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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended
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:
(Exact name of small business issuer as specified in its charter)
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(State or other jurisdiction of incorporation or organization) |
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(IRS Employer Identification No.) |
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(Address of principal executive offices) |
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(Issuer’s telephone number) |
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Securities registered pursuant to Section 12(b) of the Act: None
Title of each class |
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Trading symbol |
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Name of exchange on which registered |
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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.
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).
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 |
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Accelerated filer |
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Smaller reporting company |
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Emerging growth company |
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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:
GALAXY GAMING, INC.
QUARTERLY REPORT ON FORM 10-Q FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2024
TABLE OF CONTENTS
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PART I
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Item 1: |
3 |
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Item 2: |
Management’s Discussion and Analysis of Financial Condition and Results of Operations |
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Item 3: |
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Item 4: |
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Item 5: |
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PART II
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Item 1: |
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Item 1A: |
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Item 2: |
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Item 6: |
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2
PART I
ITEM 1. FINANCIAL STATEMENTS
Our financial statements included in this Form 10-Q are as follows:
Condensed Consolidated Balance Sheets as of September 30, 2024 (unaudited) and December 31, 2023 |
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Notes to Condensed Consolidated Financial Statements (unaudited) |
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3
GALAXY GAMING, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
ASSETS |
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September 30, |
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December 31, |
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Current assets: |
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Cash and cash equivalents |
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$ |
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$ |
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Accounts receivable, net of allowance of $ |
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Income tax receivable |
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Prepaid expenses |
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Total current assets |
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Property and equipment, net |
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Operating lease right-of-use assets |
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Assets deployed at client locations, net |
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Goodwill |
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Other intangible assets, net |
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Other assets |
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Total assets |
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$ |
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$ |
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LIABILITIES AND STOCKHOLDERS’ DEFICIT |
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Current liabilities: |
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Accounts payable |
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$ |
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$ |
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Accrued expenses |
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Revenue contract liability |
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Current portion of operating lease liabilities |
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Current portion of long-term debt |
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Total current liabilities |
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Long-term operating lease liabilities |
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Long-term debt and liabilities, net |
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Deferred tax liabilities, net |
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Total liabilities |
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Stockholders’ deficit |
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Preferred stock, |
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Common stock, |
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Additional paid-in capital |
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Accumulated deficit |
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Accumulated other comprehensive loss |
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Total stockholders’ deficit |
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Total liabilities and stockholders’ deficit |
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$ |
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$ |
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The accompanying notes are an integral part of the condensed consolidated financial statements.
4
GALAXY GAMING, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS
(Unaudited)
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Three Months Ended |
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Nine Months Ended |
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September 30, 2024 |
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September 30, 2023 |
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September 30, 2024 |
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September 30, 2023 |
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Revenue: |
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Licensing fees |
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$ |
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$ |
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$ |
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$ |
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Total revenue |
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Costs and expenses: |
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Cost of ancillary products and assembled components |
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Selling, general and administrative |
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Research and development |
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Depreciation and amortization |
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Stock-based compensation |
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Total costs and expenses |
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(Loss) income from operations |
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Other income (expense): |
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Interest income |
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Interest expense |
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( |
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( |
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Foreign currency exchange gain (loss) |
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( |
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Total other expense, net |
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Loss before provision for income taxes |
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( |
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( |
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( |
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( |
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Provision for income taxes |
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( |
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( |
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( |
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( |
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Net loss |
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( |
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( |
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( |
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( |
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Foreign currency translation adjustment |
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Comprehensive loss |
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$ |
( |
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$ |
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$ |
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$ |
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Net loss per share: |
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Basic |
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$ |
( |
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$ |
( |
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$ |
( |
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$ |
( |
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Diluted |
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$ |
( |
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$ |
( |
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$ |
( |
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$ |
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Weighted-average shares outstanding: |
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Basic |
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Diluted |
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The accompanying notes are an integral part of the condensed consolidated financial statements.
5
GALAXY GAMING, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ DEFICIT
(Unaudited)
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Common Stock |
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Additional Paid-in |
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Accumulated |
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Accumulated Other Comprehensive |
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Total Stockholders' |
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Shares |
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Amount |
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Capital |
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Deficit |
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Loss |
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Deficit |
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Beginning balance, December 31, 2023 |
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$ |
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$ |
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$ |
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$ |
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$ |
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Net income |
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— |
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— |
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— |
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— |
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Foreign currency translation loss |
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— |
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— |
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— |
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— |
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( |
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Stock options exercised |
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— |
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— |
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Stock-based compensation |
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— |
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— |
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Balance, March 31, 2024 |
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( |
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( |
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( |
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Net income |
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— |
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— |
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— |
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— |
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Foreign currency translation loss |
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— |
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— |
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— |
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— |
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( |
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( |
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Stock-based compensation |
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— |
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— |
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Balance, June 30, 2024 |
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$ |
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$ |
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$ |
( |
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$ |
( |
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$ |
( |
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Net loss |
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— |
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— |
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— |
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( |
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— |
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( |
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Foreign currency translation gain |
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— |
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— |
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— |
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— |
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Stock options exercised |
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— |
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— |
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Stock-based compensation |
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— |
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— |
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Balance, September 30, 2024 |
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$ |
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$ |
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$ |
( |
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$ |
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$ |
( |
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Common Stock |
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Additional Paid-in |
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Accumulated |
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Accumulated Other Comprehensive |
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Total Stockholders' |
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Shares |
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Amount |
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Capital |
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Deficit |
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Loss |
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Deficit |
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Beginning balance, December 31, 2022 |
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$ |
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$ |
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$ |
( |
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$ |
( |
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$ |
( |
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Net income |
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— |
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— |
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— |
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— |
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Foreign currency translation gain |
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— |
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— |
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— |
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— |
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Stock-based compensation |
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— |
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— |
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Balance, March 31, 2023 |
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$ |
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$ |
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$ |
( |
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$ |
( |
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$ |
( |
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Net income |
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— |
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— |
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— |
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— |
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Foreign currency translation loss |
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— |
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— |
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— |
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— |
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( |
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( |
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Stock-based compensation |
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— |
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— |
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Balance, June 30, 2023 |
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$ |
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$ |
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$ |
( |
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$ |
( |
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$ |
( |
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Net loss |
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— |
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— |
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— |
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( |
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— |
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( |
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Foreign currency translation loss |
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— |
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— |
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— |
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— |
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Stock options exercised |
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— |
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— |
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Stock-based compensation |
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— |
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— |
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Balance, September 30, 2023 |
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$ |
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$ |
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$ |
( |
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$ |
( |
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$ |
( |
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The accompanying notes are an integral part of the condensed consolidated financial statements.
6
GALAXY GAMING, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
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Nine Months Ended |
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September 30, 2024 |
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September 30, 2023 |
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Cash flows from operating activities: |
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Net loss |
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$ |
( |
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$ |
( |
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Adjustments to reconcile net loss to net cash provided by operating activities: |
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Depreciation and amortization |
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Amortization of right-of-use assets |
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Amortization of debt issuance costs and debt discount |
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Bad debt (recovery) expense |
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( |
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Loss on disposal of property & equipment |
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— |
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Deferred income tax |
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( |
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Stock-based compensation |
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Changes in operating assets and liabilities: |
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Accounts receivable |
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( |
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( |
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Income tax receivable |
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( |
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Prepaid expenses and other current assets |
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Other assets |
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( |
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Accounts payable |
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( |
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Accrued expenses |
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( |
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Revenue contract liability |
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( |
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Operating lease liabilities |
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( |
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( |
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Net cash provided by operating activities |
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Cash flows from investing activities: |
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Investment in internally developed software |
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( |
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( |
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Acquisition of property and equipment |
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— |
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( |
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Acquisition of assets deployed at client locations |
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( |
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( |
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Transfer of title of assets deployed at client locations to perpetual license customer |
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Net cash used in investing activities |
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( |
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( |
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Cash flows from financing activities: |
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Payments of debt issuance costs |
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— |
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( |
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Proceeds from stock option exercises |
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Principal payments on long-term debt |
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( |
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( |
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Net cash used in financing activities |
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( |
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( |
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Effect of exchange rate changes on cash |
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Net increase (decrease) in cash and cash equivalents |
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( |
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Cash and cash equivalents – beginning of period |
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Cash and cash equivalents – end of period |
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$ |
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$ |
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Supplemental cash flow information: |
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Cash paid for interest |
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$ |
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$ |
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Cash paid for income taxes |
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$ |
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$ |
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Supplemental schedule of non-cash activities: |
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Insurance acquired under note payable |
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$ |
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$ |
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The accompanying notes are an integral part of the condensed consolidated financial statements.
7
GALAXY GAMING, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE 1. NATURE OF OPERATIONS
Unless the context indicates otherwise, references to “Galaxy Gaming, Inc.,” “we,” “us,” “our,” or the “Company,” refer to Galaxy Gaming, Inc., a Nevada corporation (“Galaxy Gaming”).
We are an established global gaming company specializing in the design, development, acquisition, assembly, marketing and licensing of proprietary casino table games 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 casinos worldwide, to land-based casino gaming companies in North America, the Caribbean, Central America, the United Kingdom, Europe and Africa, and to cruise ship companies. We license our products and services for use solely 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 legalized.
On
Upon the closing of the Merger, each share of common stock, par value $
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. The Merger is expected to be completed in mid-2025, subject to satisfaction or waiver of the closing conditions.
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 consolidated financial statements and the related notes as of and for the year ended December 31, 2023 included in our 2023 Form 10-K ("2023 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.
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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.
Reclassifications. Certain accounts and financial statement captions in the prior period have been reclassified to conform to the current period financial statement presentations and had no effect on net income.
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 $
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, 2024, there was
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.
Patents |
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Customer relationships |
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Trademarks |
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Intellectual property |
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Non-compete agreements |
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Software |
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.
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. 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:
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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. See Note 5.
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. 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 loss in the Condensed Consolidated Statements of Changes in Stockholders’ Deficit.
Basic and diluted loss per share. Basic earnings 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. We define operating segments as components of our enterprise for which separate financial information is reviewed regularly by the chief operating decision-makers to evaluate performance and to make operating decisions. We currently have
Other significant accounting policies. Our significant accounting policies are described in our 2023 10-K. There have been no material changes to those policies.
Recently issued accounting pronouncements. In November 2023, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update 2023-07, “Improvements to Reportable Segment Disclosures,” (“ASU 2023-07”), which is effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024, and requires retrospective application to all prior periods presented in the financial statements. ASU 2023-07 provides for improved financial reporting by requiring disclosure of incremental segment information to enable investors to develop more decision-useful financial analyses. 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 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.
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.
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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 our 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 casino clients. 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 casino clients. Royalties are recorded net in revenue.
Disaggregation of revenue
The following table disaggregates our revenue by geographic location for the three and nine months ended September 30, 2024, and 2023. All of the royalty expense that is charged to a contra-revenue in our online gaming operating segment has been allocated to the Europe, Middle East and Africa region in both periods presented.
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Three Months |
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Nine Months |
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2024 |
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2023 |
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2024 |
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2023 |
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The Americas |
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$ |
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$ |
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$ |
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$ |
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Europe, Middle East and Africa |
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Total revenue |
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$ |
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$ |
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$ |
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$ |
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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 €
For years 5 through 10 of the contract, the amount to be billed is based on the actual usage from the Licensee. Invoices will be billed on a monthly basis. Revenue for years 5 through 10 will be recognized when actual usage is incurred.
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 $
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 sold to clients. 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.
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NOTE 4. OTHER INTANGIBLE ASSETS
Other intangible assets, net.
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September 30, |
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December 31, |
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2024 |
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2023 |
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Patents |
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$ |
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$ |
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Customer relationships |
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Trademarks |
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Intellectual property |
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Non-compete agreements |
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Software |
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Other intangible assets, gross |
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Less: accumulated amortization |
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( |
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( |
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Other intangible assets, net |
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$ |
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$ |
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For the three months ended September 30, 2024 and 2023, amortization expense related to other intangible assets was $
NOTE 5. LEASES
We have operating leases for our corporate office,
As of September 30, 2024, no renewal option periods were included in any estimated minimum lease term as the options were not deemed reasonably certain to be exercised. Our leases have remaining lease terms ranging from
Supplemental balance sheet information related to leases is as follows:
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September 30, 2024 |
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December 31, 2023 |
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Operating leases: |
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Operating lease right-of-use lease assets |
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$ |
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$ |
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Operating lease current liabilities |
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$ |
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$ |
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Operating lease long-term liabilities |
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Total operating lease liabilities |
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$ |
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$ |
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Weighted-average remaining lease term in years: |
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Operating leases |
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Weighted-average discount rate: |
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Operating leases |
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% |
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The components of lease expense are as follows:
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Three Months Ended September 30, |
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Nine Months Ended September 30, |
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2024 |
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2023 |
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2024 |
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2023 |
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Operating lease cost (1) |
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$ |
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$ |
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$ |
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$ |
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(1) Classified as selling, general and administrative expense |
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Supplemental cash flow information related to leases is as follows:
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Nine Months Ended September 30, |
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2024 |
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2023 |
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Cash paid for amounts included in the measurement of lease liabilities: |
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Principal and interest payments related to operating leases |
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$ |
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$ |
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As of September 30, 2024, future maturities of our operating lease liabilities are as follows:
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Amount |
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Years ended December 31, |
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2024 |
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$ |
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2025 |
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2026 |
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2027 |
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Total minimum lease payments |
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Less: imputed interest |
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( |
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Total operating lease liability |
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Less: current portion |
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( |
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Long-term portion |
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$ |
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NOTE 6. LONG-TERM DEBT AND LIABILITIES
Long-term debt and liabilities consisted of the following at:
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September 30, |
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December 31, |
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2024 |
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2023 |
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Fortress credit agreement |
$ |
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$ |
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Insurance notes payable |
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Long-term debt and liabilities, gross |
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Less: Unamortized debt issuance costs |
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( |
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( |
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Long-term debt and liabilities, net of debt issuance costs |
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Less: Current portion of long-term debt |
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( |
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( |
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Long-term debt and liabilities, net |
$ |
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$ |
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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 $
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In connection with entering into the Fortress Credit Agreement, the Company also issued warrants to purchase a total of up to
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)
As of September 30, 2024, future maturities of our long-term obligations are as follows:
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Total |
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Years ended December 31, |
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2024 |
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$ |
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2025 |
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2026 |
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Long-term liabilities, gross |
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$ |
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NOTE 7. COMMITMENTS AND CONTINGENCIES
Concentration of risk. We are exposed to risks associated with clients who represent a significant portion of total revenues.
For the nine months ended September 30, 2024 and 2023, respectively, we had the following client concentrations:
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Location |
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Nine Months Ended September 30, 2024 |
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Nine Months Ended September 30, 2023 |
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Accounts |
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Accounts |
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Client A |
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Europe |
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% |
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% |
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$ |
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$ |
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Client B |
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North America |
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% |
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% |
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$ |
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$ |
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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. See "Litigation Related to the Merger" in Item 1 of Part II of this Quarterly Report.
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,
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 clients. 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 8. INCOME TAXES
Our forecasted annual effective tax rate (“AETR”) at September 30, 2024 was -
For the nine months ended September 30, 2024 and 2023, our effective tax rate (“ETR”) was -
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NOTE 9. SUBSEQUENT EVENTS
None
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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, 2024 and 2023. 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 2023 Form 10-K.
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SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
Some of the information contained in this Quarterly Report includes forward-looking statements In some cases, you can identify forward-looking statements by terms 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 (as defined herein) on the proposed terms or on the anticipated timeline, or at all, including risks and uncertainties related to securing the necessary stockholder approval, 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 (as defined herein); 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 announcem