GALAXY GAMING, INC.

BASIS OF PRESENTATION FOR THE UNAUDITED PRO FORMA

COMBINED CONDENSED FINANCIAL STATEMENTS

 

BASIS OF PRESENTATION

 

The accompanying unaudited pro forma combined condensed financial statements illustrate the pro forma effect of the PTG Acquisition and all financing related to the PTG Acquisition on the registrant Galaxy Gaming, Inc.’s financial position and results of operations.

 

The unaudited pro forma combined condensed balance sheet as of September 30, 2011 is based on the historical balance sheets of Galaxy Gaming, Inc., Prime Table Games, LLC and Prime Table Games UK as of that date. The unaudited pro forma combined condensed balance sheet assumes that the PTG Acquisition and all financing related to the PTG Acquisition took place on September 30, 2011.

 

The unaudited pro forma combined condensed statement of operations for the year ended December 31, 2010 is based on the historical statements of Galaxy Gaming, Inc., Prime Table Games, LLC and Prime Table Games UK for the year then ended. The unaudited pro forma combined condensed statement of operations assumes the PTG Acquisition and all financing related to the PTG Acquisition took place on January 1, 2010.

 

The unaudited pro forma combined condensed statement of operations for the nine months ended September 30, 2011 is based on the historical statements of operations of Galaxy Gaming, Inc., Prime Table Games, LLC and Prime Table Games UK for the nine months then ended. The unaudited pro forma combined condensed statement of operations assumes the PTG Acquisition and all financing related to the PTG Acquisition took place on January 1, 2011.

 

The adjustments included in the “Assets Not Acquired and the Liabilities Not Assumed” column on the Unaudited Pro Forma Combined Condensed Balance Sheet represent the Prime Table Gaming assets and liabilities that were not acquired in connection with the PTG Acquisition.

 

The unaudited pro forma combined condensed financial statements may not be indicative of the actual results of the PTG Acquisition and there can be no assurance that the foregoing results will be obtained. In particular, the unaudited pro forma combined condensed financial statements are based on management’s estimated of the fair value of assets acquired; however, the actual amounts may differ. The unaudited pro forma combined condensed statements of operations may not be indicative of the actual results which would have been obtained if the transactions had occurred on January 1, 2010 or January 1, 2011.

 

The accompanying unaudited pro forma combined condensed financial statements should be read in conjunction with the historical financial statements of Galaxy Gaming, Inc., Prime Table Gaming, LLC and Prime Table Gaming UK.

 

The unaudited pro forma combined condensed financial statements have been prepared using the acquisition method of accounting for a business combination. The historical financial information has been adjusted to give effect to matters that are (1) directly attributable to the acquisition, (2) factually supportable, and (3) with respect to the statement of operations, are also expected to not have a continuing impact on the operating results of the combined company.

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GALAXY GAMING, INC.

UNAUDITED PRO FORMA COMBINED CONDENSED BALANCE SHEET

AS OF SEPTEMBER 30, 2011

 

ASSETS  Galaxy Gaming, Inc.  Prime Table Games  Assets Not Acquired and Liabilities Not Assumed     Galaxy Gaming
Pro Forma Adjustments		     Pro Forma Combined Company
Current Assets                                   
     Cash  $120,900   $1,304,186   $(1,304,186)   A   $—          $120,900 
     Accounts receivable – trade, net   321,772    643,582    (643,582)   A    —           321,772 
     Miscellaneous receivables   60,396    —      —           —           60,396 
     Prepaid expenses   37,581    —      —           —           37,581 
     Inventory   177,815    —      —           —           177,815 
Total Current Assets   718,464    1,947,768    (1,947,768)        —           718,464 
                                    
Property and equipment, net   50,712    137    (137)   A    —           50,712 
                                    
Other Assets                                   
     Intangible assets, net   442,125    649,801    —           19,409,199    C      
                        1,091,000    C    21,592,125 
     Note receivable – related party   385,823    —      —           —           385,823 
     Products leased and held for lease, net   38,769    —      —           —           38,769 
     Other assets   15,396    —      —           —           15,396 
Total Other Assets   882,113    649,801    —           20,500,199         22,032,113 
                                    
TOTAL ASSETS  $1,651,289   $2,597,706   $(1,947,905)       $20,500,199        $22,801,289 
                                    
LIABILITIES AND STOCKHOLDERS’ EQUITY                                   
Current Liabilities                                   
     Accounts payable  $181,269   $115,119    (115,119)   A   $—          $181,269 
     Accrued expenses and taxes   297,930    161,555    (161,555)   A    —           297,930 
     Deferred revenue   217,681    —      —           —           217,681 
Total Current Liabilities   696,880    276,674    (276,674)        —           696,880 
                                    
Long-term Liabilities                                   
     Notes payable – related party   2,813    —      —                     2,813 
     Note payable, net   1,154,658    —      —           22,200,000    C      
                        (1,530,000)   C    21,824,658 
                                    
TOTAL LIABILITIES   1,854,351    276,674    (276,674)        20,670,000         22,524,351 
                                    
TOTAL STOCKHOLDERS’ EQUITY (DEFICIT), NET   (203,062)   2,321,032    (1,671,231)   B    (169,801)   C    276,938 
                                    
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT)  $1,651,289   $2,597,706   $(1,947,905)       $20,500,199        $22,801,289 

 

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GALAXY GAMING, INC.

UNAUDITED PRO FORMA COMBINED CONDENSED STATEMENT OF OPERATIONS

FOR THE YEAR ENDED DECEMBER 31, 2010

 

   Galaxy Gaming, Inc.  Prime Table Games  Prime Table Games
Pro Forma Adjustments		     Galaxy Gaming, Inc.
Pro Forma Adjustments		     Pro Forma Combined Company
Revenue                                   
  Product leases and royalties  $2,950,157   $2,630,495   $(54,043)   D   $—          $5,526,609 
  Product sales and services   104,699    —      —           —           104,699 
     Total Revenue   3,054,856    2,630,495    (54,043)        —           5,631,308 
                                    
Costs and Expenses                                   
Costs of ancillary products and     assembled components   135,738    —      —           —           135,738 
  Selling, general and administrative   2,642,319    862,245    (461,662)   E    —           3,042,902 
  Research and development   285,310    —      —           —           285,310 
  Depreciation   12,833    12,184    (12,184)   F    —           12,833 
  Amortization   26,258    16,677    (16,677)   F    1,540,033    I    1,566,291 
     Total Costs and Expenses   3,102,458    891,106    (490,523)        1,540,033         5,043,074 
Income (Loss) From Operations   (47,602)   1,739,389    436,480         (1,540,033)        588,234 
                                    
Other Income (Expense)                                   
   Interest income   26,150    —      —           —           26,150 
   Interest expense   (114,409)   —      —           (290,938)   J    (405,347)
   Other income   —      6,995,359    (6,995,359)   G    —           —   
       Total Other Income (Expense)   (88,259)   6,995,359    (6,995,359)        (290,938)        (379,197)
                                    
Income (Loss) before Provision for Income Taxes   (135,861)   8,734,748    (6,558,879)        (1,830,971)        209,037 
Provision for Income Taxes   —      —      —           —           —   
                                    
Net Income (Loss)  $(135,861)  $8,734,748   $(6,558,879)       $(1,830,971)       $209,037 
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GALAXY GAMING, INC.

UNAUDITED PRO FORMA COMBINED CONDENSED STATEMENT OF OPERATIONS

FOR THE NINE MONTHS ENDED SEPTEMBER, 2011

 

   Galaxy Gaming, Inc.  Prime Table Games  Prime Table Games
Pro Forma Adjustments		     Galaxy Gaming, Inc. Pro Forma Adjustments     Pro Forma Combined Company
Revenue                                   
  Product leases and royalties  $2,226,205   $2,036,488   $(54,521)   D   $—          $4,208,172 
  Product sales and services   37,874    —      —           —           37,874 
     Total Revenue   2,264,079    2,036,488    (54,521)        —           4,246,046 
                                    
Costs and Expenses                                   
Costs of ancillary products and assembled components   61,628    —      —           —           61,628 
  Selling, general and administrative   2,351,569    382,150    (72,126)   H    (18,000)   H    2,643,593 
  Research and development   225,060    —      —           —           225,060 
  Depreciation   13,757    6,007    (6,007)   F    —           13,757 
  Amortization   24,496    16,235    (16,235)   F    1,155,025    I    1,179,521 
     Total Costs and Expenses   2,676,510    404,392    (94,368)        1,137,025         4,123,559 
Income (Loss) From Operations   (412,431)   1,632,096    39,847         (1,137,025)        122,487 
                                    
Other Income (Expense)                                   
   Interest income   18,696    —      —           —           18,696 
   Interest expense   (69,515)   —      —           (353,148)   J    (422,663)
   Other income   —      —      —           —           —   
       Total Other Income (Expense)   (50,819)   —      —           (353,148)        (403,967)
                                    
Income (Loss) before Provision for Income Taxes   (463,250)   1,632,096    39,847         (1,490,173)        (281,480)
Provision for Income Taxes   —      —      —           —           —   
                                    
Net Income (Loss)  $(463,250)  $1,632,096   $39,847        $(1,490,173)       $(281,480)

 

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GALAXY GAMING, INC.

NOTES TO UNAUDITED PRO FORMA COMBINED CONSENSED FINANCIAL STATEMENTS

 

  1. This adjustment represents certain assets and liabilities not acquired by Galaxy Gaming, Inc. as a part of the Purchase Agreement.

  1. This amount represents the total impact of item A. The offset for these items is accumulated.

  1. The following table presents the historical value at September 30, 2011 and the fair value of assets acquired and liabilities assumed at the acquisition date based on a final appraisal and the resulting pro forma adjustments:

   Fair Value Based on Final Appraisal  Historical Value as of September 30, 2011  Pro Forma Adjustments
Consideration:               
     Common stock  $480,000           
     Notes payable   22,200,000           
        Fair value of total consideration transferred   22,680,000           
                
Recognized amounts of identifiable assets assumed as of October 4, 2011:               
     Trademarks  $2,740,000   $—     $2,740,000 
Patents
Non-compete agreement		   

13,259,000

660,000

    649,801-    

12,609,199

660,000

 
     Customer relationships   3,400,000    —      3,400,000 
        Total Assets   20,059,000    649,801    19,409,199 
                
     Debt discount   1,530,000    —      1,530,000 
        Total Liabilities   1,530,000    —      1,530,000 
                
        Total identifiable net assets  $21,589,000   $649,801   $20,939,199 
                
        Goodwill  $1,091,000           

 

  1. Amounts represent activity based fees for internet content not acquired.

  1. Amounts represent legal expenses related to the Shuffle Master, Inc. litigation.

  1. This adjustment is to remove depreciation and amortization expenses of assets not required.

  1. This amount represents the removal of the Shuffle Master, Inc. settlement income.

  1. Adjustment represents legal expenses incurred related to the execution of the Purchase Agreement between Prime Table Games and Galaxy Gaming, Inc.

  1. Amount represents amortization expense related to intangible assets acquired

  1. This amount represents interest expense, net of debt discount amortization, on notes payable to PTG.
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Silberstein Ungar, PLLC CPAs and Business Advisors

Phone (248) 203-0080

Fax (248) 281-0940

30600 Telegraph Road, Suite 2175

Bingham Farms, MI 48025-4586

www.sucpas.com

 

August 2, 2012

 

CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

 

Board of Directors

Galaxy Gaming, Inc.

Las Vegas, Nevada

 

To Whom It May Concern:

 

Silberstein Ungar, PLLC hereby consents to the use in the Form 8-K, Current Report Pursuant to Section 13 or 15(d) of the Securities Act of 1934, filed by Galaxy Gaming, Inc. of our report dated August 2, 2012, relating to the combined financial statements of Prime Table Games, LLC and Prime Table Games UK, as of and for the years ending December 31, 2010 and 2009.

 

Sincerely,

 

/s/ Silberstein Ungar, PLLC

 

Silberstein Ungar, PLLC

 

Bingham Farms, Michigan

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