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. Total rent expense was $81,746 and $76,986 for the six months ended June 30, 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 March 2003, Galaxy Gaming of California, LLC (“GGCA”), an independent entity managed by GGLLC, submitted an application to the California Gambling Control Commission (the “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 and was required to be included in the application process. On July 11, 2013 we received notice that the California Gambling Control Commission (“Commission”) denied the applications of our CEO and GGCA for a finding of suitability (the “Finding”). The Commission then denied a request for stay or any further reconsideration of the matter on July 25, 2013.

As a result of this decision, the Department of Justice of the State of California, on August 1, 2013, issued a letter returning our application for a Finding of Suitability, declining to process our corporate application in California as well.

On August 9, 2013, GGCA and Mr. Saucier filed and served a petition for writ of mandate with the Sacramento County Superior Court, asking the Court to issue a writ directing the Commission to find GGCA and Mr. Saucier suitable. There can be no assurances that the judicial review will be successful or that our CEO will be found suitable. The Finding against Mr. Saucier, as demonstrated by the return of our application by the Department of Justice of the State of California, has and will subject us to certain increased, material, known and unknown risks and uncertainties of materially adverse effects on our business and/or prospects, including possible restrictions against us from doing business in California (and possibly other states). Please see the form 8-K, filed by us on July 30, 2013 for further details regarding these risks.

Bank of America action. In October 2012, we were served with a complaint by Bank of America (“BofA”) regarding a promissory note payable between GGLLC and BofA. See Note10 and Note 13. The complaint, filed in the Eighth Judicial District Court in the State of Nevada, alleges we received valuable assets from GGLLC in 2007 for little or no consideration. In the complaint, BofA seeks to collect in full the outstanding principal and any accrued interest owed under the promissory note.