Operating lease obligations. We lease our offices from a related party that is connected with our CEO. We entered into a lease effective September 1, 2010 for a period of two years with a monthly rental payment of $10,359. Our lease expired at the end of August 2012 and is currently on a term of month-to-month. In addition to our offices, we rent various temporary storage facilities in the range of $150 to $460 a month. All temporary facilities have rental agreements with a monthly term. Rent expense was $40,456 and $40,034 for the three months ended March 31, 2013 and 2012, respectively.

Based upon our current growth projections, we anticipate either renewing our existing lease agreement and/or expanding our operations with a lease of a second office, or in the alternative, we may elect to not renew our existing lease and seek an entirely new facility sometime in 2013. The amounts shown in the accompanying table reflect our estimates of lease obligations for the twelve months ending 2013 through 2018 and are based upon our current estimates of our projected needs and our forecast of the commercial real estate market in Las Vegas. These estimates are summarized as follows:

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, that are complex in nature and have outcomes that are difficult to predict. In accordance with topic ASC Topic 450, we record accruals for such contingencies to the extent that we conclude that it is probable that a liability will be incurred and the amount of the related loss can be reasonably estimated. Our assessment of each matter may change based on future unexpected events. 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. We assume no obligation to update the status of pending litigation, except as may be required by applicable law, statute or regulation. For a complete description of the facts and circumstances surrounding material litigation to which we are a party, see Note 11 in Item 8. “Financial Statements and Supplementary Data” included in our annual report on Form 10-K for the year ended December 31, 2012. There are no material updates to matters previously reported on Form 10-K for the year ended December 31, 2012, except:

California administrative licensing action – In 2003, Galaxy Gaming of California, LLC (“GGCA"), submitted an application to the California Gambling Control Commission (“Commission”) for a determination of suitability for licensure to do business with tribal gaming operations in California. At the time, our CEO was a member of GGCA. We acquired GGCA in 2008, through it, operated in 2008 and 2009, transferred all of its operations to us in 2009 and dissolved it in 2011. The Division of Gambling Control of the California Department of Justice (“Division”) processed GGCA's application and in 2005 made a recommendation to the Commission alleging GGCA and our CEO were unsuitable. In 2006, the Commission assigned the matter to the Office of Administrative Hearings ("OAH") to further adjudicate the process. In April 2013, the OAH released a proposed decision, finding some of the allegations without merit, affirmed others and returned the matter to the Commission upholding the Division's prior recommendation. In February 2009, we independently applied to the Commission for a finding of suitability. Since our CEO was named in the GGCA case, our application with the Commission remains in a pending status. Until such time the Commission acts on our application, we are authorized and continue to conduct business with California tribes, subject to each tribe's gaming agency's requirements. In the event the Commission reaches an adverse decision in the GGCA action, it could potentially prevent us from conducting future business in California and may influence other gaming regulatory agencies thereby negatively affecting our ability to conduct business in those jurisdictions. We believe the remaining allegations against GGCA and our CEO are inaccurate, moot, immaterial and/or do not apply to us. None of the allegations pertain to any operations performed by us within or outside of California. The matter is now, or will soon be, before the Commission, who has the authority to determine our suitability, subject to judicial review.