galaxy gaming (glxz) 10 20 11

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This report was prepared from data and information believed reliable but not guaranteed by us as to its accuracy and does not purport to be complete. It is not to be considered as an offer to sell or a

solicitation of an offer to buy the securities of the companies covered by this report. Opinions expressed are subject to change without notice. Catalyst Financial Research LLC, its affiliates and other

associates may have positions and may effect transactions in securities of companies mentioned herein. ©Catalyst Financial Research LLC. Suite 201, 3220 SW 1st Ave. Portland, Or. 97239; (503)-

241-1880.

GALAXY GAMING INC. (OTC BB: GLXZ) RATING: BUY

INDUSTRY: GAMING EQUIPMENT DISCLOSURES: 1, 4AD, 10 RISK: HIGH

CLOSING PRICE

10/19/11

TRAILING P/E

(TTM)

SHARES OUT

(MILS.)

MARKET CAP

(MILS.)

3-5 YEAR REV.

GROWTH

PRICE TARGET

(PROJECTED)

$0.27 N/A 36.1 $9.7 65% $0.50

ANNUAL DATA – DEC YEAR END EARNINGS

2011E 2012E 2013E Q1 Q2 Q3 Q4 ANNUAL

EPS $ 0.00 $ 0.00 $ 0.01 2013E N/A N/A N/A N/A $0.01

P/E N/M N/M 27.0x 2012E $0.00 $0.00 $0.00 $0.00 $0.00

REVENUE (MIL.) $3.8 $6.8 $7.9 2011E $0.00 $0.00 $0.00 $0.00 $ 0.00

P/S 2.6 1.4 1.2

There’s No Zoo Like Las Vegas

Introduction: Returning from G2E

I just returned from the 2011 Global Gaming Expo (G2E) and was down there for three reasons: 1)

Examine for myself some of the new games (and TableMax) that GLXZ has purchased over the last

six months; 2) Review the position of GLXZ‘s games versus the competitive backdrop; and 3) Have a

chance to witness GLXZ‘s team in action in the floor booth; selling as well as view the traffic,

prospect interest, catch-up on the game-play and just catch up on the overall feel for the Company‘s

effectiveness in the marketplace.

First, I have to say that I was impressed across the board with the games, performance and acceptance

of the Galaxy products, team, and presentation. The team was professional—attentive, helpful,

definitively there to help forward Galaxy‘s success in the industry, etc. The booth was a little

understated, but if you know CEO Robert Saucier like I do—who still controls about two-thirds of the

equity and cares very much about expenses—there‘s no need to waste extra money on glitzy or extra

trade show trappings. The second overall comment that should be made is that the ―Prime Table

Game‖ (―PTG‖) acquisition, the purchase of games from Lakes Entertainment as well as the TableMax

arrangement are strategically filling-out GLXZ‘s product offering line-up to more effectively compete

when selling a new casino a complete line-up of table games for their floor. Lastly, the word

circulating on the floor by competitors and casino operators is that Galaxy is really ramping-up their

competitive position (ala ShuffleMaster Nasdaq: SHFL - $10.39 – Not Rated ) to vie for casino entre‘.

If an outsider were to think that a lot of disparate acquisitions had occurred during 2011 adding many

games and not a lot of sense, one need genuinely step-back from the individual transactions and view

the whole line-up to bring into focus the CEO‘s grand plan. Over the past several years—and

particularly in 2011, Saucier has nearly completed assembling the ―required set‖ of starting games

needed to launch a table game operation in a casino. The Lakes Entertainment (Nasdaq: LACO-$2.07)

selling partnership allows GLXZ to not only corner a very ―hot‖ Craps (side-bet) game but one with a

O C T O B E R 20 , 2011

RESEA RC H UPDA TE

M A R C R O B I N S 8 7 7 - 2 7 6 - 2 4 6 7

Catalyst Financial Research 2 Research Update

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solicitation of an offer to buy the securities of the companies covered by this report. Opinions expressed are subject to change without notice. Catalyst Financial Resources LLC, its affiliates and other

associates may have positions and may effect transactions in securities of companies mentioned herein. ©Catalyst Financial Resources LLC. Suite 201, 3220 SW 1st Ave. Portland, Or. 97239; (503)

241-1880.

proprietary aspect that is easy-to-learn, fun and incrementally profitable for the ―House.‖ With the

games picked up from the Prime Table Game acquisition, Saucier bought the ―ownership‖ and

operating revenue of one of the hottest new Poker games in the UK as well as the rising-star,

Blackjack/Poker games in the USA. He also obtained two alternatives to help fill the remaining game

void for the table game pit—Baccarat—with two games designed, patented and approved in Nevada.

The TableMax addition has been slower to contribute to Galaxy‘s operating statement than

planned…that delay is/was out of the CEO‘s hands. On the other hand, it will allow a new, training

platform for Galaxy to help new card devotees to pick-up the skills required for playing actual dealer-

operated tables. It also should become a meaningful contributor in the next quarter or early next year.

In the meantime, the arrangement allows for GLXZ to receive vital training on operating these devices

while the technical bugs are worked out.

There is one more aspect to the Galaxy mix of gaming IP and paraphernalia, the electronic tracking,

monitoring and ―bonus-ing‖ capability (now approved in Nevada)….AND, this is a very big aspect to

GLXZ‘s future revenue growth as it becomes introduced and launched into the Market. Installing

GLXZ‘s Inter-casino Jackpot Bonus System and the new, just-allowed ―MEGA-Share Jackpot Bonus

System‖ provides the Company not only with an incredible way to gain access to obdurate casino

management members because of greatly enhanced profit returns on table games, but lock-out

competition from the pits. The new combination systems are about to be launched (MEGA-Share

should receive regulatory permission this week) in the quarter and we‘re betting they take the table pits

by storm.

From a big picture standpoint, the acquisition of Prime Table Games (PTG) boosts Galaxy‘s number of

operating tables from roughly 2,000 to 2,500 tables. So, from a prima fascia review, it adds about 25%

to Galaxy‘s table volume. But, that is not a correct assessment. As you read our report, there are two

very important points that must be focused on: 1) the PTG assets add all kinds of new existing revenue

but also provide GLXZ enumerable ways to expand upon the base of games that PTG had as assets but

hadn‘t deployed. 1a) If I can add an addendum to the two points here, Galaxy could not afford not to

buy PTG because by letting it fall into the hands of any competitor (particularly ShuffleMaster), it

would boost the owner‘s competitive position ahead for a decade. 2) As good as the new games are in

filling-out GLXZ‘s game portfolio, investors have to examine and understand the real workings and

incremental value that MEGA-Share is about to provide the Company. This should be a winning

advancement for GLXZ.

Where Does Galaxy’s Share Price Go From Here:

From a valuation standpoint, making a model this early after an acquisition is tough and dangerous, but

investors need some guidance as to what all these transactions amount to. That said, it should be stated

that GLXZ just doubled the size of the Company and quadrupled its game portfolio of IP. The other

aspect that is the hardest to grasp is the ramp in growth, which we will really need a quarter or two to

properly scribe a trajectory, but it does appear that we should be seeing a growth path that will be

considerably stronger than that experienced over the last couple of years.

As such we are projecting that revenues for 2011 close on a strong note at $3.875 million. This is due

to a very strong fourth quarter…one started slightly after the beginning of the fiscal period with the

completion of the PTG acquisition. In addition, because of the timing differences of the various


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financing and cost aspects of the transaction, we show GLXZ showing a very small bottom-line loss,

but a fairly substantial production of cash (about a third of a million dollars) due to the heavy

amortization of purchased assets.

For next year, and this is where our crystal ball is pretty fuzzy, revenues for the year more than double

to $7.915 million and cash generated exceeds $1.250 million. Our knowledge of the growth in new

game sales and MEGA-Share sales was not sufficient to feel any more comfortable being more

aggressive.

From a valuation standpoint, the nearly $8 million dollars in sales and a very anxious and excited

buyer would be willing to look at GLXZ and bid $ 80 million or 10-time revenues (this is a top-end

multiple for this stream, but I‘m counting up the patent portfolio and the other games, etc) for the

operations. Net to the shareholders would exceed $1.50 per share.

The obvious point is that GLXZ should not be selling in the $0.20 to $0.30 range but should, given

some acceleration in its top-line growth, sell closer to $0.50 during the next 6 months.

Let’s Talk About “Prime Table Games”

Because the transaction is certainly the ‗elephant in the room‘, it‘s best we chat about GLXZ‘s

transforming acquisition. PTG is both a collection of devised table game patents, trademarks and

actually ―licensed‖ (or approved in certain jurisdictions) games that are out in the market. Currently,

just three games out of the roughly forty PTG games that generate pretty ―sufficient‖ revenue, and for

all intents and purposes cash flow and income, for GLXZ to finance the transaction. In addition, there

is ample runway for the Galaxy team to further penetrate existing markets with the three operating

games and develop the UK market with GLXZ games to essentially roll-back the debt service burden

and make the acquisition work to shareholders‘ benefit.

The game portfolio was acquired from well-known game inventor, Derek Webb, who now resides in

Las Vegas. Webb successfully resolved litigation with both Progressive Gaming and ShuffleMaster in

recent years, resulting in the realization of substantial settlement payments. Further, the combination

of those monies plus past game license returns/sale revenues and now adding the gains from the

disposition of PTG leaves Mr. Webb comfortable and preferring retirement to working everyday.

Servicing 140 of 141 casinos located throughout the United Kingdom, the acquirer‘s purchase of PTG

makes Galaxy the largest purveyor of table card games in the UK right out of the box. The games that

are generating the revenue include ―3-Card Poker‖ (TCP), which is an extraordinarily popular game in

the UK and abroad; ―21-plus-3‖ and ―Two-way Poker.‖ There is one unfortunate aspect to the

Galaxy/Prime Table Games transaction that should be mentioned. Since TCP is the most profitable,

proprietary table game ever devised (when measured by win percentages and profits generated for

casinos or by revenue generated for the rights owners), the unfortunate aspect is that Galaxy doesn‘t

own any rights to ―3-Card Poker‖ outside of the British Isles. This limitation was the result of an IP

sale negotiated between ShuffleMaster and Webb back in 1999: It has the unfortunate effect of limiting

GLXZ‘s stance for realizing further revenue gains from this valuable game outside of the British Isles.

Despite the twist of history, the UK license fees from TCP are generating about $1.17 million per year,

which GLXZ secured rights to in the recent transaction. Revenue realized can be increased by the new


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operator by in-selling more games per casino, when new casinos are added in the UK and potentially

through the addition of Ireland as part of the British Isles, which may be included in the license.

The other big game popular with the Brits (and gaining real popularity here in the States) is ―21-plus-

3‖. This is Blackjack with a very rigorous side bet. (More precisely, you start with a game of ―3-Card

Poker‖ and end with Blackjack. The two games start when you‘re dealt two Blackjack cards and the

dealer deals himself two cards but only your two cards and one of the dealers cards are face-up. You

then proceed to play a quick hand of 3-card-poker with the three, face-up cards. Best ―abbreviated

poker‖ hand wins the side-bet. When finished, the players continue playing ―21‖ with the same dealt

hands of cards.)

In the UK, not only is this side-bet generating about $200 thousand at the casino tables for PTG per

year, but ―21-plus-3‖ via internet adds another $45 thousand to the sum, annually. The really positive

feature is that ―21-plus-3‖ is approved for play in the USA and is generating revenue from essentially

five states amounting to $1.25 million: Those states being Indiana, Missouri, Mississippi, Illinois and

South Dakota. ―21-plus-3‖ is also approved in Nevada; we learned that one casino (in Winnemucca)

has the table game and was playing it in the pit at this time.

21-Plus-3 Casino Card Table

Given the small operating territory, it is reported that there is incredible, pent-up demand for ―21-plus-

3‖ because game requests from both US and UK operators have not been fulfilled by Mr. Webb.

Probably the most notable opportunity is that GLXZ‘s team has a strong chance to fill ready demand

for ―21-plus-3‖ along the Vegas Strip. While at the booth, I surely witnessed several major casino

floor operators come over and discuss the installation of this game into their facilities. According to

GLXZ management, they believe that the current revenue run rate should be as much as tripled in as


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many years. The validity of the value of this game and the fact that it wasn‘t being properly marketed

or serviced by the former owner is illustrated by the license fee the owners are able to charge:

Currently, Galaxy will receive $12 per day or $365 per month as the on-going license compensation

for ―21-plus-3‖. This is nearly three-times the current license fee GLXZ is getting for other ―side-

bets.‖

Other assets of value that were purchased by Galaxy with the transaction include International

trademarks and patents for ―21-plus-3‖ as well as ―Two-Way Poker.‖ Interestingly, the seller also was

able to create and benefit from an Internet version of ―21-plus-three‖, which should soon be adding to

GLXZ‘s monthly cash flow. Also, there are thirty-five US patents and eleven patents pending for

other new games. From a more immediate operating standpoint, fifteen of Webb‘s games received

approval in Mississippi, of which six are also approved in Nevada (such is the case with ―21-plus-3‖,

which is approved in both Mississippi and Nevada.) There is also seven other game designs ―in

progress‘ as well as concepts for video games.

The other new game that was being showcased at G2E was a side-bet game for Craps, called ―Bonus

Craps.‖ This is an unbelievably easy game to learn (and fun to play) and that is particularly true for

the novice. It also has the unique distinction of being a side-bet that is attached to the Craps table

essentially placing somewhat of a proprietary flag on a table game position that has been out of reach

for GLXZ in the past. ―Bonus Craps‖ is a relatively new game, and there are now about 100 games out

in the field, according to the salesman in the booth. I understood that 40 games are installed in casinos

with the remainder being tested.

“Bonus Craps” Casino Layout of the Game Felt


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If you notice the above photo of the ―Craps‖ playing table, there is a bright red/orange banner on the

felt closest to the croupier. The point of the game is to wager that your throws will not ‗come up to

equal 7‘ but you can throw dice sums that will either add to ―2,3,4,5,6‖ or ―8,9,10,11,12‖. Note that

the pay-outs are posted right on the banner and are pretty ―rich.‖

Now, beside this game providing GLXZ a completely new entrée into the table game pit with a Craps

game, it has already been approved in states including California, Nevada, New Mexico, Mississippi,

Missouri, Illinois, Indiana, Michigan and is about ready for approval in both Pennsylvania and

Connecticut. ―Bonus Craps‖ has also been a great door-opener for Galaxy‘s sales team. Some of the

most prestigious casinos on the Vegas Strip--those that have been least likely to return the sales staffs

calls in the past—are now responding to phone calls by the Galaxy sales team given that Bonus Craps

is so popular and in such high demand by the clientele.

The deal with Lakes Entertainment was more of an extended operating agreement…a 50/50 split on

existing business and then an increasing scale on the new business that Galaxy uncovers (say, for new

tables in an existing account or new tables installed in new casinos opened.) Galaxy secured a ―buy-

out‖ option and you can see why this would be cash flow positive from day #1: Galaxy is charging

around $200 per month for the monthly table license fee.

What Happened to TableMax

I too, have been a little disappointed over the lack of evidence regarding any incremental benefit from

TableMax. On one hand, we were expecting some good things to be happening by certainly the fourth

quarter (yet, we were hoping for the third quarter.) It now appears that the new model that is able to

leap regulators restrictions and assuage casino owners criticisms won‘t be out until sometime in the

First quarter of 2012. The one good aspect of the ―Yea!/Boo!‖ situation is that Ari Emanuel (the lead

investor of the TableMax public company) is reimbursing the losses that GLXZ is accumulating in

relationship to the their TableMax product operations.

What‘s going on? Well, I sat down at the machine that was at G2E (see below) for several good hours

playing ―Blackjack‖ with different Expo visitors as well as the ―booth babes.‖ (I have to make sure

that my wife—who really helps proofing my long, editorial ramblings—completely understands the

experience playing ―Blackjack‖ with the young ladies was purely for research purposes.) I am not an

avid patron of casinos: So, I am quite shy around the ―big rollers!‖ at the actual tables and really don‘t

want to embarrass myself in front of the dealer and other players.

(Please continue reading on the next page.)


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TableMax Table Game with Blackjack with Upright Screen and Five Player Positions

So, here I was able to play with, not only other avid casino operators/patrons, but professional dealers

who weren‘t in a rush to deal out the next hand and impatient over slow decision-making card players.

I was also able to ask the booth visitors and ladies what the benefits and features were that they really

liked about the TableMax game versus other available machines.

I learned a lot!

1. These machines are just what the novice player wants to experience when being tutored on a

new game. The ―gals‖ were talking about how they try to take time on the floor to teach new

players, but a lot of dealers are very cranky, are short with the patrons and novices don‘t need

that negative feedback.

2. The TableMax machines have a face-up, eyes ahead ―table‖ display, which makes playing the

game more enjoyable since there is better viewing of the cards and game in total and there can

be more interaction between players while playing.

3. The TableMax has large buttons (switches) directly in front of the players to hit when making

bets or taking other game actions: This seems more preferable to players than a touch LCD

because they can get excited while in play and the actual feel of the button and positive

reaction is more decisive to the player.

4. The Unit can have multiple games loaded onto the system, or include games that include side-

bets, providing greater flexibility and a broader ability to learn more games.

The Model ―E‖, which is the unit under development, has some features that will be very important to

help Galaxy grow the acceptance of the TableMax systems by Casinos. For instance:


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The Model ―E‖ will have the ability to trim down the number of player seats from five places to

three player seats. This, interestingly enough, is because in some jurisdictions the table game

system is considered a ―slot machine‖ and each seat at the TableMax is legally considered one

more mechanical device. If a casino is up against the top-limit of the slot machine allowance as

dictated by the regulators, Galaxy can ―trim‖ down the number of places to help the casino

owner ―fit‖ within his allowed machine guidelines.

One of the real reasons the TableMax E unit is needed is that they are moving from a disk

memory technology to an EEPROM memory technology. This is a requirement for many

jurisdictions and is the single largest reason holding back placement growth.

Right now, the TableMax unit is approved in Idaho, California, Oklahoma and they would like

to launch New Mexico as soon as they get GLI approval. It‘s rumored that GLXZ has some

pending orders in hand.

I guess my hands-on experience with the table game confirms the ―player‘s positive feedback‖ on the

points I‘ve made above. I think that this device should be a pretty exciting addition whenever it gets

introduced.

MEGA-Share Bonus Jackpot: The Gambling Pièce de Résistance

One of the electronic features that Galaxy was premiering at G2E was their ―MEGA-Share Bonus

Jackpot‖. Now this is a real trick game feature benefit and should greatly help bolster GLXZ‘s top-line

growth possibly as soon as the current quarter. Remembering back to our original report, side-bets

work (like state-sponsored ―Mega-Lotto‘s‖) because gamblers want that chance to win a ―life-altering‖

cash pay-out. The reverse is also true. The state lotteries and casino side-bet opportunities are also the

best (most profitable for the sponsoring entities) wagers for the house.

Galaxy has developed a very distinctive way of building on this thrill aspect regarding their players‘

Bonus Jackpot win, using the winning event to advertise the ―hotness‖ of the table or game, actually

building the brand for the casino (as well as Galaxy if the Company deploys the MEGA-Share Bonus

Jackpot as originally described), and creating a wager that nearly doubles the take for the house on

each game that deploys the new electronic system. Mega-Share is an inspiration.

Here‘s how it works. We‘re going to use the ―Players Edge‖ game photo (see below) because it shows

the game felt and the Bonus Jackpot ―reader board‖, which is off to the right-hand side of the photo

with the two big dollar numbers. It will make explaining the process a lot easier to follow along with

the photo. When you start a Galaxy Gaming game (and that‘s an important distinction!) and begin

your wager, you place your ―ante‖ to enter the game. In the photo, the large, green circle directly in

front you/the player seat position is where the first chip (ante) is placed. At the same time, you decide

to wager on the Bonus Jackpot by making a $1.00 wager (say a $1.00, on the smaller round, red circle

at the ―2:00 o‘clock‖ position) and the MEGA-Share Jackpot wager (by placing another wager, assume

it‘s another $1.00, on the smaller, red circle at the ―10 o‘clock position.)

There will be other players at other tables playing differing MEGA-Share games(!!!); through-out the

casino(!!!); that are making the exact same kind of multiple wagers. Before we go on, this last point is

very important to understand. Notice the ―reader board‖ (in the photo below) just to the left of the two

casino dealers in black (just slightly left of center.) See, there is another MEGA-Share game but it

doesn‘t happen to also be Players Edge (It‘s Galaxy‘s Triple Attack Blackjack). The point I‘m making


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here is that the Galaxy Gaming games that are equipped with the Bonus Jackpot electronic capability

and the MEGA-Share capability are electronically tied together so that if one Jackpot is won, all

qualified players throughout the casino win.

If someone wins the Bonus Jackpot at any of the Galaxy Gaming table game positions—and in this

example, the reader board says that the payout is $339,987, the winner is incredibly happy winning the

nearly $400g‘s. BUT, those of the players who also bet on the additional, MEGA-Share red spot—and

there might be nine players across 20 different games—get to share the other Jackpot of $121,069

among the nine individuals—the nine players each get $13,452!

There is a tremendous amount of hooting and hollering and general carousing because of the

excitement of so many (nine MEGA-Share winners whooping it up and the one big, Bonus Jackpot

guy going crazy) folks raising a commotion.

Photo of MEGA-Share Bonus System using the Player Edge Game Table

Think about what has just happened. From the game players‘ side of the table, the MEGA-Share

players think they will get more opportunities to win—since so many more players are playing thereby

increasing the odds that the lucky event will happen (at least the ―win‖ should be more frequent than

―non-connected‖ jackpots). Separately, there are now ten winners that are hooting and hollering about

the great money they‘ve won, which certainly makes it sound like there are more wins coming from

the same set of tables. The increase in noise and celebration ought to attract attention not only from

other parts of the casino (say, dragging folks away from the bar, shops and slot machines) but from

across the street at the competing casinos. Lastly, there is the ―feeling‖ that the tables are ―hotter‖ at


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the casinos with MEGA-Share capability. It is a perceived competitive advantage for the casino with

MEGA-Share.

From the house‘s side of the game equation, some good things happen, too. First and foremost, the

win probabilities for these Bonus Jackpot games have statistically the poorest possible chances (like 1

in 6+ million, etc) to win. Hence, these Bonus Jackpots games are the best paying bets for the house

that the house has to offer its patrons. What has just happened with the played game of MEGA-Share,

the house standard revenue take has just been doubled because a patron has placed the usual wager

down for the chance to win the Bonus Jackpot as well as another wager down to bet on the same odds

for the MEGA-Share Jackpot win. But, the statistical odds of the game haven‘t changed. The number

of ―perceived‖ winners has changed given the Bonus Jackpot winner and the nine other shared winners

that split a secondary pot. If MEGA-Share works the way it is designed, the casinos play-up the wins

and people‘s human nature remains intact, it should attract other players from various other games

(possibly slot machines) and possibly from competitive casinos.

From the Galaxy Gaming perspective this presents a significant money-making opportunity because

they receive a fee from every wager. The higher the potential Bonus Jackpot or the MEGA-Share

Jackpot, the more players‘ greed will push them to play to win that life-altering prize. (During last

summer‘s test of the Manufacturer‘s bonus system, table attendance and game plays increased

proportionately and dramatically with the increase in the size of the bonus.). We believe that MEGA-

Jackpot has the potential of creating real cannibalization of players from other casinos on the strip or

from near-by locals first, and then game opportunities from ShuffleMaster‘s near monopoly dominance

in the table game pit. Lastly, it will be a hard strategy for SHFL to broach since MEGA-Share is

already well patented and trademarked.

GLXZ Price Chart

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This report was prepared from data and information believed reliable but not guaranteed by us as to its accuracy and does not purport to be complete. It is not to be considered as an offer to sell or a solicitation of an offer to buy the securities of the companies covered by this report.

Opinions expressed are subject to change without notice. Catalyst Financial Research LLC, its affiliates and other associates may have positions and may effect transactions in securities of companies mentioned herein. ©Catalyst Financial Research LLC. Suite 201, 3220 SW 1st Ave.

Portland, Or. 97239; (877)-276-2467


Galaxy Gaming, Inc.

Detailed Income Statement Model - Proforma for Continuing Operations

($ in thousands except for per share amounts)

3/31/11 6/30/11 9/30/2011E 12/31/2011E CY2011E 3/31/2012E 6/30/2012E 9/30/2012E 12/31/2012E CY2012E CY2013E

Galaxy Original Gross Revs 781 749 765 $800 3,095 $855 905 960 $1,020 3,740 $4,315

Galaxy Original COGs 29 16 40 50 135 70 85 95 105 355 475

Gross Profit 752 733 725 750 2,960 785 820 865 915 3,385 3,840

Gross Margin 96.3% 97.9% 94.8% 93.8% 95.6% 91.8% 90.6% 90.1% 89.7% 90.5% 89.0%

PTG Incremental Revs na na na 670$ 670 710$ 727$ 738$ 750$ 2,925 3435

PTG Incremental Prof cont na na na 640 640 675 688 699 710 2,772 3320

Lakes Entertain Incr. Rev. na na na 18 18 21 23 25 27 96 165

Lakes Entertain Incr. Profit na na na 16 16 19 20 23 25 87 156

GLXZ Combined Rev contribut na na na 1,488$ 3,783$ 1,586$ 1,655$ 1,723$ 1,797$ 6,761 7,915$

GLXZConsolidated Gross Profit 1,406$ 3,616$ 1,479$ 1,528$ 1,587$ 1,650$ 6,244 7,316$

Selling, Gen'l & Admin. 736 814 830 900 3,280 915 925 935 950 3,725 3965

Research & Development 65 78 80 75 298 65 78 78 80 301 400

Operating Expenses 801 892 910 975 3,578 980 1,003 1,013 1,030 4,026 4,365

Oper. Exp. % 102.6% 119.1% 119.0% 65.5% 94.6% 57.7% 55.9% 54.3% 52.9% 55.1% 50.1%

Net Oper. Profit (Loss) (49) (159) (185) 431 38 499 525 574 620 2,218 2,951

Net Oper. Profit % -6.3% -21.2% -24.2% 29.0% 1.0% 58.4% 58.0% 59.8% 60.8% 59.3% 68.4%

Amortization expense na na na (450) (450) (450) (450) (450) (450) (1,800) ($1,800)

Interest on PTG (111) (163) (160) (156) (590) ($862)

Other Inc. (Exp.) (18) (17) (27) (25) (87) (22) (22) (22) (22) (88) ($80)

Net profit (loss) Bef. Inc. tax (67) (176) (212) (44) (499) (84) (110) (58) (8) (260) 209

Prov. for Inc. Tax - - - - 0 - - - - 0 0

Taxes % 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%

Net Profit (Loss) from Cont. Ops (67) (176) (212) (44) (499) (84) (110) (58) (8) (260) 209

Net Margin % (0) (0) (0) (0) (0) (0) (0) (0) (0) (0) 4.8%

Wtd avg shares out. FD 35,850,000 36,125,000 36,300,000 36,500,000 36,193,750 36,550,000 36,125,000 36,300,000 36,500,000 36,368,750 36,600,000

EPS from continuing ops (0) (0) (0) (0) (0) (0) (0) (0) (0) (0) 0.01


________________________________________________________________________________________________________________________________________________________________

This report was prepared from data and information believed reliable but not guaranteed by us as to its accuracy and does not purport to be complete. It is not to be considered as an offer to sell or a solicitation of an

offer to buy the securities of the companies covered by this report. Opinions expressed are subject to change without notice. Catalyst Financial Resources LLC, its affiliates and other associates may have positions and

may effect transactions in securities of companies mentioned herein. ©Catalyst Financial Resources LLC. Suite 201, 3220 SW 1st Ave. Portland, Or. 97239; (503) 241-1880.

DISCLOSURES:

This report has been commissioned by Galaxy Gaming, Inc. (the Company) as part of an on-going research and awareness program contracted

between Catalyst Financial Resources, LLC (CFR), and the Company. CFR has been paid or promised payment for the production and editorial

content of this report. The Company is paying CFR $3,000 per month for 12 months for services rendered. In addition to the annual contract, CFR

holds 175,000 warrants. However, the opinions, forecasts and price targets are based on our examination of company fundamentals, conversations

with management, independent analysis of markets, economic conditions, and other publicly available information.

This report has been written in accordance with current SEC regulations and the Standards of Practice developed by the Association of Investment

Management & Research (AIMR). Our research has been conducted by employing analytical practices generally accepted as standard within the

analytical industry. Our conclusions are, by the very nature of forecasting, speculative, but are also reasonable, supportable and consistent.

Key to disclosures:

(1) Catalyst Financial Resources LLC (CFR) does not make markets in any securities and has not managed or co-managed a public offering of

securities for the subject company within the past 12 months.

(2) CFR received compensation for investment banking services from the Subject Company within the past 12 months.

(3) CFR expects to receive or intends to seek compensation for investment banking services from the Subject Company within the next 3

months.

(4) The research analyst or a member of the research analyst‘s household has a financial interest in the securities of the Subject Company in

the form of a (a) long position (b) short position (c) right (d) warrant (e) future or (f) call option in such securities.

(5) CFR and/or its officers or affiliates may either hold a position in this company‘s share or own options, rights or warrants to purchase any of

the securities of the subject company.

(6) The research analyst principally responsible for preparing this research report received compensation based upon various factors, including

CFR total revenue, a portion of which was generated by CFR‘s investment banking services.

(7) The research analyst or a member of the analyst‘s household serves as an officer, director, or advisory board member of the subject

company;

(8) An affiliate of CFR may have a different view from the views expressed herein.

(9) CFR and/or its affiliates beneficially own 1% or more of the subject company.

(10) The Subject Company is a client of CFR or one of its affiliates.

(11) CFR is a client of the Subject Company or one of its affiliates.

The analyst herby certifies that the research conclusions and recommendation contained herein accurately reflects his/her personal views about the

industry, company and shares and also hereby certifies that no part of his/her research compensation was or will be directly or indirectly related to the

earnings estimates, target price or recommendation about the security.

The research provided herein should not be considered a complete analysis of every material fact regarding the companies, industries or securities

named above. The opinions expressed herein reflect the analysis and judgment of the author on the date of publication and are subject to change

without notice. Facts have been obtained from sources considered reliable but should not be construed as complete and are not guaranteed to be

accurate. Catalyst Financial Research LLC; its members; employees and their families may have positions in the securities covered within the

research material above and may make purchases or sales while this report is in circulation. Additional information on the subject companies is

available upon request.

EQUITY RECOMMENDATION SYSTEM:

Buy Immediate purchase is recommended. The security expected to outperform the market over the next 12 to 18 months.

Accumulate Purchase of the stock is recommended for above average appreciation over the next 12 to 18 months, but the buyer may have an

opportunity to acquire the stock within a 10% trading range.

Hold Holding the stock is recommended because the share price has moved above the specific ―Buy‖ range and, therefore, appreciation

potential is less than or equal to the market.

Sell The stock has reached the target price objective and/or conditions have changed sufficiently to alter the outlook for the stock.

EQUITY RISK SYSTEM:

High The security is more volatile than the market and/or the company is more leveraged than its peer group.

Moderate The security has about the same volatility as the market and/or the company carries a level of leverage in line with its peer group.

Low The security is less volatile than the market and/or the company is less leveraged than its peer group.

DISTRIBUTION OF RECOMMENDATIONS:

At this time, there are an insufficient number of companies under coverage to generate usable distribution information or draw any conclusions

regarding bias about the research methodology. Prospective companies are screened and evaluated by sales personnel and research analysts with the

investment thesis and overall research recommendation developed before the commission is established.

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