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QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended
September 30,
2025
OR
☐
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission file number:
000-30653
Galaxy Gaming, Inc.
(Exact name of small business issuer as specified in its charter)
Nevada
20-8143439
(State or other jurisdiction of incorporation or organization)
(IRS Employer Identification No.)
6480 Cameron Street Ste. 305
–
Las Vegas
,
NV
89118
(Address of principal executive offices)
(
702
)
939-3254
(Issuer’s telephone number)
Securities registered pursuant to Section 12(b) of the Act: None
Title of each class
Trading symbol
Name of exchange on which registered
Common stock
GLXZ
OTCQB marketplace
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.
Large accelerated filer
☐
Accelerated filer
☐
Non-accelerated filer
☒
Smaller reporting company
☒
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:
25,334,216
common shares as of October 31, 2025.
GALAXY GAMING, INC.
QUARTERLY REPORT ON FORM 10-Q FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2025
Accounts receivable, net of allowance of $
219,931
and $
154,729
, respectively
5,157,092
4,719,717
Income tax receivable
152,447
96,212
Prepaid expenses
1,479,982
1,237,948
Total current assets
10,124,100
24,171,920
Property and equipment, net
108,531
69,916
Operating lease right-of-use assets
345,804
533,163
Assets deployed at client locations, net
4,044,247
3,334,266
Goodwill
1,091,000
1,091,000
Other intangible assets, net
10,537,358
11,443,753
Other assets
151,499
366,713
Total assets
$
26,402,539
$
41,010,731
LIABILITIES AND STOCKHOLDERS’ DEFICIT
Current liabilities:
Accounts payable
$
2,215,142
$
2,646,153
Accrued expenses
2,868,660
2,828,290
Current portion of operating lease liabilities
296,685
286,019
Current portion of long-term debt
2,485,267
842,282
Revenue contract liability
57,966
—
Total current liabilities
7,923,720
6,602,744
Long-term operating lease liabilities
79,983
297,714
Long-term debt and liabilities, net
37,398,707
54,120,183
Deferred tax liabilities, net
63,844
44,429
Total liabilities
45,466,254
61,065,070
Commitments and Contingencies (See Note 6)
Stockholders’ deficit
Preferred stock,
10,000,000
shares authorized; $
0.001
par value;
0
shares issued and outstanding
—
—
Common stock,
65,000,000
shares authorized; $
0.001
par value;
25,334,216
and
25,115,299
shares issued and outstanding, respectively
25,334
25,115
Additional paid-in capital
20,565,149
19,948,363
Accumulated deficit
(
39,783,022
)
(
39,751,236
)
Accumulated other comprehensive income (loss)
128,824
(
276,581
)
Total stockholders’ deficit
(
19,063,715
)
(
20,054,339
)
Total liabilities and stockholders’ deficit
$
26,402,539
$
41,010,731
The accompanying notes are an integral part of the condensed consolidated financial statements.
4
GALAXY GAMING, INC.
CONDENSED CONSOLIDATED STATEM
ENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)
(Unaudited)
Three Months Ended
Nine Months Ended
September 30, 2025
September 30, 2024
September 30, 2025
September 30, 2024
Revenue:
Licensing fees
$
7,325,142
$
7,646,298
$
22,637,766
$
24,169,866
Total revenue
7,325,142
7,646,298
22,637,766
24,169,866
Costs and expenses:
Cost of ancillary products and assembled components
241,139
342,865
617,152
1,347,941
Selling, general and administrative
4,021,121
6,260,283
12,547,372
14,878,844
Research and development
230,545
261,493
836,483
782,858
Depreciation and amortization
806,483
701,127
2,372,215
2,089,317
Stock-based compensation
122,202
204,467
441,605
540,322
Total costs and expenses
5,421,490
7,770,235
16,814,827
19,639,282
Income (loss) from operations
1,903,652
(
123,937
)
5,822,939
4,530,584
Other income (expense):
Interest income
4,789
207,488
43,546
617,873
Interest expense
(
872,101
)
(
2,293,239
)
(
2,782,049
)
(
6,863,534
)
Foreign currency exchange (loss) gain
(
21,184
)
18,971
(
40,287
)
30,583
Loss on extinguishment of debt
—
—
(
2,969,585
)
—
Total other expense, net
(
888,496
)
(
2,066,780
)
(
5,748,375
)
(
6,215,078
)
Income (loss) before provision for income taxes
1,015,156
(
2,190,717
)
74,564
(
1,684,494
)
Benefit (provision) for income taxes
23,983
(
7,197
)
(
106,350
)
(
61,815
)
Net income (loss)
1,039,139
(
2,197,914
)
(
31,786
)
(
1,746,309
)
Foreign currency translation adjustment
1,405
94,729
405,405
12,342
Comprehensive income (loss)
$
1,040,544
$
(
2,103,185
)
$
373,619
$
(
1,733,967
)
Net income (loss) per share:
Basic
$
0.04
$
(
0.09
)
$
(
0.00
)
$
(
0.07
)
Diluted
$
0.04
$
(
0.09
)
$
(
0.00
)
$
(
0.07
)
Weighted-average shares outstanding:
Basic
26,089,512
25,746,433
26,012,974
25,691,128
Diluted
26,274,251
25,746,433
26,012,974
25,691,128
The accompanying notes are an integral part of the condensed consolidated financial statements.
5
GALAXY GAMING, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES I
N STOCKHOLDERS’ DEFICIT
(Unaudited)
Common Stock
Additional Paid-in
Accumulated
Accumulated Other Comprehensive
Total Stockholders'
Shares
Amount
Capital
Deficit
(Loss) Income
Deficit
Beginning balance, December 31, 2024
25,115,299
$
25,115
$
19,948,363
$
(
39,751,236
)
$
(
276,581
)
$
(
20,054,339
)
Net loss
—
—
—
(
2,021,282
)
—
(
2,021,282
)
Foreign currency translation gain
—
—
—
—
151,790
151,790
Stock options exercised
100,000
100
126,900
—
—
127,000
Stock-based compensation
38,216
38
166,223
—
—
166,261
Balance, March 31, 2025
25,253,515
$
25,253
$
20,241,486
$
(
41,772,518
)
$
(
124,791
)
$
(
21,630,570
)
Net income
—
—
—
950,357
—
950,357
Foreign currency translation gain
—
—
—
—
252,210
252,210
Stock options exercised
20,000
20
24,180
—
—
24,200
Stock-based compensation
20,501
21
153,121
—
—
153,142
Balance, June 30, 2025
25,294,016
$
25,294
$
20,418,787
$
(
40,822,161
)
$
127,419
$
(
20,250,661
)
Net income
—
—
—
1,039,139
—
1,039,139
Foreign currency translation gain
—
—
—
—
1,405
1,405
Stock options exercised
20,000
20
24,180
—
—
24,200
Stock-based compensation
20,200
20
122,182
—
—
122,202
Balance, September 30, 2025
25,334,216
$
25,334
$
20,565,149
$
(
39,783,022
)
$
128,824
$
(
19,063,715
)
Common Stock
Additional Paid-in
Accumulated
Accumulated Other Comprehensive
Total Stockholders'
Shares
Amount
Capital
Deficit
Loss
Deficit
Beginning balance, December 31, 2023
24,845,439
$
24,846
$
18,972,901
$
(
37,124,126
)
$
(
117,042
)
$
(
18,243,421
)
Net income
—
—
—
208,908
—
208,908
Foreign currency translation loss
—
—
—
—
(
30,394
)
(
30,394
)
Stock options exercised
20,000
20
24,180
—
—
24,200
Stock-based compensation
45,243
45
141,197
—
—
141,242
Balance, March 31, 2024
24,910,682
$
24,911
$
19,138,278
$
(
36,915,218
)
$
(
147,436
)
$
(
17,899,465
)
Net income
—
—
—
242,697
—
242,697
Foreign currency translation loss
—
—
—
—
(
51,993
)
(
51,993
)
Stock-based compensation
46,811
47
194,566
—
—
194,613
Balance, June 30, 2024
24,957,493
$
24,958
$
19,332,844
$
(
36,672,521
)
$
(
199,429
)
$
(
17,514,148
)
Net loss
—
—
—
(
2,197,914
)
—
(
2,197,914
)
Foreign currency translation loss
—
—
—
—
94,729
94,729
Stock options exercised
18,333
18
31,864
—
—
31,882
Stock-based compensation
23,677
24
204,444
—
—
204,468
Balance, September 30, 2024
24,999,503
$
25,000
$
19,569,152
$
(
38,870,435
)
$
(
104,700
)
$
(
19,380,983
)
The accompanying notes are an integral part of the condensed consolidated financial statements.
6
GALAXY GAMING, INC.
CONDENSED CONSOLIDATED STATEMENTS OF
CASH FLOWS
(Unaudited)
Nine Months Ended
September 30, 2025
September 30, 2024
Cash flows from operating activities:
Net loss
$
(
31,786
)
$
(
1,746,309
)
Adjustments to reconcile net loss to net cash provided by operating activities:
Depreciation and amortization
2,372,215
2,089,317
Amortization of right-of-use assets
194,274
189,238
Amortization of debt issuance costs and debt discount
116,625
1,142,699
Bad debt expense (recovery)
30,138
(
31,875
)
Gain (loss) on disposal of property & equipment
(
62
)
33,245
Deferred income tax
19,415
(
39,388
)
Stock-based compensation
441,605
540,322
Loss on extinguishment of debt
2,969,585
—
Changes in operating assets and liabilities:
Accounts receivable
(
122,418
)
(
1,433,623
)
Income tax receivable
(
60,685
)
(
5,739
)
Prepaid expenses and other current assets
(
6,767
)
334,954
Other assets
215,214
53,766
Accounts payable
(
433,601
)
2,226,036
Accrued expenses
(
78,002
)
42,468
Revenue contract liability
57,968
(
166,678
)
Operating lease liabilities
(
213,980
)
(
200,977
)
Net cash provided by operating activities
5,469,738
3,027,456
Cash flows from investing activities:
Investment in internally developed software
(
751,067
)
(
562,247
)
Acquisition of property and equipment
(
93,683
)
—
Acquisition of assemblies in process
(
612,198
)
(
35,188
)
Acquisition of assets deployed at client locations
(
928,982
)
(
1,686,876
)
Transfer of title of assets deployed at client locations to perpetual license customer
171,575
1,102,908
Net cash used in investing activities
(
2,214,355
)
(
1,181,403
)
Cash flows from financing activities:
Proceeds from BMO Credit Agreement
45,000,000
—
Principal payments on long-term debt (Fortress)
(
57,576,929
)
(
704,120
)
Principal payments on long-term debt (BMO)
(
4,812,500
)
—
Principal payments on long-term debt (Insurance)
(
242,281
)
—
Payments of debt issuance costs
(
630,024
)
—
Fees associated with debt transactions — prior debt
(
138,233
)
—
Proceeds from stock option exercises
175,400
56,082
Net cash used in financing activities
(
18,224,567
)
(
648,038
)
Effect of exchange rate changes on cash
185,720
9,656
Net (decrease) increase in cash and cash equivalents
(
14,783,464
)
1,207,671
Cash and cash equivalents – beginning of period
18,118,043
16,691,514
Cash and cash equivalents – end of period
$
3,334,579
$
17,899,185
Supplemental cash flow information:
Cash paid for interest
$
2,656,333
$
5,762,757
Cash paid for income taxes
$
147,914
$
101,536
Supplemental schedule of non-cash activities:
Right-of-use assets obtained in exchange for lease liabilities
$
6,914
$
330,371
The accompanying notes are an integral part of the condensed consolidated financial statements.
7
GALAXY GAMING, INC.
NOTES TO CONDENSED CONSOLIDATED FINANC
IAL STATEMENTS
(Unaudited)
NOTE 1. NATURE OF OPERATIONS
Unless the context indicates otherwise, references to “Galaxy,” “we,” “us,” “our,” or the “Company,” refer to Galaxy Gaming, Inc., a Nevada corporation.
We are an established global gaming company specializing in the design, development, acquisition, assembly, marketing and licensing of proprietary casino table games, side bets, and associated technology, platforms and systems for the casino and iGaming industries. Casinos use our proprietary products and services to enhance their gaming operations and improve their profitability and productivity, as well as to offer popular cutting-edge gaming entertainment content and technology to their players. We market our products and services to online and land-based casinos worldwide with products currently present in North America, the Caribbean, Central America, the United Kingdom, Europe, Africa, and to cruise ships exploring the world's oceans. We license our products and services for use in regulated land-based gaming markets. We also license our content and distribute content from other companies to iGaming operators in gaming markets throughout the world where iGaming is not illegal.
On
July 18, 2024
, we entered into an Agreement and Plan of Merger (the “Merger Agreement”) with Evolution Malta Holding Limited, a company registered in Malta (“Parent” or "Evolution"), and Galaga Merger Sub, Inc., a Nevada corporation and direct wholly owned subsidiary of Parent (“Merger Sub”), pursuant to which, and subject to the terms and conditions thereof, Merger Sub would merge with and into the Company (the “Merger”), with the Company surviving the Merger as a wholly owned subsidiary of Parent.
Upon the closing of the Merger, each share of common stock, par value
$
0.001
per share of the Company issued and outstanding immediately prior to the effective time of the Merger, other than any Company common stock (i) owned by Company stockholders who are entitled to demand and have properly and validly demanded their appraisal rights under Nevada law or (ii) owned by Parent, Merger Sub, the Company or by any of their respective subsidiaries, will be converted automatically into the right to receive
$
3.20
per share in cash, without interest and subject to any applicable withholding taxes.
Consummation of the Merger is subject to the satisfaction or waiver of certain closing conditions, including approval by at least a majority of the voting power of the outstanding shares of the Company’s common stock of the Merger Agreement and the transactions contemplated thereby, including the Merger, and the receipt of certain gaming regulatory approvals. At the special meeting of the Company’s stockholders held on November 12, 2024, stockholders voted to approve the Merger. Upon completion of the Merger, the Company will become a privately held company and shares of Company’s common stock will no longer be listed on any public market.
Under the terms of the Merger Agreement, if the Merger has not been consummated by
October 18, 2025
(the "First Extended Outside Date"), either Galaxy or Evolution may terminate the Merger Agreement; provided that such date shall be automatically extended to
January 18, 2026
(the "Second Extended Outside Date") if, on the First Extended Outside Date, all conditions to the Merger would have been satisfied or waived if the closing had taken place on the First Extended Outside Date, other than the closing conditions related to the absence of certain legal constraints, or the receipt of certain gaming regulatory approvals (the "Gaming Approval Closing Condition"). As of October 18, 2025, all conditions to the Merger would have been satisfied or waived if the closing occurred on such date, other than the Gaming Approval Closing Condition. In accordance with the foregoing terms, on October 18, 2025, the First Extended Outside Date was automatically extended to January 18, 2026.
Galaxy and Evolution continue to be actively engaged with gaming regulators to secure the approvals required to satisfy the Gaming Approval Closing Condition, and, consistent with Galaxy's prior disclosure, Galaxy continues to anticipate regulatory consideration of the transaction to occur in December of 2025, and subject to regulatory approval and satisfaction of all closing conditions, closing of the transaction to occur prior to the end of the calendar year 2025.
8
NOTE 2. SIGNIFICANT ACCOUNTING POLICIES
Basis of presentation.
The accompanying condensed consolidated 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 U.S. Securities and Exchange Commission ("SEC"). In the opinion of management, the accompanying unaudited interim condensed consolidated financial statements contain all necessary adjustments (including all those of a recurring nature and those necessary in order for the financial statements to not be misleading) and all disclosures to present fairly our financial position and the results of our operations and cash flows for the periods presented.
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. These unaudited interim condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and the related notes as of and for the year ended December 31, 2024 included in our 2024 Form 10-K ("2024 10-K").
Use of estimates and assumptions.
The preparation of financial statements in conformity with U.S. GAAP requires the Company to make decisions based upon estimates, assumptions, and factors considered relevant to the circumstances. Such decisions include the selection of applicable accounting principles and the use of judgment in their application, the results of which impact reported amounts and disclosures. Changes in future economic conditions or other business circumstances may affect the outcomes of the estimates and assumptions. Accordingly, actual results could differ materially from those anticipated.
Consolidation.
The financial statements are presented on a consolidated basis and include the results of the Company and its wholly owned subsidiaries, Progressive Games Partner, LLC ("PGP") and Galaxy Gaming-01 LLC ("GG-01"). All intercompany transactions and balances have been eliminated in consolidation.
Cash and cash equivalents.
Cash and cash equivalents consist primarily of deposits held at major banks and highly liquid investments with original maturities of three months or less. With the exception of funds held outside the U.S., these deposits are in insured banking institutions, which are insured up to $
250,000
per account. To date, we have not experienced uninsured losses.
Accounts receivable and allowance for credit losses.
Accounts receivable are stated at face value net of allowance for credit losses. Management estimates the allowance for expected credit losses balance using relevant available information from internal and external sources, relating to past events, current conditions, and reasonable and supportable forecasts. Historical credit loss experience provides the basis for the estimation of expected credit losses. Adjustments to historical loss information are made for differences in the current environmental economic conditions and reasonable and supportable forecast. The allowance for expected credit losses on financial instruments is measured on a collective (pool) basis when similar risk characteristics exist. Accounts receivable are non-interest bearing. Accounts are written off when management deems them to be uncollectible. Recoveries of accounts previously written off are recorded when received.
For the three and nine months ended September 30, 2025
, there was
no
material activity in allowance for credit losses.
Goodwill.
The excess of the purchase price of an acquired business over the estimated fair value of the assets acquired and the liabilities assumed, is recorded as goodwill. The Company tests for possible impairment of goodwill at least annually, or when circumstances change that would more likely than not reduce the fair value of a reporting unit below its carrying value. The Company has the option to begin with a qualitative assessment, commonly referred to as “Step 0”, to determine whether it is more likely than not that the reporting unit’s fair value of goodwill is less than its carrying value. This qualitative assessment may include, but is not limited to, reviewing factors such as the general economic environment, industry and market conditions, changes in key assumptions used since the most recently performed valuation and overall financial performance of the reporting units. If the Company determines that it is more likely than not that a reporting unit’s fair value is less than its carrying value, the Company performs a quantitative goodwill impairment analysis, and depending upon the results of that measurement, the recorded goodwill may be written down and charged to income from operations when the carrying amount of the reporting unit exceeds the fair value of the reporting unit.
Other intangible assets, net.
The following intangible assets have finite lives and are being amortized using the straight-line method over their estimated economic lives as follows:
Patents
4
-
20
years
Customer relationships
9
-
22
years
Trademarks
20
-
30
years
Intellectual property
12
years
Non-compete agreements
9
years
Software
3
years
9
Software relates primarily to assets where costs are capitalizable during the application development phase. External and internal labor-related costs associated with product development are included in software. The Company reviews its identifiable intangible assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Impairment losses are recognized for identifiable intangibles, other than goodwill, when indicators of impairment are present and the estimated undiscounted cash flows are not sufficient to recover the assets’ carrying amount.
No
impairment was recorded for the
three and nine months ended September 30, 2025. See Note 4
.
Fair value of financial instruments.
Fair value is defined as a market-based measurement intended to estimate the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date under current market conditions. The Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 820,
Fair Value Measurement
(“ASC 820”), defines fair value and provides guidance on how to measure it. ASC 820 outlines required disclosures and describes valuation techniques, including the market approach (using comparable market prices), the income approach (present value of future income or cash flows), and the cost approach (replacement cost of an asset's service capacity). ASC 820 also establishes a fair value hierarchy, which requires an entity to maximize the use of observable inputs when measuring fair value. These inputs are categorized as follows:
•
Level 1: Observable inputs such as quoted prices (unadjusted) in active markets for identical assets or liabilities.
•
Level 2: Inputs other than quoted prices that are observable for the asset or liability, either directly or indirectly. These include quoted prices for similar assets or liabilities in active markets and quoted prices for identical or similar assets or liabilities in markets that are not active.
•
Level 3: Unobservable inputs that reflect the reporting entity’s own assumptions.
The carrying values of cash equivalents, accounts receivable and accounts payable approximate fair value due to their short-term nature. The estimated fair value of our long-term debt approximates its carrying value based upon our expected borrowing rate for debt with similar remaining maturities and comparable risk (level 2). The Company currently has no financial instruments measured at estimated fair value on a recurring basis based on valuation reports provided by counterparties.
Leases
. The Company classifies leases at inception as operating leases or finance leases in accordance with ASC 842, "Leases." We account for lease components (such as rent payments) separately from non-lease components (such as common-area maintenance costs, real estate and sales taxes and insurance costs). Operating and finance leases with terms greater than 12 months are recorded on the condensed consolidated balance sheets as right-of-use assets with corresponding lease liabilities. Lease liabilities are amortized over the lease term using the effective interest method, while lease assets are depreciated over the shorter of the asset's useful life or the lease term. The discount rate used to determine present value is typically the incremental borrowing rate at lease commencement, unless the implicit rate in the lease is readily determinable. Subsequent changes in lease terms or payments are adjusted accordingly.
Revenue recognition.
We account for our revenue in accordance with ASC Topic 606,
Revenue from Contracts with Customers
("ASC 606"). See Note 3
.
Foreign currency translation.
The functional currency for PGP is the Euro. Gains and losses from settlement of transactions involving foreign currency amounts are included in other income or expense in the Condensed Consolidated Statements of Operations. Gains and losses resulting from translating assets and liabilities from the functional currency to U.S. dollars are included in accumulated other comprehensive income or (loss) in the Condensed Consolidated Statements of Changes in Stockholders’ Deficit.
Basic and diluted earnings (loss) per share.
Basic earnings (loss) per share is calculated by dividing net income by the weighted-average number of shares of common stock outstanding during the period. Diluted earnings per share is calculated by dividing net income by the weighted-average number of shares of common stock outstanding during the period increased to include the number of additional shares of common stock that would have been outstanding if the potentially dilutive securities had been issued. Potentially dilutive securities include outstanding stock options, shares to be purchased under the employee stock purchase plan, and unvested restricted stock units (“RSUs”).
Segment information.
Operating segments are defined as components of our enterprise for which separate financial information is regularly reviewed by the Chief Operating Decision Maker ("CODM"), CEO, Matthew Reback, to assess performance and make operational decisions. Currently, we have two revenue streams—land-based gaming and online gaming—that are aggregated into a single reporting segment based on their similar economic characteristics, products, and distribution methods. See Note 7.
The CODM evaluates performance and allocates resources based on consolidated net income (loss), which is the primary performance metric for the reporting segment. Additionally, the CODM reviews reporting segment revenue in conjunction with consolidated revenues, expenses, and net income (loss) to assess performance. The accounting policies of the reporting segment are consistent with those described in the summary of significant accounting policies.
Other significant accounting policies.
Our significant accounting policies are described in our 2024
10-K. There have been no material changes to those policies.
10
Recently issued accounting pronouncements.
Accounting Standard Update 2023-09, "Improvements to Income Tax Disclosures" ("ASU 2023-09"). In December 2023, the FASB issued ASU 2023-09, which requires more detailed income tax disclosures. The guidance requires entities to disclose disaggregated information about their effective tax rate reconciliation as well as expanded information on income taxes paid by jurisdiction. The disclosure requirements will be applied on a prospective basis, with the option to apply them retrospectively. The standard is effective for fiscal years beginning after December 15, 2024, with early adoption permitted. The Company is currently assessing the impact that adoption of this new accounting guidance will have on its consolidated financial statements and footnote disclosures.
Accounting Standard Update 2024-03, "Disaggregation of Income Statement Expenses" ("ASU 2024-03"). In November 2024, the FASB issued ASU 2024-03, which requires public business entities to disclose additional information about specific expense categories in the notes to financial statements at interim and annual reporting periods. The amendments in ASU 2024-03 are effective for annual reporting periods beginning after December 15, 2026, and interim reporting periods beginning after December 15, 2027. Early adoption is permitted. The Company is currently assessing the impact that adoption of this new accounting guidance will have on its consolidated financial statements and footnote disclosures.
Accounting Standard Update 2025-05, "Measurement of Credit Losses for Accounts Receivable and Contract Assets" ("ASU 2025-05"). In July 2025, the FASB issued ASU 2025-05 to address challenges in applying the current expected credit loss ("CECL") model to current accounts receivable and contract assets related to revenue from customers. The amendments are intended to reduce the cost and complexity of estimating credit losses for current accounts receivables while maintaining decision-useful information for financial statement users. The amendments in ASU 2025-05 are effective for annual reporting periods beginning after December 15, 2025, and interim periods within those annual periods. Early adoption is permitted. The Company is currently assessing the impact that adoption of this new accounting guidance will have on its consolidated financial statements and footnote disclosures.
Accounting Standards Update 2025-06, "Accounting for Internal-Use Software" ("ASU 2025-06"). In September 2025, the FASB issued ASU 2025-06 to simplify the accounting for internal-use software by replacing the stage-based model with a principles-based approach. The amendments aim to align accounting with modern development practices and reduce complexity. The amendments are effective for annual reporting periods beginning after December 15, 2027, and interim periods within those annual periods. Early adoption is permitted. The Company is currently assessing the impact that adoption of this new accounting guidance will have on its consolidated financial statements and footnote disclosures.
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.
11
NOTE 3. REVENUE RECOGNITION
Revenue recognition.
We generate revenue primarily from the licensing of our intellectual property and the intellectual property that we license from third parties. We recognize revenue under recurring fee license contracts monthly as we satisfy our performance obligation, which consists of granting the customer the right to use said intellectual property. Amounts billed are determined based on flat rates or usage rates stipulated in the customer contract.
From time to time, we may sell the perpetual right to use our intellectual property for our progressive gaming systems, that is separate from the licensing of our game content and from time to time, sell the units used to deliver the progressive gaming systems. Control transfers and we recognize revenue at a point in time when the gaming system is available for use by a customer, which is no earlier than the shipment of the products to the customer or an intermediary for the customer.
From time to time, the Company licenses intellectual property from third-party owners and re-licenses that intellectual property to its customers. In these arrangements, the Company usually agrees to pay the owner of the intellectual property a royalty based on the revenues the Company receives from licensing the intellectual property to its customers. Depending on the relationship between Galaxy and the licensor, those royalties are either deducted from gross revenue to arrive at net revenue or are included in operating expenses.
Disaggregation of revenue.
The following table disaggregates our revenue by geographic location for the
three and nine months ended September 30, 2025 and 2024. All of the royalty expense that is charged to a contra-revenue in our online gaming revenue stream has been allocated to the Europe, Middle East and Africa region in all periods presented below.
Three Months
Ended September 30,
Nine Months
Ended September 30,
2025
2024
2025
2024
The Americas
$
4,007,232
$
4,580,666
$
12,733,498
$
14,751,736
Europe, Middle East and Africa
3,317,910
3,065,632
9,904,268
9,418,130
Total revenue
$
7,325,142
$
7,646,298
$
22,637,766
$
24,169,866
Contract liabilities.
Amounts billed and cash received in advance of performance obligations fulfilled are recorded as contract liabilities and recognized as revenue when performance obligations are fulfilled.
On May 10, 2023, the Company and a customer entered into an amended and restated agreement (the "Agreement"). The Agreement amends and restates a previous agreement between the parties, dated June 2, 2015, for the provision of licenses for certain table game content and related intellectual property which the Company, succeeded to as successor in interest by merger with PGP.
The Agreement guarantees a minimum payment from the customer of €
6,000,000
Euros (converted to approximately $
7,035,240
USD as of September 30, 2025) per each year ended March 31, 2024, 2025, 2026, and 2027. The amount is to be billed and paid based on minimum monthly payments of €
500,000
Euros (converted to approximately $
586,270
USD as of
September 30, 2025). Any usage amount lower than the minimum monthly payment is deferred until the end of the contract year when the revenue is considered earned and can be recognized. As of September 30, 2025, the Company has deferred €
9,637
Euros in revenue (converted to approximately $
11,299
USD as of September 30, 2025), which represents monthly amounts billed in excess of the monthly usage from the Licensee. The deferred revenue will be recognized at the end of the current contract year ending March 31, 2026, if aggregate performance during the current contract year has not equaled or exceeded €
6,000,000
Euros.
Contract assets.
The Company’s contract assets consist solely of unbilled receivables which are recorded when the Company recognizes revenue in advance of billings. Unbilled receivables are included in the balance of accounts receivable, net of allowance on the balance sheet and totaled $
1,742,597
, $
1,454,066
and $
1,374,379
as of
September 30, 2025, December 31, 2024 and September 30, 2024, respectively.
Intellectual property agreements.
From time to time, the Company purchases or licenses intellectual property from third-parties and the Company, in turn, utilizes that intellectual property in certain games licensed to customers. In these agreements, the Company may agree to pay the seller of the intellectual property a fee if and when the Company receives revenue from games containing the intellectual property.
12
NOTE
4. OTHER INTANGIBLE ASSETS
Other intangible assets, net consisted of the following at:
September 30,
December 31,
2025
2024
Patents
$
13,507,338
$
13,507,338
Customer relationships
14,040,856
14,040,856
Trademarks
2,880,967
2,880,967
Intellectual property
2,012,545
2,000,000
Non-compete agreements
660,000
660,000
Software
2,876,369
2,137,847
Other intangible assets, gross
35,978,075
35,227,008
Less: accumulated amortization
(
25,440,717
)
(
23,783,255
)
Other intangible assets, net
$
10,537,358
$
11,443,753
For the three months ended September 30, 2025 and 2024, amortization expense related to other intangible assets was $
552,487
and $
489,852
, respectively. For the nine months ended September 30, 2025 and 2024, amortization expense related to other intangible assets was $
1,657,462
and $
1,464,995
, respectively.
NOTE
5. LONG-TERM DEBT AND LIABILITIES
Long-term debt and liabilities consisted of the following at:
September 30,
December 31,
2025
2024
BMO credit agreement
$
40,187,500
$
-
Fortress credit agreement
-
57,576,929
Insurance notes payable
235,267
242,282
Long-term debt and liabilities, gross
40,422,767
57,819,211
Less: Unamortized debt issuance costs
(
538,793
)
(
2,856,746
)
Long-term debt and liabilities, net of debt issuance costs
39,883,974
54,962,465
Less: Current portion of long-term debt
(
2,485,267
)
(
842,282
)
Long-term debt and liabilities, net
$
37,398,707
$
54,120,183
BMO Credit Agreement.
On January 6, 2025, the Company entered into a credit agreement with BMO Bank N.A. ("BMO"), a national banking association (the "Credit Agreement"). The Credit Agreement provides for senior secured financing in the aggregate amount of up to
$
47,000,000
, consisting of a
$
2,000,000
senior secured revolving credit facility and a
$
45,000,000
senior secured term loan.
The new Credit Agreement replaces the Fortress Credit Agreement, which included a term loan with a maturity date of
November 13, 2026
. On January 6, 2025, the Company borrowed
$
45,000,000
under the new term loan and used this amount plus cash on hand to repay all amounts outstanding under the Fortress Credit Agreement, which was terminated.
Borrowings under the Credit Agreement bear interest at a rate equal to an applicable margin plus, at the Company’s option, either (1) at a floating rate equal to the base rate (the “Base Rate”) determined by reference to the greatest of: (a) the prime commercial rate announced or otherwise established by BMO, (b) the federal funds rate plus one half of
1
%
, and (c) the one-month Term Secured Overnight Financing Rate ("SOFR") (as defined in the Credit Agreement) plus
1.00
%
; or (2) at a fixed rate based on Term SOFR with an interest period of one, three or six months (at the Company’s election). The applicable margin for borrowings is determined by reference to a pricing grid based on the Company’s then current Total Funded Debt to EBITDA Ratio (as defined in the Credit Agreement). The applicable margin for Base Rate loans ranges from
2.0
% to
2.5
%
per annum. The applicable margin for SOFR loans ranges from
3.0
% to
3.5
%
per annum. The Company pays interest on a
monthly basis
and has elected the one-month SOFR plus
1.00
%
. The Company will pay (i) a commitment fee equal to the applicable margin on the average daily undrawn amount under the new revolving credit facility, and (ii) a one-time closing fee based on the total commitments under the new term loan and new revolving credit facility.
The new term loan and new revolving credit facility will mature on the earlier of (i)
January 6, 2030, or (ii) January 6, 2028 if the merger with Evolution Malta Holding Limited is not completed by December 31, 2025
.
13
The Credit Agreement contains customary representations and warranties, affirmative and negative covenants and events of default. The Credit Agreement includes financial covenants requiring the Company to maintain a maximum Total Funded Debt to EBITDA Ratio, a minimum Fixed Charge Coverage Ratio, minimum EBITDA, and maximum Capital Expenditures (each as defined in the Credit Agreement).
The Company’s obligations under the Credit Agreement are guaranteed by the Company’s domestic subsidiaries, and secured by a first-priority security interest in substantially all of the tangible and intangible personal property of the Company and each subsidiary.
Fortress Credit Agreement.
On November 15, 2021, the Company entered into a senior secured term loan agreement with Fortress Credit Corp. (“Fortress Credit Agreement”) in the amount of
$
60,000,000
. As described above, this loan was repaid in full on January 6, 2025, and the Fortress Credit Agreement was terminated.
Prior to its termination on January 6, 2025
,
the Fortress Credit Agreement bore interest at a rate equal to, at the Company’s option, either (a) London Interbank Offered Rate ("LIBOR") (or a successor rate, determined in accordance with the Fortress Credit Agreement) plus
7.75
%
, subject to a reduction to
7.50
%
upon the achievement of a net leverage target or (b) a base rate determined by reference to the greatest of (i) the federal funds rate plus
0.50
%
, (ii) the prime rate as determined by reference to The Wall Street Journal’s “Prime Rate” and (iii) the one-month adjusted LIBOR rate plus
1.00
%
, plus
6.75
%
, subject to a reduction to
6.50
%
upon the achievement of a net leverage target.
In response to ASU No. 2020-04, Reference Rate Reform (Topic 848) and effective May 30, 2023, the Benchmark Replacement replaced LIBOR under the Fortress Credit Agreement. The Benchmark Replacement is (a) the sum of: (i) Term Secured Overnight Financing Rate ("SOFR") and (ii)
0.11448
%
for an Available Tenor of one-month's duration,
0.26161
%
for an Available Tenor of three-months duration, and
0.42826
%
for an Available Tenor of six months duration, or (b) the sum of: (i) Daily Simple SOFR and (ii) the spread adjustment selected or recommended by the Relevant Governmental Body for the replacement of the tenor of USD LIBOR with a SOFR-based rate having approximately the same length as the interest payment period.
The Fortress Credit Agreement had a final maturity of
November 13, 2026
. The obligations under the Fortress Credit Agreement were guaranteed by the Company’s subsidiaries and were secured by substantially all of the assets of the Company and its subsidiaries. The Fortress Credit agreement required, among other things, principal payments of
$
150,000
per quarter and included an annual sweep of
50
%
of excess cash flow commencing in 2023 based on results for the prior fiscal year. The Fortress Credit Agreement contained affirmative and negative financial covenants (as defined in the Fortress Credit Agreement) and other restrictions customary for borrowings of this nature. The Fortress Credit Agreement had no prepayment penalty after November 15, 2023.
In connection with entering into the Fortress Credit Agreement, the Company also issued warrants to purchase a total of up to
778,320
shares of the Company’s common stock to certain affiliates of Fortress at a price per share of
$
0.01
(the “Warrants”). The Warrants are exercisable at any time, subject to certain restrictions. For purposes of calculating earnings (loss) per share, the Warrants are considered outstanding.
As of
September 30, 2025, future maturities of our long-term obligations are as follows:
Total
Years ended December 31,
2025
$
631,659
2026
2,416,108
2027
3,375,000
2028
3,375,000
2029
4,500,000
Thereafter
26,125,000
Long-term liabilities, gross
$
40,422,767
14
NOTE
6. COMMITMENTS AND CONTINGENCIES
Concentration of risk.
We are exposed to risks associated with customers who represent a significant portion of total revenues.
For the
nine months ended September 30, 2025 and 2024, respectively, we had the following client concentrations:
Location
Nine Months Ended September 30, 2025
Revenue
Nine Months Ended September 30, 2024
Revenue
Accounts
Receivable
September 30, 2025
Accounts
Receivable
December 31, 2024
Client A
Europe
19.2
%
20.5
%
$
1,767,796
$
1,186,528
Client B
North America
3.3
%
10.7
%
$
28,870
$
686,133
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.
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 those matters.
Beginning on September 11, 2024, seven purported stockholders of Galaxy have sent demands to the Company and two of which included draft complaints. On October 18, 2024,
two
purported stockholders filed complaints, relating to the Merger Agreement disclosures, captioned Finger v. Galaxy Gaming, Inc., et al., Index No. 655536/2024 (N.Y. Sup. Ct.) and Coffman v. Galaxy Gaming, Inc., et al., Index No. 655530/2024 (N.Y. Sup. Ct.). The demand letters and complaints allege that the definitive proxy statement on Schedule 14A filed by the Company on September 26, 2024 is materially incomplete and misleading because it omitted certain information related to the Merger (as defined herein), including but not limited to information about the Company’s financial projections and analyses performed by Galaxy’s financial advisor, Macquarie Capital (USA) Inc. While we believe that the disclosures set forth in the proxy statement comply fully with all applicable law and deny the allegations in the demand letters and the complaints, in order to moot plaintiffs’ disclosure claims, avoid nuisance and possible expense and business delays, and provide additional information to our stockholders, on November 1, 2024, we determined to voluntarily supplement certain disclosures in the proxy statement related to the purported stockholders’ claims.
Intellectual property agreements.
From time to time, the Company purchases intellectual property from third-parties and the Company, in turn, utilizes that intellectual property in certain games licensed to customers. In these purchase agreements, the Company may agree to pay the seller of the intellectual property a fee, if and when, the Company receives revenue from games containing the intellectual property.
NOTE
7. SEGMENT
We define operating segments as components of our enterprise for which separate financial information is reviewed regularly by the chief operating decision maker ("CODM"),
CEO
, Matthew Reback, to evaluate performance and make operating decisions. We currently have two revenue streams (land-based gaming and online gaming), which are aggregated into
one
reporting segment. The land-based revenue stream derives its revenues from casinos using our proprietary products to enhance their gaming operations. The online gaming ("iGaming") revenue stream derives its revenues from the licensing and distribution of our content to iGaming operators. The Company has intra-entity sales between subsidiaries. The accounting policies of each revenue stream are the same as those described in the summary of significant accounting policies.
The CODM assesses performance of the revenue streams and allocates resources based on consolidated net income (loss), which is the primary performance metric. Net income (loss) is used to monitor budget versus actual results and assess the performance of the business. The measure of segment assets is reported on the Condensed Consolidated Balance Sheet as total assets, which are not allocated to individual revenue streams for performance evaluation by the CODM.
The following table discloses significant segment expenses. The Company determined the following significant expenses: cost of ancillary products and assembled components, selling, general and administrative, compensation and related expenses, research and development, depreciation and amortization, and stock-based compensation. The CODM reviews these significant expenses as provided in the monthly reporting package.
15
A summary of segment expense activity is as follows:
For Three Months Ended September 30,
For Nine Months Ended September 30,
2025
2024
2025
2024
Revenue:
Total Core Revenue
$
4,519,799
$
5,129,560
$
14,230,307
$
16,507,743
Total Digital Revenue
2,805,343
2,516,738
8,407,459
7,662,123
Consolidated Revenue
$
7,325,142
$
7,646,298
$
22,637,766
$
24,169,866
Cost and expenses
Cost of ancillary products and assembled components
$
241,139
$
342,865
$
617,152
$
1,347,941
Selling, general and administrative
2,340,456
4,570,659
7,017,074
9,706,429
Compensation and related expenses
1,893,856
1,898,447
6,248,036
5,804,754
Research and development
17,354
52,670
118,745
150,519
Depreciation and amortization
806,483
701,127
2,372,215
2,089,317
Stock-based compensation
122,202
204,467
441,605
540,322
Total costs and expenses
$
5,421,490
$
7,770,235
$
16,814,827
$
19,639,282
Net income (loss)
$
1,039,139
$
(
2,197,914
)
$
(
31,786
)
$
(
1,746,309
)
NOTE
8. INCOME TAXES
Our forecasted annual effective tax rate (“AETR”) at September 30, 2025
was
2.9
%, compared to
-
3.6
% at September 30, 2024. The change was primarily driven by differences in forecasted earnings before income taxes and the amount of permanent differences relative to the prior-year period, mainly attributable to legal expenses incurred in connection with the acquisition by Evolution.
For the nine months ended September 30, 2025 and 2024
, our effective tax rate (“ETR”) was
-
11.3
% and
-
3.7
%, respectively. The decrease in the ETR for the nine months ended September 30, 2025 is mainly attributable to the loss on extinguishment of debt as compared to the nine months ended September 30, 2024
.
NOTE
9. SUBSEQUENT EVENTS
None
16
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 nine months ended September 30, 2025 and 2024. This discussion should be read together with our audited consolidated financial statements and related notes included in Item 8. Financial Statements and Supplementary Financial Information included in our 2024 Form 10-K.
17
SPECIAL NOTE REGARDING FO
RWARD-LOOKING STATEMENTS
This Quarterly Report on Form 10-Q (“Quarterly Report”) contains “forward-looking” statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and the Private Securities Litigation Reform Act of 1995, as do other materials or oral statements we release to the public. Forward-looking statements are neither historical facts nor assurances of future performance, but instead are based only on our current beliefs, expectations, and assumptions regarding the future of our business, plans and strategies, projections, anticipated events and trends, the economy, and other future conditions, as of the date on which this report is filed. Forward-looking statements often, but do not always, contain words such as “may,” “will,” “should,” “could,” “might,” “expect,” “intend,” "target," “plan,” “anticipate,” “believe,” “estimate,” “predict,” “potential,” “continue,” or the negative of these terms or other similar expressions. These forward-looking statements are only predictions. We have based these forward-looking statements on our current expectations, assumptions and projections about future events and financial trends that we believe may affect our business, financial condition and results of operations. These forward-looking statements speak only as of the date of this Quarterly Report and are subject to a number of risks and uncertainties. These risks and uncertainties include, but are not limited to, the ability to complete the Merger on the proposed terms or on the anticipated timeline, or at all, including risks and uncertainties related to securing the necessary gaming regulatory approvals and satisfaction of other closing conditions to consummate the proposed Merger; the occurrence of any event, change or other circumstance that could give rise to the termination of the Merger Agreement; risks that the proposed Merger disrupts the Company’s current plans and operations or diverts the attention of the Company’s management or employees from ongoing business operations; the risk that certain restrictions during the pendency of the Merger may impact the Company's ability to pursue certain business opportunities or strategic transactions; the risk of potential difficulties with the Company’s ability to retain and hire key personnel and maintain relationships with customers and other third parties as a result of the proposed Merger, including during the pendency of the Merger; the risk that the proposed Merger may involve unexpected costs and/or unknown or inestimable liabilities; the risk that the Company’s business may suffer as a result of uncertainty surrounding the proposed Merger; the risk that stockholder litigation in connection with the proposed Merger may affect the timing or occurrence of the proposed Merger or result in significant costs of defense, indemnification and liability; effects relating to the announcement of the proposed Merger or any further announcements or the consummation of the proposed Merger on the market price of the Company’s common stock or the Company’s operating results; the ability of Galaxy Gaming to enter and maintain strategic alliances, product placements or installations in land based casinos or grow its iGaming business, garner new market share, secure licenses in new jurisdictions or maintain existing licenses, successfully develop or acquire and sell proprietary products, comply with regulations, including changes in gaming related and non-gaming related statutes and regulations that affect the revenues of our customers in land-based casino and, online casino markets, have its games approved by relevant jurisdictions, unfavorable economic conditions in the US and worldwide; changes in international trade policies and the impact of tariffs imposed by U.S. and foreign governments; our level of indebtedness; restrictions and covenants in our loan agreement; dependence on major customers; protection of intellectual property and our ability to license the intellectual property rights of third parties; failure to maintain the integrity of our information technology systems, including without limitation, cyber-attacks or other failures in our telecommunications or information technology systems, or those of our collaborators, third-party logistics providers, distributors or other contractors or consultants, could result in information theft, data corruption and significant disruption of our business; and other factors. The events and circumstances reflected in our forward-looking statements may not be achieved or occur, and actual results could differ materially from those projected in the forward-looking statements. Except as required by applicable law, we do not plan to publicly update or revise any forward-looking statements contained herein, whether as a result of any new information, future events, changed circumstances or otherwise.
OVERVIEW
We develop, acquire, assemble and market technology and entertainment-based products and services for the gaming industry for placement on casino floors and on legal internet gaming sites. Our products and services primarily relate to licensed casino operators’ table games activities and focus on either increasing their profitability and productivity or expanding their gaming entertainment offerings in the form of proprietary table games, electronically enhanced table game platforms and other ancillary equipment. In addition, we license intellectual property to legal internet gaming operators. Our products and services are offered in various highly regulated markets and certain non-regulated (where such is not illegal) 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.
Agreement and Plan of Merger with Evolution
On July 18, 2024, we entered into an Agreement and Plan of Merger (the “Merger Agreement”) with Evolution Malta Holding Limited, a company registered in Malta (“Parent” or "Evolution"), and Galaga Merger Sub, Inc., a Nevada corporation and direct wholly owned subsidiary of Parent (“Merger Sub”), pursuant to which, and subject to the terms and conditions thereof, Merger Sub would merge with and into the Company (the “Merger”), with the Company surviving the Merger as a wholly owned subsidiary of Parent.
Upon the closing of the Merger, each share of common stock, par value $0.001 per share of the Company issued and outstanding immediately prior to the effective time of the Merger, other than any Company common stock (i) owned by Company stockholders who are entitled to demand and have properly and validly demanded their appraisal rights under Nevada law or (ii) owned by Parent, Merger
18
Sub, the Company or by any of their respective subsidiaries, will be converted automatically into the right to receive $3.20 per share in cash, without interest and subject to any applicable withholding taxes.
Consummation of the Merger is subject to the satisfaction or waiver of certain closing conditions, including the receipt of certain gaming regulatory approvals. At the special meeting of the Company’s stockholders held on November 12, 2024, stockholders voted to approve the Merger. Upon completion of the Merger, the Company will become a privately held company and shares of Company’s common stock will no longer be listed on any public market.
Under the terms of the Merger Agreement, if the Merger has not been consummated by October 18, 2025 (the "First Extended Outside Date"), either Galaxy or Evolution may terminate the Merger Agreement; provided that such date shall be automatically extended to January 18, 2026 (the "Second Extended Outside Date") if, on the First Extended Outside Date, all conditions to the Merger would have been satisfied or waived if the closing had taken place on the First Extended Outside Date, other than the closing conditions related to the absence of certain legal constraints, or the receipt of certain gaming regulatory approvals (the "Gaming Approval Closing Condition"). As of October 18, 2025, all conditions to the Merger would have been satisfied or waived if the closing occurred on such date, other than the Gaming Approval Closing Condition. In accordance with the foregoing terms, on October 18, 2025, the First Extended Outside Date was automatically extended to January 18, 2026.
Galaxy and Evolution continue to be actively engaged with gaming regulators to secure the approvals required to satisfy the Gaming Approval Closing Condition, and, consistent with Galaxy's prior disclosure, Galaxy continues to anticipate regulatory consideration of the transaction to occur in December of 2025, and subject to regulatory approval and satisfaction of all closing conditions, closing of the transaction to occur prior to the end of the calendar year 2025.
19
Results of operations for the three months ended September 30, 2025 and 2024.
Three Months Ended September 30,
2025
2024
$ Change
% Change
Revenue:
Core Revenues:
Recurring License Revenue
$
5,186,967
$
5,202,783
$
(15,816
)
-0.3
%
Perpetual License Sales of Progressive Gaming Systems
68,714
705,000
(636,286
)
-90.3
%
Gross Revenue
5,255,681
5,907,783
(652,102
)
-11.0
%
Royalties Netted against Gross Revenue
(735,882
)
(778,223
)
42,341
-5.4
%
Total Core Revenue
$
4,519,799
$
5,129,560
$
(609,761
)
-11.9
%
Digital Revenues:
Recurring License Revenue
$
3,947,334
$
3,513,194
$
434,140
12.4
%
Gross Revenue
3,947,334
3,513,194
434,140
12.4
%
Royalties Netted against Gross Revenue
(1,141,991
)
(996,456
)
(145,535
)
14.6
%
Total Digital Revenue
$
2,805,343
$
2,516,738
$
288,605
11.5
%
Consolidated Revenues:
Recurring License Revenue
$
9,134,301
$
8,715,977
$
418,324
4.8
%
Perpetual License Sales of Progressive Gaming Systems
68,714
705,000
(636,286
)
-90.3
%
Gross Revenue
9,203,015
9,420,977
(217,962
)
-2.3
%
Royalties Netted against Gross Revenue
(1,877,873
)
(1,774,679
)
(103,194
)
5.8
%
Revenue
$
7,325,142
$
7,646,298
$
(321,156
)
-4.2
%
Costs and expenses
Cost of ancillary products and assembled components
$
241,139
$
342,865
$
(101,726
)
-29.7
%
Selling, general and administrative
4,021,121
6,260,283
(2,239,162
)
-35.8
%
Research and development
230,545
261,493
(30,948
)
-11.8
%
Depreciation and amortization
806,483
701,127
105,356
15.0
%
Stock-based compensation
122,202
204,467
(82,265
)
-40.2
%
Total costs and expenses
5,421,490
7,770,235
(2,348,745
)
-30.2
%
Income (loss) from operations
1,903,652
(123,937
)
2,027,589
-1636.0
%
Other income (expense):
Interest income
4,789
207,488
(202,699
)
-97.7
%
Interest expense
(872,101
)
(2,293,239
)
1,421,138
-62.0
%
Foreign currency exchange (loss) gain
(21,184
)
18,971
(40,155
)
-211.7
%
Total other expense, net
(888,496
)
(2,066,780
)
1,178,284
-57.0
%
Income (loss) before provision for income taxes
$
1,015,156
$
(2,190,717
)
$
3,205,873
-146.3
%
Provision for income taxes
23,983
(7,197
)
31,180
-433.2
%
Net income (loss)
$
1,039,139
$
(2,197,914
)
$
3,237,053
-147.3
%
Revenue
Recurring core revenue totaled $5,186,967 for the three months ended September 30, 2025, representing a modest year-over-year decline of 0.3%. This slight decrease was primarily attributable to the impact of recent casino closures, with a smaller contribution from reduced revenue tied to licensed third-party intellectual property. These declines were partially offset by revenue generated from placements of our new GOS progressive gaming system, which launched earlier this year. Royalties netted against gross core revenue decreased $42,341 for the three months ended September 30, 2025, as compared to the same period in the prior year. This decrease was attributable to lower royalties paid to third-parties for licensed intellectual property. Perpetual license sales of our progressive gaming systems to customers of $68,714 were down 90.3% percent for the three months ended September 30, 2025, as compared to the same period in the prior year. This decline was primarily driven by the timing of customer purchases. Gross digital revenues of $3,947,334, increased $434,140, or 12.4% for the three months ended September 30, 2025, as compared to the same period in the prior year. This favorable increase reflects the ongoing expansion of our digital content onto new customer sites and the continued success of offering competitive
20
products with brand recognition. Net of royalties, digital revenues grew to $2,805,343, up 11.5% for the three months ended September 30, 2025, as compared to the same period in the prior year.
Costs and Expenses
Cost of ancillary products and assembled component expense decreased $101,726, or 29.7% for the three months ended September 30, 2025, as compared to the same period in the prior year. The activity in cost of ancillary products and assembled components reflects the component costs associated with the perpetual license sales of our progressive gaming systems.
Selling, general and administrative expenses decreased $2,239,162, or 35.8% for the three months ended September 30, 2025, as compared to the same period in the prior year. This decrease was primarily driven by a $1,934,107 reduction in costs associated with special projects, most notably legal expenses incurred related to the acquisition by Evolution. Normalized for the impact of special projects and excluding the related fees of $310,778 and $2,244,885 for the three months ended September 30, 2025 and September 30, 2024, respectively, selling, general, and administrative expenses decreased $305,055 for the three months ended September 30, 2025, as compared to the same period in the prior year. The decrease was primarily driven by lower legal, accounting, and consulting expenses unrelated to special projects.
Research and development expenses decreased $30,948, or 11.8% for the three months ended September 30, 2025 compared to the comparable period in the prior year. The decrease was due to the decline of the total amount of outside services used for research and development in the period.
Depreciation and amortization increased $105,356, or 15.0% for the three months ended September 30, 2025, as compared to the same period in the prior year. This increase was primarily driven by amortization expense for certain intangible assets placed in service and to a lesser extent, an increase in depreciation expense associated with incremental placements of assets deployed at client locations.
Stock-based compensation expenses decreased $82,265, or 40.2% for the three months ended September 30, 2025, as compared to the same period in the prior year. The decrease was primarily due to reduced stock-based compensation for employees as well as lower compensation for our Board of Directors in 2025, as a result of the full vesting of a previously granted equity award and a reduction in the number of board members.
Interest expense decreased $1,421,138, or 62.0% for the three months ended September 30, 2025, as compared to the same period in the prior year. The decrease was due to reduced interest rates and a reduced principal balance as a result of the refinancing of our debt in January 2025. Interest income decreased $202,699, or 97.7% compared to the prior year period, primarily due to lower cash balances.
Benefit for income taxes was $23,983 for the three months ended September 30, 2025, compared to provision for income taxes of $7,197 for the comparable prior-year period. The change primarily reflects the impact of provisions recorded earlier in the year and the full-year forecasted income before provision for income taxes.
Primarily as a result of the factors described above, we had net income of $1,039,139 for the three months ended September 30, 2025, as compared to net loss of approximately $2,197,914 for the same period in the prior year.
21
Results of operations for the nine months ended September 30, 2025 and 2024.
Nine Months Ended September 30,
2025
2024
$ Change
% Change
Revenue:
Core Revenues:
Recurring License Revenue
$
15,620,361
$
15,873,012
$
(252,651
)
-1.6
%
Perpetual License Sales of Progressive Gaming Systems
830,255
3,007,493
(2,177,238
)
-72.4
%
Gross Revenue
16,450,616
18,880,505
(2,429,889
)
-12.9
%
Royalties Netted against Gross Revenue
(2,220,309
)
(2,372,762
)
152,453
-6.4
%
Total Core Revenue
$
14,230,307
$
16,507,743
$
(2,277,436
)
-13.8
%
Digital Revenues:
Recurring License Revenue
$
11,803,908
$
10,497,613
$
1,306,295
12.4
%
Gross Revenue
11,803,908
10,497,613
1,306,295
12.4
%
Royalties Netted against Gross Revenue
(3,396,449
)
(2,835,490
)
(560,959
)
19.8
%
Total Digital Revenue
$
8,407,459
$
7,662,123
$
745,336
9.7
%
Consolidated Revenues:
Recurring License Revenue
$
27,424,269
$
26,370,625
$
1,053,644
4.0
%
Perpetual License Sales of Progressive Gaming Systems
830,255
3,007,493
(2,177,238
)
-72.4
%
Gross Revenue
28,254,524
29,378,118
(1,123,594
)
-3.8
%
Royalties Netted against Gross Revenue
(5,616,758
)
(5,208,252
)
(408,506
)
7.8
%
Revenue
$
22,637,766
$
24,169,866
$
(1,532,100
)
-6.3
%
Costs and expenses
Cost of ancillary products and assembled components
$
617,152
$
1,347,941
$
(730,789
)
-54.2
%
Selling, general and administrative
12,547,372
14,878,844
(2,331,472
)
-15.7
%
Research and development
836,483
782,858
53,625
6.8
%
Depreciation and amortization
2,372,215
2,089,317
282,898
13.5
%
Stock-based compensation
441,605
540,322
(98,717
)
-18.3
%
Total costs and expenses
16,814,827
19,639,282
(2,824,455
)
-14.4
%
Income from operations
5,822,939
4,530,584
1,292,355
28.5
%
Other income (expense):
Interest income
43,546
617,873
(574,327
)
-93.0
%
Interest expense
(2,782,049
)
(6,863,534
)
4,081,485
-59.5
%
Foreign currency exchange (loss) gain
(40,287
)
30,583
(70,870
)
-231.7
%
Loss on extinguishment of debt
(2,969,585
)
-
(2,969,585
)
100.0
%
Total other expense, net
(5,748,375
)
(6,215,078
)
466,703
-7.5
%
Income (loss) before provision for income taxes
$
74,564
$
(1,684,494
)
$
1,759,058
-104.4
%
Provision for income taxes
(106,350
)
(61,815
)
(44,535
)
72.0
%
Net loss
$
(31,786
)
$
(1,746,309
)
$
1,714,523
-98.2
%
Revenue
Recurring core revenue totaled $15,620,361 for the nine months ended September 30, 2025, representing a modest year-over-year decline of 1.6%. This slight decrease was primarily attributable to the impact of casino closures, with a smaller contribution from reduced revenue tied to licensed third-party intellectual property. These declines were partially offset by revenue generated from placements of our new GOS progressive gaming system, which launched earlier this year. Royalties netted against gross core revenue decreased $152,453 for the nine months ended September 30, 2025, as compared to the same period in the prior year. This decrease was due to lower royalties paid to third-parties for licensed intellectual property. Perpetual license sales of our progressive gaming systems to customers of $830,255 decreased 72.4% percent for the nine months ended September 30, 2025, as compared to the same period in the prior year. This decline was primarily driven by the timing of customer purchases. Gross digital revenues of $11,803,908 increased $1,306,295, or 12.4% for the nine months ended September 30, 2025, as compared to the same period in the prior year. This favorable
22
increase reflects the ongoing expansion of our digital content onto new customer sites and the continued success of offering competitive products with brand recognition. Net of royalties, digital revenues grew to $8,407,459, up 9.7% for the nine months ended September 30, 2025, as compared to the same period in the prior year.
Costs and Expenses
Cost of ancillary products and assembled component expense decreased $730,789, or 54.2% for the nine months ended September 30, 2025, as compared to the same period in the prior year. The activity in cost of ancillary products and assembled components reflects the component costs associated with the perpetual license sales of our progressive gaming systems.
Selling, general and administrative expenses decreased $2,331,472, or 15.7% for the nine months ended September 30, 2025, as compared to the same period in the prior year. This decrease was primarily driven by a $2,157,196 reduction in costs associated with special projects, most notably legal expenses incurred related to the acquisition by Evolution. Normalized for the impact of special projects and excluding the related fees of $762,733 and $2,919,929 for the nine months ended September 30, 2025 and September 30, 2024, respectively, selling, general, and administrative expenses decreased $174,276 for the nine months ended September 30, 2025, as compared to the same period in the prior year. The decrease was primarily driven by lower legal, accounting, and investor relations expenses unrelated to special projects, partially offset by higher employee compensation costs.
Research and development expenses increased $53,625, or 6.8% for the nine months ended September 30, 2025, as compared to the same period in the prior year. This increase was due to higher employee compensation costs primarily driven by increased headcount as well as the ongoing development of internal software placed in service.
Depreciation and amortization increased $282,898, or 13.5% for the nine months ended September 30, 2025, as compared to the same period in the prior year. This increase was primarily driven by amortization expense for certain intangible assets placed in service and to a lesser extent, depreciation expense associated with incremental placements of assets deployed at client locations.
Stock-based compensation expenses decreased $98,717, or 18.3% for the nine months ended September 30, 2025, as compared to the same period in the prior year. The decrease was primarily driven by lower compensation for our Board of Directors in 2025, as a result of the full vesting of a previously granted equity award and a reduction in the number of board members.
Interest expense decreased $4,081,485, or 59.5% for the nine months ended September 30, 2025, as compared to the same period in the prior year. The decrease was due to reduced interest rates and a reduced principal balance as a result of the refinancing of our debt in January 2025. Interest income decreased $574,327, or 93.0% compared to the prior year period, primarily due to lower cash balances.
The Company recognized a loss on extinguishment of debt of $2,969,585 for the nine months ended September 30, 2025 related to the refinancing of our debt from Fortress to BMO.
Provision for income taxes was $106,350 for the nine months ended September 30, 2025, compared to provision for income taxes of $61,815 for the comparable prior-year period. The increase was due to a higher adjusted pre-tax book income offset by discrete items, primarily the loss on extinguishment of debt.
Primarily as a result of the factors described above, we had net loss of $31,786 for the nine months ended September 30, 2025, as compared to net loss of approximately $1,746,309 for the same period in the prior year.
23
Adjusted Earnings Before Interest, Taxes, Depreciation and Amortization ("Adjusted EBITDA").
Adjusted EBITDA includes adjustments to U.S. GAAP net (loss) income to exclude interest, income taxes, depreciation, amortization, stock-based compensation, foreign currency exchange loss (gain), and severance and other expenses related to litigation, and other adjustments to reflect changes that occur in our business but do not represent ongoing operations, including loss on extinguishment of debt. Adjusted EBITDA is not a measure of performance defined in accordance with U.S. Generally Accepted Accounting Principles ("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 (loss) 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 (loss) income to Adjusted EBITDA is as follows:
Three Months Ended September 30,
Nine Months Ended September 30,
Adjusted EBITDA Reconciliation:
2025
2024
2025
2024
Net income (loss)
$
1,039,139
$
(2,197,914
)
$
(31,786
)
$
(1,746,309
)
Interest expense
872,101
2,293,239
2,782,049
6,863,534
Interest income
(4,789
)
(207,488
)
(43,546
)
(617,873
)
(Benefit) provision for income taxes
(23,983
)
7,197
106,350
61,815
Depreciation and amortization
806,483
701,127
2,372,215
2,089,317
EBITDA
2,688,951
596,161
5,185,282
6,650,484
Stock-based compensation
(1)
122,202
204,467
441,605
540,322
Employee severance costs and other expenses
(2)
—
—
83,030
24,482
CEO transition expenses
(3)
—
—
—
8,200
Professional fees, acquisition costs and other
(4)
310,778
2,244,885
762,733
2,919,929
Loss (gain) on disposal of assets
(5)
—
33,245
(62
)
33,245
Foreign exchange loss (gain)
(6)
21,184
(18,971
)
40,287
(30,583
)
Loss on extinguishment of debt
(7)
—
—
2,969,585
—
Tariffs
(8)
95,380
—
95,380
—
Adjusted EBITDA
$
3,238,495
$
3,059,787
$
9,577,840
$
10,146,079
(1) Represents the non-cash expense associated with the value of equity awards granted to employees, directors and consultants by the Company.
(2) Represents costs associated with the severance of employees.
(3) Represents Company reimbursed moving expenses incurred by the new President and CEO, Matthew Reback.
(4) Represents professional fees and transaction related fees incurred related to acquisitions, mergers and professional fees incurred for other projects not considered part of the normal course of business.
(5) Represents a non-cash charge related to the write off of certain fixed assets.
(6) Represents foreign exchange losses and gains associated with the fluctuations of foreign currency rates.
(7) Represents the loss on the extinguishment of debt associated with the refinancing of our debt from Fortress to BMO.
(8) Represents the total amount expended on tariffs.
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. We may require additional capital to undertake acquisitions or to repay in full our indebtedness. Our ability to access capital for operations or for acquisitions will depend on conditions in the capital markets and investors’ perceptions of our business prospects and such conditions and perceptions may not always favor us.
As of September 30, 2025, we had total current assets of $10,124,100 and total assets of $26,402,539. As of December 31, 2024, we had total current assets of $24,171,920 and total assets of $41,010,731. The decrease in current assets as of September 30, 2025 compared to December 31, 2024 was primarily due to the decreased cash and cash equivalents driven by cash used in the refinancing of our debt. The decrease in total assets as of September 30, 2025 compared to December 31, 2024 was primarily due to the decrease of current assets noted above.
Our total current liabilities as of September 30, 2025 compared to December 31, 2024 increased to $7,923,720 from $6,602,744. This increase was primarily due to an increase in the current portion of our long term debt as a result of the refinancing of our debt from Fortress to BMO.
24
Based on our current forecast of operations, we believe we will have sufficient liquidity to fund our operations and to meet the obligations under our financing arrangements as they come due over at least the next 12 months.
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, assemblies in process and research and development of our products. It is our intention to continue such initiatives and investments.
Our operating activities provided cash of $5,469,738 for the nine months ended September 30, 2025, compared to $3,027,456 provided for the comparable prior year period. This change is mainly attributable to a smaller net loss in the current period versus the prior period and a variance of $1,492,478 in use of assets and liabilities that relate to operations. Additionally, the Company recognized a loss on extinguishment of debt of $2,969,585 due to the refinancing of the Fortress loan to BMO, depreciation and amortization increased $282,898 primarily driven by amortization related to intangible assets placed in service and to a lesser extent, depreciation related to assets deployed at client locations, $98,717 decline in stock-based compensation and an increase in bad debt of $62,013.
Investing activities used cash of $2,214,355 for the nine months ended September 30, 2025, compared to cash used of $1,181,403 for the nine months ended September 30, 2024. This increase in cash used was primarily due to the decrease in the transfer of title of assets deployed at client locations to perpetual license customers, along with higher spending on assemblies in process, increased investment in internally developed software, and additional acquisitions of property and equipment.
Cash used in financing activities during the nine months ended September 30, 2025, was $18,224,567. This compares to $648,038 cash used by financing activities for the nine months ended September 30, 2024. The increase in cash used was due to the refinancing of our debt from Fortress to BMO and additional principal payments of $3,125,000 made on the debt in the current year.
Credit Facility.
On January 6, 2025, we entered into a new credit agreement with BMO that provides for a $2,000,000 senior secured revolving credit facility and a $45,000,000 senior secured term loan. On January 6, 2025, we borrowed $45,000,000 under the new term loan and used this amount plus cash on hand to repay all amounts outstanding under the Fortress Credit Agreement, which was terminated.
Critical accounting policies and estimates.
Our significant accounting policies and estimates are described in our 2024 Form 10-K. There have been no material changes to those policies.
Off-balance sheet arrangements.
As of September 30, 2025, 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.
25
ITEM 3. QUANTITATIVE AND QUALITAT
IVE DISCLOSURES ABOUT MARKET RISK
A smaller reporting company is not required to provide the information required by this Item.
ITEM 4. CONTROLS
AND PROCEDURES
Disclosure controls and procedures
Disclosure controls and procedures are controls and other procedures that are designed to ensure that information required to be disclosed in our reports filed or submitted under the Exchange Act are recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed in our reports filed submitted under the Exchange Act is accumulated and communicated to management including our Chief Executive Officer and Chief Financial Officer, to allow timely decisions regarding required disclosure.
We carried out an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) as of the end of the period covered by this Quarterly Report. This evaluation was carried out under the supervision and with the participation of our Chief Executive Officer and our Chief Financial Officer. Based upon that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that, as of September 30, 2025, our disclosure controls and procedures were effective.
Changes in internal control over financial reporting
No change in our internal control over financial reporting occurred during our last fiscal quarter that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
Limitations on the effectiveness of control and procedures and internal controls
Our management does not expect that our disclosure controls and procedures or our internal control over financial reporting will necessarily prevent all fraud and material error. Our disclosure controls and procedures are designed to provide reasonable assurance of achieving our objectives, and our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures are effective at that reasonable assurance level. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within the Company have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdowns can occur because of simple 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.
ITEM 5. OTHER INFORMATION
None
26
PART II – OTHE
R INFORMATION
ITEM 1. LEGAL
PROCEEDINGS
We have been named in and have brought lawsuits in the normal course of business. For further information on legal proceedings, see Note 6 Commitments and Contingencies in the accompanying notes to the condensed consolidated financial statements.
ITEM 1A. RISK FACTORS
In addition to the other information set forth in this Quarterly Report on Form 10-Q, you should carefully consider the risks and uncertainties set forth in our other filings with the SEC, including in our most recent Annual Report on Form 10-K.
ITEM 2. UNREGISTERED SALES OF EQUI
TY SECURITIES AND USE OF PROCEEDS
Inline XBRL Instance Document – the instance does not appear in the Interactive Data File because XBRL tags are embedded within the Inline XBRL document
Cover Page Interactive Data File (embedded within the Inline XBRL document
29
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
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