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 $109,398 and $106,460 for the nine months ended September 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 2014. The amounts shown in the accompanying table reflect our estimates of lease obligations for the twelve months ending 2014 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 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 (“California Commission”) for a determination of suitability to conduct 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 became aware that the California Commission denied the applications of our CEO and GGCA for a finding of suitability. The California 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, effectively rejecting our corporate application in California as well.

On August 9, 2013, GGCA and our CEO filed a motion for writ of mandate with the Sacramento County Superior Court, asking the Court for a judicial review of the California Commission’s ruling. A hearing on the motion has been scheduled for June 13, 2014. There can be no assurances that the judicial review will be successful or that our CEO will be found suitable. In September 2013, we were notified that until this matter is resolved, we are not permitted to conduct business in California. The California, matter 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. Please see the form 8-K, filed by us on July 30, 2013 for further details regarding these risks.

Included in total revenues for the nine months ending September 30, 2013 was approximately $167,000 sourced from California clients.

Washington administrative notice. In March 2012, we received a notice of administrative charges from the Washington State Gambling Commission (“Washington Commission”) as a result of a routine audit conducted by them in 2010. The notice alleged untimely notifications, predominantly by predecessor companies.

In September 2013, the Washington Commission withdrew all charges and cleared us of any and all alleged wrongdoing. We are obligated to reimburse the costs of their routine audit, which amounted to $129,000. Of that amount, $20,000 was previously paid and expensed in 2010 and the remaining $109,000 will be paid quarterly over the next twelve months. The amount of $109,000 has been accrued and recognized for the three month period ending September 30, 2013 and is included in selling, general & administrative expenses on the statement of operations.