Note 1: History and Nature of Operations
Unless the context indicates otherwise, references to Galaxy Gaming, Inc., we, us, our, or the Company, is defined as Galaxy Gaming, Inc., a Nevada corporation.
Galaxy Gaming, LLC (GGLLC), an entity controlled by our CEO was organized as a Nevada limited liability company on September 27, 2000. A predecessor company, also named Galaxy Gaming, Inc. (GGINC) was incorporated in the State of Nevada on December 29, 2006. On January 1, 2007 GGLLC, entered into an agreement with GGINC whereby GGLLC sold selected assets, such as inventory and fixed assets, to GGINC. Additionally GGINC and GGLLC executed an equity exchange agreement effective January 1, 2007 whereby GGLLC transferred all of its membership interests in various operating subsidiaries, including the existing client base, to GGINC in exchange for stock of GGINC. Similarly, GGINC entered into an equity exchange agreement effective January 1, 2007 with another related party whereby that entity transferred all of its membership interests in various operating subsidiaries, including its existing client base, to GGINC in exchange for stock of GGINC. On December 31, 2007, GGLLC entered into an asset purchase agreement with GGINC. Pursuant to this agreement GGINC acquired GGLLCs remaining intellectual property including patents, patent applications, trademarks, trademark applications, copyrights, know-how and trade secrets related to the casino gaming services including but not limited to games, side bets, inventions and ideas. In connection with the transaction, GGINC agreed to assume a note receivable (see Note 3) and a payment obligation (see Note 7) from GGLLC.
On February 10, 2009, Secured Diversified Investment, Ltd. (SDI) acquired all of the issued and outstanding stock of GGINC pursuant to the terms of a share exchange agreement. Following the closing of the share exchange agreement, SDI discontinued all prior operations and focused exclusively on the business and operations of its wholly-owned subsidiary, GGINC.
In August of 2009, upon filing articles of merger in Nevada GGINC was merged into SDI. At the effective date the separate legal existence of GGINC ceased and the surviving corporation in the merger (SDI) continued its existence under the laws of the State of Nevada under the name Galaxy Gaming, Inc.
We design, manufacture and market casino table games and electronic jackpot bonus system platforms played in land-based and cruise ship gaming establishments and beginning in 2011, internet gaming. The game concepts and the intellectual property associated with these games are typically protected by patents, trademarks and/or copyrights. We market our products and licensed intellectual property via our own sales force to casinos throughout North America, the Caribbean, the British Isles, Australia and to cruise ships worldwide. Revenues come primarily from recurring royalties received from our clients for the licensing of game content and other fees paid based upon the performance of our electronic platforms. Additionally, the Company receives revenue as reimbursement from the sale of its associated products.
On February 21, 2011, we entered into a definitive agreement with TableMAX Corporation (TMAX) a provider of electronic table games and platforms headquartered in Las Vegas, Nevada. Under the terms of the agreement, we obtained exclusive worldwide rights (excluding one international territory and two U.S. states) to the TMAX electronic gaming platform and certain game titles, (see Note 17).
On October 4, 2011 we executed an asset purchase agreement (Prime Agreement) with Prime Table Games LLC and Prime Table Games UK (collectively Prime Table Games). Under the terms of the Prime Agreement we acquired over 20 different table games, including 21+3, Two-way Holdem and Three Card Poker which are currently played on approximately 500 tables in 200 casinos in the United States, the United Kingdom and in the Caribbean. (Three Card Poker rights are limited to the British Isles.) The intellectual property portfolio includes 36 patents, 11 patents pending, 96 worldwide trademark and design registrations and 47 domain name registrations, (see Note 19).
On November 1, 2011, we entered into an asset purchase agreement (the Lakes Agreement) with Lakes Entertainment, Inc., a Minnesota corporation (Lakes). Included in the acquisition are nine patents, various trademarks and four casino table games known as Bonus Craps, Bonus Roulette, Rainbow Poker and Four the Money. In addition, we will receive assignment of licensing agreements for approximately 40 placements in 12 casinos. Bonus Craps is played in casinos in Illinois, Michigan, Mississippi and Nevada including on the Las Vegas Strip, (see Note 19).