended ~~March 31,~~June 30, 2020 and 2019 (unaudited)	7
Notes to Condensed Financial Statements (unaudited)	8

	Three Months Ended March 31, 2020
	Amount		Classification
Finance lease cost:
Amortization of right-of-use assets	$	—	Depreciation and amortization
Interest on lease liabilities		—	Interest expense
Total finance lease cost	$	—

Operating lease cost	$	71,712	Selling, general and administrative expense

	Three Months Ended June 30, 2020
	Amount		Classification
Operating lease cost	$	71,715	Selling, general and administrative expense

	Six Months Ended June 30, 2020
	Amount		Classification
Operating lease cost	$	143,426	Selling, general and administrative expense

	Galaxy Gaming, Inc.

Date:	~~June 29,~~August 19, 2020

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

	Galaxy Gaming, Inc.

Date:	~~June 29,~~August 19, 2020

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

Large accelerated filer

Accelerated filer

Non-accelerated filer

Smaller reporting company

Emerging growth company