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On March 29, 2021, the Galaxy Gaming, Inc., a Nevada corporation (the “Company”) entered into an amended and restated credit agreement with Zions Bancorporation, N.A. dba Nevada State Bank (“the A&R Credit Agreement”). The A&R Credit Agreement replaced the original credit agreement entered into by the Company with Zions Bancorporation, N.A. dba Nevada State Bank on April 24, 2018 and last modified on November 16, 2020. The A&R Credit Agreement provides for a Term Loan in the amount of $7,022,300 and a Revolving Loan in the amount of $1,000,000. If not paid earlier, the obligations under the A&R Credit Agreement mature on March 23, 2023. On March 12, 2020, the Company drew down $1,000,000 on the Revolving Loan component of the original credit agreement.

 

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

 

The A&R Credit Agreement contains affirmative and negative financial covenants (as defined in the A&R Credit Agreement) and other restrictions customary for borrowings of this nature. In particular, we are required to maintain (i) a quarterly minimum Fixed Charge Coverage ratio of 1.25x; (ii) a quarterly maximum Total Leverage ratio of 22.50x for the quarter ending March 31, 2021, 10.00x for quarter ending June 30, 2021, 6.50x for the quarter ending September 30, 2021 with semi-annual step-downs of 0.25x commencing December 31, 2021 and quarterly thereafter; (iii) a quarterly maximum Senior Leverage ratio of 5.25x for the quarter ending March 31, 2021, 2.50x for the quarter ending June 30, 2021 and 2.00x quarterly thereafter; (iv) a quarterly Minimum EBITDA covenant of $2.4 million for each of the quarters ending March 31, 2021, June 30, 2021 and September 30, 2021 and $8.0 million quarterly thereafter; (v) a quarterly Minimum Liquidity covenant requiring the Company to have cash and cash equivalents of no less than $1.5 million at quarter ends through and including June 30, 2021 and $2.5 million quarterly thereafter; and (vi) a yearly maximum Maintenance Capital Expenditure covenant of 5% of total revenues for the prior year. The Company was in compliance with its Maintenance Capital Expenditure and Minimum Liquidity covenants as of December 31, 2020. The Company was not in compliance with its Fixed Charge Coverage ratio, Total Leverage ratio, Senior Leverage ratio and Minimum EBITDA covenant as of December 31, 2020. The A&R Credit Agreement has waived these existing defaults as of December 31, 2020.

 

The obligations under the A&R Credit Agreement are secured by substantially all of the assets of the Company and its subsidiaries.

The foregoing descriptions of the A&R Credit Agreement is not complete and is qualified in its entirety by reference to the A&R Credit Agreement included as an exhibit to the Amendment, which is filed as Exhibit 10.1 hereto.

On March 31, 2021, the Company issued a press release announcing its results of operations and financial condition for the year ended 2020. A copy of the press release is attached hereto as Exhibit 99.1.

The information set forth under Item 1.01 of this Current Report on Form 8-K is incorporated by reference into this Item 2.03.

Exhibit Index

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 hereunto duly authorized.