UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549



(Mark One) Form 10-K

|þ  |  | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934    
|-- |  | ----------------------------------------------------------------------------------------
|   |  | For the fiscal year ended December 31, 2023                                             
|OR
|o  |  | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|   |  | For the transition period from to                                                       

Commission File Number: 000-52575

Lightning Gaming, Inc.

(Exact name of registrant as specified in its charter)

|Nevada                                                             |  | 20-8583866                              
|------------------------------------------------------------------ |  | ----------------------------------------
|(State or other jurisdiction of
    incorporation or organization) |  | (I.R.S. Employer
    Identification No.)
|                                                                   |  |                                         
|23 Creek Circle
    Boothwyn, PA                                   |  | 19061                                   
|(Address of principal executive offices)                           |  | (Zip Code)                              

Registrant’s telephone number, including area
code:

(610) 494 5534

Securities registered pursuant to Section 12(b)
of the Act: None



Name of Each Exchange on Which Registered: None



Securities registered pursuant to Section 12(g)
of the Act:

Common stock, par value $0.001 per share

Indicate by check mark if the registrant is a well-known
seasoned issuer, as defined in Rule 405 of the Securities Act. Yes o No x



Indicate by check mark if the registrant is not required
to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes x No o



Indicate by check mark whether the registrant (1) has
filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or
for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for
the past 90 days. Yes x No o



Indicate by check mark whether the registrant has submitted
electronically every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding
12 months (or for such shorter period that the registrant was required to submit and post such files).

Yes x No
o



Indicate by check mark whether the registrant is a large
accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large
accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.
(Check one):



|Large accelerated filer o                                            |  | Accelerated filero                                       
|-------------------------------------------------------------------- |  | ---------------------------------------------------------
|Non-accelerated filer o(Do not check if a smaller reporting company) |  | Smaller reporting company x
    Emerging growth company o





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If an emerging growth company, indicate by check mark if the registrant
has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant
to Section 13(a) of the Exchange Act. o



Indicate by check mark whether the registrant has filed a report on and
attestation to its management’s assessment of the effectiveness of its internal control over fi nancial reporting under Section
404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report.
o



If securities are registered pursuant to Section 12(b) of the Act, indicate
by check mark whether the financial statements of the registrant included in the filing reflect the correction of an error to previously
issued financial statements. o



Indicate by check mark whether any of those error corrections are restatements
that required a recovery analysis of incentive-based compensation received by any of the registrant’s executive officers during
the relevant recovery period pursuant to §240.10D-1(b). o



Indicate by check mark whether the registrant is a shell company (as defined
by Rule 12b-2 of the Act). Yes o No x



There is no public market for the registrant's stock. As of June 30, 2023,
there were no published bid or asked prices for the stock or sales of stock known to the registrant that would provide a basis for reporting
market value. The number of shares of the registrant’s (voting) Common Stock, par value $0.001 per share, outstanding as of March
29, 2024 was 4,649,383. The number of shares of the registrant’s Nonvoting Common Stock, par value $0.001 per share, outstanding
as of March 29, 2024 was 33,300,000.





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|TABLE OF CONTENTS               
|--------------------------------
|                                
|PART
    I - COMPANY INFORMATION
|                                
|Item
    1.                     
|Item
    1A.                    
|Item
    1B.                    
|Item
    1C.                    
|Item
    2.                     
|Item
    3.                     
|Item
    4.                     



|PART II - FINANCIAL
    INFORMATION
|-----------------------------------
|                                   
|Item 5.                            
|Item 6.                            
|Item 7.                            
|Item 7A.                           
|                                   

Item 8.     
Financial Statements



|1                                                   | Report of Independent Registered Public Accounting
    Firm                                                | 28
|--------------------------------------------------- | ---------------------------------------------------------------------------------------------------------- | --
|2                                                   | Consolidated Balance Sheets as of December
    31, 2023 and 2022;                                          | 30
|3                                                   | Consolidated Statements of Operations for the years
    ended December 31, 2023 and 2022;                  | 32
|4                                                   | Consolidated Statements of Changes in Stockholders’ Equity for the years ended December 31, 2023 and 2022; | 33
|5                                                   | Consolidated Statements of Cash Flows for the
    years ended December 31, 2023 and 2022;                  | 34
|6                                                   | Notes to Consolidated Financial Statements                                                                 | 36
|                                                    |                                                                                                            |   
|Item 9.                                             | Changes in and Disagreements
    with Accountants on Accounting and Financial Disclosure                   | 54
|Item 9A.                                            | Controls and Procedures                                                                                    | 54
|Item 9B.                                            | Other Information                                                                                          | 54
|PART
        III – CORPORATE GOVERNANCE INFORMATION
|                                                   
|Item 10.                                            | Directors, Executive Officers and Corporate
    Governance                                                 | 55
|Item 11.                                            | Executive Compensation                                                                                     | 57
|Item 12.                                            | Security Ownership of Certain Beneficial
    Owners and Management and Related Stockholder Matters         | 58
|Item 13.                                            | Certain Relationships and Related Transactions,
    and Director Independence                              | 59
|Item 14.                                            | Principal Accountant Fees and Services                                                                     | 59
|Item 15.                                            | Exhibits and Financial Statement Schedules                                                                 | 60
|Item 16.                                            | Form 10-K Summary                                                                                          | 60
|                                                    |                                                                                                            |   



---



3











PART I

|Item 1. | Business.
|------- | ---------



Lightning Poker, Inc. (“Lightning Poker”) was incorporated
in Pennsylvania in 2005 under the name Pokermatic, Inc. and succeeded to the business of Pokermatic, LLC, a Pennsylvania limited liability
company formed in 2004. Lightning Gaming, Inc. (the “Company”) was incorporated on March 1, 2007 and on January 29, 2008,
completed a merger with Lightning Poker (the “Merger”) which became a wholly owned subsidiary of the Company. Lightning Slot
Machines, LLC (“Lightning Slots”) was formed in 2008 to leverage the Company’s existing gaming licenses. The Company,
through Lightning Slots, manufactures and markets slot machines and related parts to casinos, cruise ships, and lottery venues. Its executive
offices are located at 23 Creek Circle, Boothwyn, Pennsylvania, 19061.



Products



In 2009, the Company commenced the design, manufacture, marketing, sale
and operation of slot machines to customers in various gaming jurisdictions. Our slot machines contain games where the casino patron wagers
on multiple pay lines with secondary bonusing games. Our games combine advanced graphics and digital music to create an engaging player
experience. We seek to develop games that offer high entertainment value to casino patrons and generate greater revenues for casinos than
the games offered by our competitors. Our current slot machine games are:



| | · | Americana                                 | · | Jungle Book                                   
| | - | ----------------------------------------- | - | ----------------------------------------------
| | · | Around the World in 80 Days               | · | Jungle Jackpots – Screaming Links             
| | · | Beauty and the Beast                      | · | Just Jackpots                                 
| | · | Bierfeier – Screaming Links               | · | Lightning Lotto                               
| | · | Candy Cash                                | · | Lucky Shamrock – Screaming Links              
| | · | Captivating Wizards                       | · | Penny Palooza                                 
| | · | Cash Flow                                 | · | Prosperous Buddha – Persistent Link           
| | · | Ching Shih                                | · | Scarabs of Egypt – Screaming Links            
| | · | Cinderella                                | · | Si Shou                                       
| | · | Coinolicious-Fortuitous Panda             | · | Si Xiang – Screaming Links                    
| | · | Crazy 8’s Link Deluxe                     | · | Slotto                                        
| | · | Drachma                                   | · | Snow White                                    
| | · | Duck Dynamite                             | · | Snow White – Screaming Links                  
| | · | Eye of RA – Persistent Link               | · | Swamp Fever                                   
| | · | Fins N Wins                               | · | Swamp Fever – Persistent Link                 
| | · | Fruit Jackpots                            | · | Swamp Frenzy                                  
| | · | Fruit Treasure                            | · | Ultimate Screaming Links – Golden Egg         
| | · | Golden Egg                                | · | Ultimate Screaming Links – Golden Geigi       
| | · | Goyaate                                   | · | Ultimate Screaming Links – Great Balls of Fire
| | · | Great Balls of Fire – Screaming Links     | · | Vampires Fortune                              
| | · | Hao Yun                                   | · | Year of the Horse                             
| | · | Hua Mulan – Screaming Links               | · | Ye Xian                                       
| | · | Jackpot Link Deluxe – Jackpot Link Deluxe | · | Zhang Jiao – Screaming Links                  
| | · | Jumbo Fish Stacks                         | · | Zuo Ci – Screaming Links                      



When we expanded our product line to include slot machines, we embarked
on an initiative to market to additional Native American jurisdictions as well as the commercial casino marketplace. As of December 31,
2023, we have 58 active regulatory gaming licenses, which includes 38 from Native American tribes and 20 state jurisdictions. We are working
to secure licensing to place our slot machines in a number of new jurisdictions across North America. The licensing process includes specific
jurisdictional approvals from the appropriate testing laboratory and regulatory agency. We expect to be licensed in several additional
jurisdictions during 2024 and over the next several years.





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Our first product was The Lightning Poker Table, a fully automated electronic
poker table that enabled up to ten players to make their wagers and game decisions via individual touch-screen betting stations. We ceased
production of the Poker Table in 2010 and were able to utilize tables in stock that had previously been out on lease, to fulfill sales
and lease orders obtained after then. As of December 31, 2020, all Poker Table leases were terminated and there were no remaining tables
in stock.



Distribution



All sales are handled through the Company’s seasoned and experienced
in-house sales team and outside account managers who are located in those areas in which we are strategically seeking market share. The
Company believes it is very important for its salespeople to have regular contact with the casino decision makers. As our footprint in
the market expands, additions to sales staff will be necessary to maximize customer interaction.



Revenue Models



We have three different revenue models for the products that we offer to
our customers:



|● | Lease model          
|- | ---------------------
|● | Sale model           
|● | Revenue sharing model



The majority of our customers utilize a lease program whereby we receive
a fixed daily rate per slot machine. Typical lease agreements involve a month-to-month term and are cancellable upon thirty days written
notice.



In an outright sale of our gaming machines, we receive cash for the entire
purchase price. This model is typically used in situations where there is a strong customer preference for an outright purchase or in
situations where leasing to a customer may be impractical due to geographic or financial reasons. All expenses pertaining to the sale
are recorded as they are incurred.



The third model is a revenue sharing model, where we place gaming machines
on the floor of the casino and participate in a portion of the revenue generated. Typical revenue sharing agreements involve a month-to-month
term and include a maximum monthly payment per machine.



Manufacture of Products



The slot machines cabinets are produced by a third-party manufacturer.
The gaming software and artwork is created in our Boothwyn facility. The software, motherboard, player tracking bracket, bill validators
and ticket printers are loaded into the cabinets. The games are then tested and shipped from our Boothwyn, Pennsylvania facility.





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Competition



The gaming machine market is highly competitive and is characterized by
the continual introduction of new games and new technologies. Our ability to compete successfully in this market is dependent, in large
part, upon our ability to:



| | ● |  | develop and offer games with higher earnings performance than the games and gaming machines from our competitors;
| | - |  | -----------------------------------------------------------------------------------------------------------------
| | ● |  | create an expanding and constantly refreshed portfolio of games;                                                 
| | ● |  | adapt our products for use with new technologies;                                                                
| | ● |  | implement product innovation and reliability;                                                                    
| | ● |  | offer mechanical and electronic reliability;                                                                     
| | ● |  | generate brand recognition;                                                                                      
| | ● |  | implement effective marketing and customer support; and                                                          
| | ● |  | offer competitive prices and lease terms.                                                                        



There are many companies in the world that manufacture slot machines for
legalized gaming markets. Of these companies, we believe that Aristocrat, International Gaming Technology PLC, Konami Co. Ltd., Evri Holdings,
Inc., Aruze Gaming, Novomatic Group of Companies, and Light & Wonder, Inc. have a majority of this worldwide market.



Our competitors vary in size from small companies with limited resources
to large multi-national corporations with greater financial, marketing and product development resources than we have. The larger competitors
have an advantage in being able to spend greater amounts to develop new technologies, games, and products, however we have the advantage
of being able to react to market conditions more rapidly and bring new games to market much quicker than larger competitors.



Intellectual Property



The trademark for “Lightning Poker” is registered with the
U.S. Patent and Trademark Office. We have registered the www.LightningPoker.net, www.LTGaming.com, and www.LightningGaming.com
Internet domain names.



From time to time, we enter into license agreements for the use of intellectual
properties and technologies in our products. These agreements generally provide for license fee payments when the agreements are signed
and minimum commitments, which are cancellable in certain circumstances. Each license typically provides that the licensor retains the
right to exploit the licensed property for all other purposes, including the right to license the property for use with any products not
related to gaming machines.

Gaming Regulations and Licensing



Regulatory Overview



Generally, the manufacture, sale and use of gambling devices are subject
to extensive federal, state, local and tribal regulation. In order to sell and distribute products to target markets, we, along with our
customers, must comply with the applicable regulations of each jurisdiction in which we operate. We expect it to take up to 12 months
or longer from the date of the submission of applications to obtain regulatory approval in some jurisdictions. As of March 29, 2024, we
had a total of 58 regulatory gaming licenses including regulatory gaming licenses in Native American jurisdictions and are preparing to
file applications for several additional licenses in North America.



It is possible that the approval of gaming licenses will take much longer
than expected or that the gaming license will not be approved in the jurisdictions where we intend to operate which will result in being
unable to generate revenues in such jurisdictions. The laws and regulations of the jurisdictions in which we intend to operate are subject
to amendment and reinterpretation from time to time, and therefore it is possible that even if gaming licenses are approved at one time,
they may be denied in the future.

A total of 40 states and provinces in Canada allow casino-type gambling.
We will not sell or distribute our gaming products in states or provinces that prohibit casino gambling.





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The following is a brief description of the material regulations that may
apply in some of the jurisdictions in which we intend to market and sell our products.



If a state requires that the Company, as well as our products, obtain regulatory
approval, we will be required to submit detailed financial and operating reports and furnish any other information the state may require.
Our officers, directors, certain key employees and any person having a material relationship with us may also have to qualify with the
state and obtain a finding of suitability. Beneficial owners, especially beneficial owners of more than 5% of our outstanding Common Stock,
may also be required to obtain a finding of suitability.



If a gaming authority in any jurisdiction fails to find any of our officers,
directors or significant shareholders suitable, we may be prohibited from leasing, licensing or selling our products in that jurisdiction.



A finding of suitability is generally determined based upon a myriad of
facts and circumstances surrounding the entity or individual in question and many gaming authorities have broad discretion in determining
whether a particular entity or individual is suitable. We are unaware of circumstances that would prevent a gaming authority from finding
any of our officers, directors or significant shareholders suitable.



If any of our officers, directors or significant shareholders are not found
suitable in a jurisdiction requiring a finding of suitability, we would be prevented from leasing, licensing or selling our products in
that jurisdiction as long as the person in question remained an officer, director, or a significant shareholder. Such an occurrence would
likely delay introduction of our products into such jurisdiction or prevent us from introducing our products in such jurisdiction altogether.
Failure to obtain such findings of suitability could have a material adverse effect on our results of operations. In addition, a finding
that one of our officers, directors or significant shareholders is not suitable in any jurisdiction may hinder our ability to obtain necessary
regulatory approvals in other jurisdictions. Conversely, however, a finding of suitability by one or more gaming authorities does not
ensure that similar suitability determinations will be obtained from any other gaming authorities.



A state regulator may have the authority to disapprove a change in our
officers, directors and key employees. Some corporate transactions, including those that may be advantageous to our shareholders, may
require prior approval of various state regulators. These states may also require our products to undergo rigorous testing, a field trial
and a determination as to whether our products meet strict technical standards set forth in the applicable state regulations.



The failure to comply with any requirements imposed by state regulators
or required by state law could prevent us from selling our products in such state, subject us to criminal and civil penalties, substantial
fines, and adversely affect our business.



Tribal Casinos



Numerous Native American tribes have become engaged in or have licensed
gaming activities on Native American tribal lands as a means of generating revenue for tribal governments. Gaming on Native American tribal
lands, including the terms and conditions under which gaming equipment can be sold or leased to Native American tribes, is or may be subject
to regulation under the laws of the tribes, the laws of the host state, and the Indian Gaming Regulatory Act of 1988 (“IGRA”),
which includes regulation and oversight by the National Indian Gaming Commission (“NIGC”) and the Secretary of the United
States Department of the Interior (“Interior Secretary”). Furthermore, gaming on Native American lands may also be subject
to the provisions of statutes relating to contracts with Native American tribes, which are also administered by the Interior Secretary.





7









The IGRA requires that the tribe and the host state enter into a written
agreement called a tribal-state compact, that specifically authorizes Class III gaming. The compact must be approved by the Interior Secretary,
with the notice of approval published in the Federal Register. Tribal-state compacts vary from state to state. Many require that equipment
suppliers meet ongoing registration and licensing requirements of the state and/or the tribe and some impose background check requirements
on the officers, directors, principals and shareholders of gaming equipment suppliers. Under the IGRA, tribes are required to regulate
gaming on their tribal lands under ordinances approved by the NIGC. These ordinances may impose standards and technical requirements on
hardware and software and may impose registration, licensing and background check requirements on gaming equipment suppliers and their
officers, directors, principals and shareholders.



We have the required licenses to manufacture and distribute our products
in the Native American jurisdictions in which we do business.



The United States Department of Justice ("DOJ"), the primary
law enforcement entity responsible for enforcing the federal law that restricts or prohibits certain gaming devices and activities, namely
the Federal Gambling Devices Act of 1962, which is commonly known as the Johnson Act, has traditionally taken a broad view as to what
constitutes a gambling device prohibited by the Johnson Act. We believe the Johnson Act is inapplicable to the use of our gaming products,
but it is possible that the DOJ would disagree with our position. In that event, the DOJ might institute criminal and civil proceedings
against us, and a court might rule that the Johnson Act prohibits the use of our gaming products by tribal casinos unless the tribe and
state have entered into an appropriate tribal-state compact. Any such proceedings could interfere with our ability to obtain regulatory
approvals in other jurisdictions.



Additionally, certain tribes require gaming lab certification for devices
such as our gaming products before the casino will agree to purchase or lease the devices. Gaming lab certification requires meeting certain
technical specifications and standards and can be difficult and time consuming. It is possible this process will take longer than we anticipate
for a particular jurisdiction, or we may never obtain gaming lab certification for a particular jurisdiction.



Federal Regulation



We are required to register annually with the Criminal Division of the
DOJ in connection with the sale, distribution or operation of gaming equipment. The Johnson Act makes it unlawful, in general, for a person
to manufacture, transport or receive gaming machines or components across state lines unless that person has first registered with the
U.S. Attorney General. We also have various record-keeping and equipment-identification requirements imposed by this act. Violation of
the Johnson Act may result in seizure and forfeiture of the equipment, as well as other penalties.



We believe the Johnson Act is inapplicable to the use of our gaming products.
However, the DOJ has traditionally taken a broad view as to what constitutes a gambling device prohibited by the Johnson Act and may disagree
with our position on the Johnson Act.

Research and Development



We currently conduct research and development activities primarily to develop
new gaming platforms and content and to add enhancements to our existing product lines. We believe our ability to deliver differentiated,
appealing products to the marketplace is based on our research and development investments and we expect to continue to make such investments
in the future. These research and development costs consist primarily of salaries and benefits and consulting fees.



Our research and development expenses were $625,357 and $641,584 during
the years ended December 31, 2023 and 2022, respectively.





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Significant Customers, Foreign Revenues and Foreign Assets



For the years 2023 and 2022, there was no revenue from customers outside
the United States. For the years 2023 and 2022, four casino customers accounted for 31% and 36%, respectively, of our revenues. One customer
which was a group of casinos under common control represented approximately 15% and 17% of our 2023 and 2022, revenues, respectively.
As of December 31, 2023 and 2022, we had no long-lived assets outside the United States. As of December 31, 2023, two casino customers
accounted for 60% of our net accounts receivable and as of December 31, 2022, two casino customers accounted for 54% of our net accounts
receivable.



Employees



As of March 29, 2024, we had 15 full-time and 1 part-time employees. We
consider our relationships with our employees to be satisfactory. None of our employees is covered by a collective bargaining agreement.



---



Item 1A. Risk Factors.



Our business is subject to a variety of risks. The following risk factors
could result in a material adverse effect upon our business, financial condition, results of operations, and ability to implement our
business plan. Many of these events are outside of our control.



Risks Relating to our Business



We have a limited operating history on which to evaluate our business.



We were formed in 2004 and in 2009, we switched our focus from the manufacture
of Poker Tables to slot machines. We are continually developing and testing new game software and new slot machine themes. Our business
model is unproven and the lack of meaningful historical financial data makes it difficult to evaluate our prospects. To the extent that
we are able to implement our business plan, our business will be subject to all of the problems that typically affect a business with
a limited operating history, such as unanticipated expenses, capital shortfalls, delays in program development, delays in product availability
and possible cost overruns.



We have a history of losses. We may be unable to generate sufficient
net revenue in the future to achieve or sustain profitability.



We recognized a net loss of $494,248 for the year and have an accumulated
deficit of $30,560,911 as of December 31, 2023. To implement our business plan and generate the increased revenues necessary to achieve
profitability, we must gain broad market acceptance of our products. The market for our products is heavily regulated. We must obtain
regulatory approvals for our Company and our products in many additional jurisdictions, including some jurisdictions where we have not
yet filed applications. In addition to the usual risks associated with the introduction of a new product, the timing of our revenue generation
will be driven, in part, by our ability to gain broad market acceptance of our products in those jurisdictions where we are able to distribute
our products, our receipt of regulatory approvals in additional jurisdictions, and our entry into definitive agreements with customers
in those jurisdictions. For the reasons discussed in this Risk Factors section and elsewhere in this report, we might not generate significant
revenues to achieve profitability in the foreseeable future or at all. Even if we achieve profitability, we might not be able to sustain
or increase it on a quarterly or annual basis. Our failure to do so would adversely affect our business and may require us to raise additional
capital or incur additional debt, which may be very difficult given the current state of the gaming industry, capital markets and the
overall economy due to the lasting impact of the Coronavirus pandemic COVID-19.





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Our success in the gaming industry depends in large part on our ability
to expand further into the slot machine market and new geographical markets. Our further expansion into these markets will present new
challenges and risks that could adversely affect our business and results of operations.



As we seek to expand further into the slot machine market and new geographical
markets, we expect to encounter business, legal, operational, and regulatory uncertainties. As a result, we may encounter legal and regulatory
challenges that are difficult or impossible to foresee and which could result in an unforeseen adverse impact on planned revenues or costs
associated with this expansion. If we are unable to effectively develop and operate within these new markets, then our business, operating
results and financial condition would be impaired.



Successful growth in new markets may require us to make changes to our
products to ensure that they comply with applicable regulatory requirements and will require us to obtain additional licenses. Our ability
to affect these changes and obtain the required licenses is subject to a great degree of uncertainty and may never be achieved.



Generally, our ability to further expand into the slot machine market and
enter new geographical markets involves a number of business uncertainties, including:



|● |  | whether our resources and expertise will enable us to effectively operate and grow in such new markets;                           
|- |  | ----------------------------------------------------------------------------------------------------------------------------------
|● |  | whether our internal processes and controls will continue to function effectively;                                                
|● |  | whether we have enough experience to accurately predict revenues and expenses in these new markets;                               
|● |  | whether we will be able to successfully compete against larger companies who dominate the markets that we are trying to enter; and
|● |  | whether we can timely perform under our agreements in these new markets because of other unforeseen obstacles.                    



If we are unable to keep pace with rapid innovations in new technologies
or product design and deployment, or if we are unable to quickly adapt our development and manufacturing processes to compete, our business
and results of operations could be negatively impacted.



Our success is dependent on our ability to develop and sell our products
that are attractive not only to our customers, but also to their customers, the end players. If our slot machines do not appeal to customers,
or do not meet or sustain revenue and profitability expectations, our slot machines may be replaced by our competitors’ machines.
Additionally, we may be unable to enhance existing slot machines in a timely manner in response to changing regulatory, legal or market
conditions or customer requirements, or new products or new versions of our existing products may not achieve acceptance in new or existing
markets. Therefore, our future success depends upon our ability to design and market technologically sophisticated products that meet
our customers’ needs regarding, among other things, ease of use and adaptability, and are unique and entertaining such that they
achieve high levels of player appeal and sustainability. If we fail to keep pace with our competitors, our business could be adversely
affected and a decrease in demand for our products could also result in inventory obsolescence charges.





10









The demands of our customers and the preferences of the end players are
continually changing. As a result, there is constant pressure to develop and market new game content and technologically innovative products.
As our revenues are heavily dependent on the earning power and life span of our games, we face increased pressure to design and deploy
new and successful game themes to maintain our revenue stream and remain competitive. Our ability to develop new and innovative products
could be adversely affected by:

|● |  | the failure of our new gaming products to become popular with end players;                                                                                                                            
|- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|● |  | a decision by our customers in particular or the gaming industry in general to decline to purchase our new slot machines or to cancel or return previous orders in anticipation of newer technologies;
|● |  | an inability to roll out new games on schedule as a result of delays in regulatory approval in the applicable jurisdictions, or otherwise; and                                                        
|● |  | an increase in the popularity of competitors' games.                                                                                                                                                  



If we cannot adapt our manufacturing to meet the needs of our product innovations,
or if we are unable to increase our production capacity in a timely manner, our business could be negatively impacted.



If we fail to obtain or maintain gaming licenses and regulatory approvals,
we will be unable to operate our business and license or sell our products.



The manufacture and distribution of gaming machines are subject to extensive
federal, state, local and tribal regulation. Some jurisdictions require licenses, permits and other forms of approval for gaming devices.
Most, if not all, jurisdictions also require licenses, permits and documentation of suitability, including evidence of financial stability,
for the manufacturers and distributors of such gaming devices and for their officers, directors, significant shareholders and key personnel.
Our failure to obtain regulatory approval in any jurisdiction will prevent us from distributing our products and generating revenue in
that jurisdiction. Obtaining such approval is a time-consuming and costly process and cannot be assured. Although a manufacturer of gaming
devices may pursue entity regulatory approval with regulators of tribal casinos at the same time that it pursues regulatory approval for
its gaming devices, states that license commercial casinos require that a manufacturer obtain entity regulatory approval before seeking
approval for gaming devices. This might result in additional time and expense associated with obtaining regulatory approvals. Even after
incurring significant time and expense seeking such regulatory approvals, we may not be able to obtain them.



If we fail to obtain a necessary registration, license, approval or finding
of suitability in a given jurisdiction, we would likely be prohibited from distributing our products in that jurisdiction. In addition,
some jurisdictions require license holders to obtain government approval before engaging in some transactions, such as business combinations,
reorganizations, stock offerings and repurchases. We may not be able to obtain all necessary registrations, licenses, permits, approvals
or findings of suitability in a timely manner, or at all. Our failure to obtain regulatory approvals in a timely manner in jurisdictions
that are material to us, whether individually or in the aggregate, would have a material adverse effect on our net revenue and delay or
prevent market acceptance of our products.



If we fail to obtain or maintain gaming licenses and regulatory approvals
for our officers, directors and significant shareholders, we might be unable to operate our business and license or sell our products.



Gaming authorities in some jurisdictions may investigate any individual
who has a material relationship with us, and any of our shareholders, to determine whether the individual or shareholder is suitable to
those gaming authorities. If a gaming authority in any jurisdiction fails to find any of our officers, directors or significant shareholders
suitable, we may be prohibited from leasing, licensing or selling our products in that jurisdiction and it could adversely affect our
regulatory approvals in other jurisdictions.







11







A finding of suitability is generally determined based upon a myriad of
facts and circumstances involving the entity or individual in question, and many gaming authorities have broad discretion in determining
suitability. If any of our officers, directors or significant shareholders are not found suitable in a jurisdiction requiring a finding
of suitability, we would be prevented from leasing, licensing or selling our products in that jurisdiction as long as the individual or
entity in question remained an officer, director, or significant shareholder. Such an occurrence would likely delay or prevent our introduction
of our products into such jurisdiction.



Depending on how material such jurisdiction is to our plan of operations,
failure to obtain findings of suitability could have a material adverse effect on us. In addition, a finding that one of our officers,
directors or significant shareholders is not suitable in any jurisdiction may hinder our ability to obtain or retain regulatory approvals
in other jurisdictions. Conversely, however, a finding of suitability by one or more gaming authorities does not ensure that similar suitability
determinations will be obtained from any other gaming authorities.



Although we can terminate the employment of an officer or remove a director
who is not found suitable, such action could disrupt the management of our Company and adversely affect our business and the results of
our operations. In addition, the removal of a director may be delayed if such removal requires action on the part of our shareholders.



Most of our competitors have greater resources and other advantages,
and our failure to remain competitive could adversely affect our ability to retain existing customers and obtain future business.



There are a number of companies that offer, manufacture and distribute
slot machines. Most of these companies have greater financial resources than we have.



The primary challenges to entering a market are the need to establish relationships
with the owners and operators of casinos, the requirements for regulatory approvals, and the development of the necessary technology for
our products. Our competitors include manufacturers of gaming devices that have already established such relationships and that have received
some, if not all, of the regulatory approvals needed to market and sell slot machines in our target markets, and we anticipate that the
number of such competitors will increase in the future. Most of our competitors have greater financial resources than we have. Therefore,
we anticipate that the challenges to enter into our markets would not pose a significant obstacle for such manufacturers if they sought
to compete with us.



Competition in the gaming industry is intense due to the number of providers,
as well as the limited number of facilities and jurisdictions in which they operate. There are many companies that could introduce directly
competitive products in the short term that also have established relationships and have the potential to develop technology quickly with
greater resources than we have.



Additionally, our customers compete with other providers of entertainment
for their end users’ entertainment budget. Consequently, our customers might not be able to spend new capital on acquiring gaming
equipment. Moreover, our customers might reduce their utilization of revenue sharing agreements.



We operate in a very competitive business environment and if we do
not adapt our approach and our products to meet this competitive environment, our business, results of operations, and/or financial condition
could be adversely impacted.



There is intense competition in the gaming products industry, which is
characterized by dynamic customer demand and rapid technological advances. We must continually adapt our approach and our products to
meet this demand and match these technological advances and if we cannot do so, our business, results of operations, and/or financial
condition may be adversely impacted. Conversely, the development of new competitive products or the enhancement of existing competitive
products in any market in which we operate could have an adverse impact on our business, results of operations, and/or financial condition.
If we are unable to remain dynamic in the face of changes in the market, it could have a material adverse effect on our business, results
of operations and financial condition.





12









In general, we compete with other gaming products for space on the casino
customers’ floor, as well as for our customers' capital and operational spending. Some of the larger gaming supply companies with
whom we compete are IGT, Light & Wonder and Aristocrat. New competitors may also enter our key markets.



Adverse general economic conditions that affect the gaming industry
or a reduction in demand for gaming in any of our significant markets may adversely affect our results of operations.



Our business operations are affected by national and local economic conditions.
The current level of activity in the general economy, or in a region constituting a significant source of our customers, or a reduction
in demand for gaming, may harm the health of casino operators and our other customers and result in fewer customers leasing or purchasing
our products, which would adversely affect our results.



Our growth and ability to access capital markets are subject to a
number of economic risks.



In the wake of the global health crisis caused by the novel coronavirus
pandemic known as COVID-19, financial markets in the United States and abroad have suffered significant losses. It is possible that unfavorable
financial market conditions will continue for a long time or that there will be an even further deterioration in financial markets and
confidence in major economies even after the crisis of COVID-19 has passed.



These financial market conditions affect our business in a number of ways.
The diminished availability of credit in financial markets adversely affects the ability of our customers to obtain financing for purchases
and operations and could result in a decrease in or cancellation of orders for our products. Financial market conditions could also affect
our ability to raise funds in the capital and bank lending markets.



Risks that impact our customers may impact us.



If fewer players visit our customers' facilities, if such players have
less disposable income to spend at our customers' facilities, if our customers are unable to devote resources to purchasing and leasing
our products, or if our customers are in an area that is experiencing a health crisis, such as COVID-19, that causes them to shut down
either voluntarily or involuntarily, there could be an adverse effect on our business. Such risks that affect our customers include, but
are not limited to:



| | · | adverse economic conditions in gaming markets including recession, economic slowdown, higher airfares
and higher energy and gasoline prices;                                       
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | · | global geopolitical events such as terrorist attacks, other acts of war or hostility, and popular uprisings
and violence such as those that have been occurring in the Middle East;
| | · | natural disasters such as major fires, floods, hurricanes, tornadoes, earthquakes, snowstorms and tsunamis
and their aftermath;                                                    
| | · | health crises, such as those caused by the spread of virus, epidemics and pandemics.                                                                                               



Political, legal and other risks associated with sales in Native
American jurisdictions could adversely affect our operating results.



Agreements with casinos in Native American jurisdictions may subject us
to sovereign immunity risks and could subject us to additional compliance costs.



We compete in a single industry and our business may suffer if our
products become obsolete or demand for them decreases, including downturns in the gaming industry.



We derive substantially all of our revenues from leasing and selling slot
machines for the gaming industry. If the gaming industry suffers a significant downturn, our business may materially suffer if our products
become obsolete or if use of our products decreases. Our licensing agreements with our customers are typically month-to-month and provide
for termination upon 30 days' prior notice by either party.





13









Accordingly, consistent demand for and satisfaction with our products by
our customers is critical to our financial condition and future success. Problems, defects or dissatisfaction with our products could
cause us to lose customers or revenues from leases with minimal notice. Additionally, our success depends on our ability to keep pace
with technological advances in our industry and to adapt and improve our products in response to evolving customer needs and industry
trends. If demand for our products weakens due to lack of market acceptance, technological change, competition, regulatory changes, or
other factors, it could have a material adverse effect on our business, results of operations and financial condition.



Defects in, and fraudulent manipulation of, our products could reduce
our revenue, increase our costs, burden our engineering and marketing resources, involve us in litigation and adversely affect our gaming
licenses.



Our success will depend, in part, on our ability to avoid, detect and correct
software and hardware defects and prevent fraudulent manipulation of our products. Our products are subject to rigorous internal testing
and will be subject to additional testing by regulators in certain gaming jurisdictions. We may not be able to build and maintain products
that are free from defects or manipulations and that satisfy these tests. Although we have taken steps to prevent defects and manipulations,
our products could suffer such defects and manipulation after they have been widely distributed.



Although we do not believe it is likely, it is possible that an individual
could breach the security of a casino and fraudulently manipulate its operations. Any such fraudulent manipulation, defects or malfunctions,
or any such problems with our slot machines, could result in financial losses for our customers and, in turn, termination of leases, cancellation
of orders, product returns and diversion of our resources. Even if our customers do not suffer financial losses, casinos may replace our
machines if they do not perform according to expectations. Any of these occurrences could also result in the loss of, or delay in, market
acceptance of our products and loss of licenses, leases and sales.



In addition, the occurrence of defects in, or fraudulent manipulation of,
our products may give rise to claims for lost revenues and related litigation by our customers and may subject us to investigation or
other disciplinary action by regulatory authorities that could include suspension or revocation of our regulatory approvals.



Our failure to obtain any necessary additional financing would have
a material adverse effect on our business.



Most of our revenue is derived from leasing our products to customers under
operating leases. Our ability to lease our products to customers on a large scale will require us to obtain additional financing necessary
for the manufacture of our products. Our inability to obtain financing on terms that would allow us to license our products profitably
would hamper our ability to distribute the products on a large scale and may therefore, delay our ability to obtain significant market
presence as well as market acceptance of our products.



In addition, if our revenues are not sufficient, or if we incur more than
anticipated expenses, we may need to seek additional equity or debt financing. It is uncertain whether we could obtain such financing.
Even if such financing is available, it may not be on terms that are favorable to us or in sufficient amounts to satisfy our requirements.
If we need, but are unable to obtain, additional financing we may be unable to develop our products, meet customer demand for our products,
withstand adverse operating results, or otherwise accomplish our business objectives. More importantly, if we are unable to obtain further
financing when needed, our continued operations may have to be scaled down or even ceased and our ability to generate revenues would be
negatively affected.





14









We are dependent on intellectual property rights. Therefore, infringement
claims against us, patents issued to our competitors, or misappropriation of our trade secrets or other proprietary information may adversely
affect us.



Our competitors have patents covering, among other things, gaming machine
features, bonusing techniques and related technologies. If our products use processes or other subject matter that is claimed under our
competitors’ patents, or if other companies obtain patents claiming subject matter that we use, those companies may bring infringement
actions against us.



Whether a product infringes a patent involves complex legal and factual
issues, which can be time-consuming and expensive to resolve. In addition, because patent applications can take many years to be approved,
there may be applications now pending of which we are unaware, which may later result in the issuance of patents that our products may
infringe upon or that may lead to infringement claims against us. If our product infringes a patent, we could be prevented from distributing
the product unless and until we obtain a license or redesign the product to avoid infringement. A license may not be available or may
require us to pay substantial royalties. We also may not be successful in redesigning a product to avoid infringement.



Infringement and other intellectual property claims, with or without merit,
can be expensive and time-consuming to litigate, and we may not have the resources to defend against infringement suits brought against
us. Furthermore, if we are found to have willfully infringed on another party’s patent, we might be liable for treble damages.



We also rely on trade secrets and other proprietary information. We enter
into confidentiality agreements with our employees and independent contractors regarding our trade secrets and proprietary information,
but we cannot be assured that the obligation to maintain the confidentiality of our trade secrets or proprietary information will be honored.
Despite various confidentiality agreements and other trade secret protections, our trade secrets and proprietary know-how could become
known to, or independently developed by, competitors.



The use of our products could result in product liability claims
that could be expensive and that could damage our reputation and harm our business.



Our business exposes us to the risk of product liability claims. Subject
to contractual limitations, we will face financial exposure to product liability claims if our products fail to work properly and cause
monetary damage to patrons, casinos or gaming venues. In addition, defects in the design or manufacture of our products might require
us to recall each product that has been leased. Although we maintain product liability insurance, the coverage limits of policies available
to us may not be adequate to cover future claims. If a successful claim is brought against us in excess or outside of our insurance coverage,
we may be forced to divert resources from the development of our products, the pursuit of regulatory approvals and other working capital
needs in order to satisfy such claims.



We are dependent on the success of our customers and are subject
to industry fluctuations.



Our success depends on our customers licensing or buying our products to
expand their existing operations, replace existing gaming products or equip a new casino. Any slowdown in the replacement cycle may negatively
impact our operations. Additionally, to the extent existing or potential customers choose to allocate capital to expenditures other than
gaming products, such as real estate acquisitions, hotel furnishings, restaurants and other improvements, or generally to reduce expenditures,
particularly in response to current conditions in the global economy and especially in the gaming industry and due to COVID-19, we may
suffer a material adverse effect on our business, results of operations and financial condition.





15











Certain market risks may affect our business, results of operations
and prospects.



In the normal course of our business, we are routinely subjected to a variety
of market risks, examples of which include, but are not limited to, interest rate movements, fluctuating commodities markets, higher labor
costs, labor shortages, increased fuel prices and collectability of receivables. Further, some of our customers may experience financial
difficulties, possibly as a result of conditions in the gaming industry, or may otherwise not pay accounts receivable when due, resulting
in increased write-offs. We may incur material losses in these areas in the future, particularly in the aftermath of COVID-19.



The loss of the services of our Chief Executive Officer (“CEO”)
or other key employees, or the failure to attract additional key individuals, could materially and adversely affect our business.



Our success will depend on retention of key executives who have been instrumental
in our development thus far, and on our ability to attract and retain employees to complete the development or enhancements of our products
and to market them widely. We seek to compensate and incentivize our executives and other key employees through competitive salaries and
equity incentive compensation, but such compensation may not be sufficient to enable us to retain them or hire new personnel.



Our success will depend on the reliability and performance of third-party
manufacturers and suppliers.



We currently obtain slot machine cabinets from third party manufacturers.
If those manufacturers are unable to meet our requirements, we would be significantly hampered in serving our customers and may miss revenue-generating
opportunities. Our inability to contract with third-party manufacturers and suppliers to provide a sufficient supply of our products on
acceptable terms and on a timely basis could negatively impact our relationships with existing customers and cause us to lose revenue-generating
opportunities with potential customers. We may experience shortages in materials used in the manufacture of our slot machines as well
as additional lead times in receiving those supplies which could delay filling customer orders. In addition, manufacturing costs may increase
significantly, and we may not be able to successfully recover these cost increases with increased pricing to our customers. Either situation
could have an adverse impact on our business, results of operations and financial condition.



Attitudes and public policies regarding gaming might change to our
detriment.



Gaming has historically experienced backlash from various constituencies
and communities. Public tastes are unpredictable and subject to change, and they may be affected by changes in the country’s economic,
political and social climate. A change in public tastes or a backlash among certain constituencies or in certain communities could result
in reduced popularity of gaming in general, or increased regulation of the gaming industry, either of which could significantly reduce
demand.



The novel coronavirus pandemic outbreak COVID-19 could continue to
spread rapidly and affect our suppliers, customers and employees, and cause disruptions in current and future plans for operations and
expansion.



Our performance will depend on the duration and spread of the outbreak
of the novel coronavirus disease COVID-19, as well as any future restrictions placed on us or our customers due to the outbreak, whether
mandated or recommended.



With continued waves of variants and subvariants of COVID-19, customers
may continue to lose patrons due to fears about being in public and potential exposure to COVID-19 or future pandemics. Customers may
experience significant losses due to the COVID-19 outbreak and may terminate their existing contracts or postpone or ultimately cancel
future planned orders and contracts due to those losses. Travel may be restricted to certain areas which may limit our ability to obtain
new customers or jurisdictions, or to provide services in those areas in which our customers are currently located. We may experience
a shortage of labor due to quarantine or prolonged illness within our own organization or at supplier or customer locations.





16











The situation surrounding COVID-19 remains uncertain and the degree to
which COVID-19 will impact the Company’s performance in its aftermath will depend on the duration and continued spread of COVID-19
and its variants and sub-variants, as well as any future restrictions placed on us or our customers due to the outbreak, whether mandated
or recommended.



We have been incurring significant additional costs since we became
a publicly reporting company in 2008, and we expect this to continue.



Our public company compliance costs before we acquired Lightning Poker
in January 2008 in the Merger were not substantial, due to our minimal operations before the Merger. Lightning Poker did not operate as
a public company before the Merger. As a publicly reporting company with operations since January 2008, we have been incurring, and will
continue to incur, significant legal, auditing and other expenses. In addition, the Sarbanes-Oxley Act of 2002, as well as rules implemented
by the United States Securities and Exchange Commission (“SEC”), have imposed various requirements on public companies. Our
management and other personnel need to devote a substantial amount of time to these matters.



Our business is subject to quarterly fluctuation.



Our quarterly operating results may vary based on the timing of the opening
of new gaming jurisdictions, the opening or closing of casinos, the expansion or contraction of existing casinos, approval or denial of
our products and corporate licenses under gaming regulations, the introduction of new products, the mix of lease versus sales revenue,
and the closure of or operating restrictions imposed on ours and our customers’ physical locations due to COVID-19. As a result,
our operating results could be volatile, particularly on a quarterly basis.



Risks Relating to our Common Stock



There is no trading market for our common stock, and liquidity of
shares of our common stock is limited.



There is no public trading market for our common stock, and we do not expect
a public trading market to develop in the foreseeable future. Trading in our stock has been minimal, the number of shareholders is relatively
small, and there are currently no market makers for our stock. Consequently, holders of our stock may find it difficult to liquidate their
investments.



Our common stock might never be listed on any stock exchange.



We might not attempt to meet, or we might be unable to meet, the initial
listing standards of NASDAQ or any other stock exchange. Even if we obtain a listing of our common stock, we might be unable to maintain
that listing. Before our stock is so listed, we might seek to have our stock quoted on the OTCQB or OTC Pink marketplaces of OTC Link,
where our stockholders may find it more difficult than on a stock exchange to dispose of shares or obtain accurate quotations as to trading
price and trading activity. In addition, if we failed to meet criteria set forth in a trading rule issued by the SEC, that rule would
impose various practice requirements on broker-dealers who sell our stock to persons other than established customers and accredited investors.
This may deter broker-dealers from recommending or selling our stock, which may further reduce its liquidity. This would also make it
more difficult for us to raise additional capital.



We have never paid dividends on our common stock.



We have never paid dividends on our common stock and do not intend to pay
any dividends in the foreseeable future. We anticipate that any funds available for payment of dividends will instead be re-invested into
the Company to further our business strategy.





17









Our authorized Preferred Stock could be issued under circumstances
that would adversely affect holders of our common stock.



Our Articles of Incorporation authorize the issuance of up to 10,000,000
shares of Preferred Stock with designations, rights and preferences determined from time to time by our Board of Directors. Accordingly,
our Board of Directors is empowered, without stockholder approval, to issue those shares with dividend, liquidation, conversion, voting,
or other rights which could adversely affect the voting power or other rights of holders of our common stock. For example, those shares
could be utilized, under certain circumstances, as a method of discouraging, delaying or preventing a change in control of our company.
Although no shares of Preferred Stock are currently outstanding and we have no present intention to issue any shares of Preferred Stock,
there is no assurance that we will not do so in the future.



---



Item 1B. Unresolved Staff Comments



None.



---



Item 1C. Cybersecurity



The Company has integrated the assessment, identification, and management
of cybersecurity threats within its overall risk assessment process. In general, cybersecurity risk is overseen by management which reports
and discusses cyber risks and developments, if any, with the Board of Directors. In addition, the Company has engaged an outside managed
IT services company which provides continuous monitoring of any events that could cause a business interruption or degradation of technology
performance as well as any information regarding security incidents that may pose a risk to the Company.



---



Item 2. Properties.



We lease office and warehouse space of 11,566 square feet located at 23
Creek Circle, Boothwyn, PA 19061 at a current average rental of $113,732 per year. The lease was renewed in 2020 and expires in August
2026. This is the location of our principal offices and substantially all of our operations. The premises are in good condition and adequate
for our foreseeable needs. We believe our property is adequately insured.



---



Item 3. Legal Proceedings.



None.



---



Item 4. Mine Safety Disclosures.



None



---





18













PART II





Item 5. Market for Registrant's Common Equity, Related Stockholder Matters
and Issuer Purchases of Equity Securities.



Market information. There is currently no established public trading
market for our common stock, and we do not expect such a market to develop in the foreseeable future. Trading in our stock to date has
been minimal and we have no reliable basis for reporting trading prices or bid prices.



Holders of record. On March 29, 2024, there were 73 shareholders
of record of our common stock and one shareholder of record of our Nonvoting Common Stock. We have no information that indicates the number
of beneficial owners is materially higher.



Dividend policy.We have never declared or paid cash dividends on
our stock. We intend to retain any future earnings to finance the growth and development of our business and do not intend to pay any
cash dividends on our stock in the foreseeable future. Payment of dividends in the future, if any, will be made at the discretion of our
Board of Directors. Such decisions will depend on a number of factors, including our future earnings, capital requirements, financial
condition and future prospects and such other factors as our Board of Directors may deem relevant.



Securities Authorized for Issuance Under Equity Compensation Plans



The following table sets forth information as of December 31, 2023, with
respect to the equity compensation plan approved by security holders, the 2016 Stock Option Plan (the “2016 Plan”) under which
we have authorized 5,700,000 shares of our Non-voting common stock for issuance.





|Stock
    Option Plan |  | Number
                                            of securities to be issued upon exercise of outstanding options, warrants and rights (a) |  | Weighted-
                                            average 
                                            exercise 
                                            price of 
                                            outstanding 
                                            options, 
                                            warrants
                                            and rights (b) |  | Number
                                            of 
                                            securities 
                                            remaining 
                                            available for future issuance under equity 
                                            compensation plan (excluding 
                                            securities reflected in column (a)) (c)
|--------------------- |  | ------------------------------------------------------------------------------------------------------------------------------------------- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|2016 Plan             |  | 2,875,000
    (1)                                                                                                                           |  | $                                                                                                                                                                                                                                                                                                                                                                                                         |  |                                                                                                                                                                                                                                                                                                                                                                                                                            
|                      |  |                                                                                                                                             |  |                                                                                                                                                                                                                                                                                                                                                                                                           |  |                                                                                                                                                                                                                                                                                                                                                                                                                            





(1) Stock
options were granted on March 8, 2017 and on March 5, 2019 to employees with greater than one year of service as of those dates. 100,000
in options were granted to new hires as incentives upon hire in May 2021. All options were granted using a five-year vesting schedule
and as of March 29, 2024, no options have been exercised.



(2) On
November 30, 2018, the Board of Directors determined that it was in the best interests of the Company to approve the reduction in the
exercise price of the options granted under the 2016 Plan before that date based on current valuation information available. The market
price of the Company’s stock was determined to be $.13 per share and the Board authorized the reduction of the option exercise price
to that amount from the original $.28 per share.



---



Item 6. Selected Financial Data.



Not applicable.



---





19











Item 7. Management’s Discussion and Analysis of Financial Condition
and Results of Operations.



CAUTIONARY STATEMENT



Throughout this report we make “forward-looking statements,”
as that term is defined in Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of
the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Forward-looking statements include the words “may,”
“will,” “could,” “would,” “likely,” “estimate,” “intend,” “plan,”
“continue,” “believe,” “expect,” “project” or “anticipate” or the negative
of such terms and similar words and include all discussions about our ongoing or future plans, objectives or expectations.



We have based these forward-looking statements on our current expectations
and projections about future events. These forward-looking statements are subject to known and unknown risks, uncertainties and assumptions
that may cause our actual results, level of activity, performance or achievements to be materially different from any future results,
levels of activity performance or achievements expressed or implied by such forward-looking statements. You should read this report completely
and with the understanding that actual future results may be materially different from what we expect. We do not plan to update forward-looking
statements unless applicable law requires us to do so, even though our situation or plans may change in the future.



All future written and oral forward-looking statements attributable to
us or any person acting on our behalf are expressly qualified in their entirety by the cautionary statements contained or referred to
in this section or elsewhere in this report. In light of these and other risks, uncertainties and assumptions, the forward-looking events
discussed in this report might not occur. Specific factors that might cause our actual results to differ from our expectations, might
cause us to modify our plans or objectives, or might affect our ability to meet our expectations include, but are not limited to those
identified in Item 1A. “RISK FACTORS”. The historical financial information contained in this section has been derived from
our financial statements and should be read together with the financial statements and related notes contained elsewhere in this report.



Overview



We were formed to develop and market our Poker Table, which is an electronic
poker table that provides a fully automated table gaming experience without a dealer in casinos and card rooms in regulated jurisdictions
worldwide. In 2009, we commenced the design, manufacture, marketing, sale and operation of slot machines to customers in various gaming
jurisdictions. When we expanded our products to include slot machines, we embarked on an initiative to market our slot machines to Native
American jurisdictions as well as the commercial casino marketplace and cruise lines.



We are registered as an approved vendor to distribute our gaming products
in 58 jurisdictions. We must obtain regulatory approvals in many additional jurisdictions in order to fully effectuate our business plan.
We may not receive any such regulatory approvals. Due to these and a variety of other factors, including those described under “RISK
FACTORS” in Item 1A. of this report, we may be unable to generate significant revenues or margins, control operating expenses or
achieve or sustain profitability in future years.



Critical Accounting Policies



The discussion and analysis of our financial condition and results of operations
are based on our financial statements, which have been prepared in accordance with accounting principles generally accepted in the United
States (“GAAP”). The preparation of these financial statements requires us to make estimates and judgments that affect the
reported amounts of assets, liabilities, revenues and expenses, and related disclosures. On an ongoing basis, we evaluate these estimates,
including those related to the valuation of equity awards issued. We base our estimates on historical experience and on various other
assumptions that we believe are reasonable under the circumstances, the results of which form the basis for making judgments about the
carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates
under different assumptions or conditions.





20









We believe that of our significant accounting policies, which are described
in Note 1 to our financial statements appearing elsewhere in this report, the following accounting policies involve a greater degree of
judgment and complexity. Accordingly, these are the policies we believe are the most critical to aid in fully understanding and evaluating
our consolidated financial condition and results of operations.



Revenue Recognition



We generate revenue from leasing and selling our slot machines and from
sales of parts and certain services relating to our slot machines. We recognize revenue on sales of our products, net of rebates, discounts
and allowances, when an agreement exists, typically an approved sales proposal or contract, or upon receipt of customer’s purchase
order, in which the sales price is fixed or determinable and when the performance obligations under that agreement have been completed.
This typically occurs when products are delivered and/or installed. If multiple units of the products are included in any one sale or
lease agreement or ancillary services are provided such as delivery, installation, or placement of the product on the gaming floor (“placement
fees”), revenue is allocated to each unit or service based upon its respective fair value against the total contract value, and
revenue recognition is deferred on those units or services until each of the performance obligation requirements under the applicable
section(s) of that agreement have been completed.



Revenue generated under operating leases is recognized when the performance
obligation is satisfied. Lease agreements are based on either a fixed daily or monthly rate, or a pre-determined percentage of the monthly
net win or “participation” revenue collected for each slot machine, subject to monthly minimums and maximums. Customers under
fixed daily rate agreements are invoiced on the first day of the month at the agreed upon daily rate per unit for the number of days the
unit is leased during the month, typically the total number of days in the month. Customers under revenue agreements are invoiced when
participation reports are remitted to us detailing the monthly per unit and per theme information including coin-in, net win, and days
on the floor data. Revenue under both of these bases is recorded as lease revenue and recognized in the month to which the lease data
pertains.



There may be instances in which a lease is offered to a customer with the
option to convert to a sale upon the completion of certain obligations such as a pre-determined paid or reduced-rate lease term and/or
a

free-trial period. In addition, circumstances may arise in which a customer
wishes to purchase machines after being on lease at their facility. In all of these situations, the initial revenue is recorded as lease
revenue as described above, and the agreed upon sales price is shown as sales revenue when the lease is converted to a sale and all performance
obligations of the sale have been met.



For sales of slot machines, a warranty on parts may be offered which expires
after a defined period of time, usually 90 days after delivery or installation date. One slot machine theme conversion per unit sold may
also be offered during the one-year period beginning upon the delivery and/or installation of the slot machine, and only if the slot game
fails to earn at least eighty percent of the rolling monthly slot machine gaming floor area average for the customer. The game theme must
be of the same category approved in the customer's gaming jurisdiction for use in the slot machine and the customer must provide written
notice requesting the conversion, including certification of the average that serves as the basis for any such game theme conversion.
In addition, the customer must return the original game theme components to the Company upon conversion of the slot game theme.



The cost of the warrantied and theme conversion items is borne by the Company.
Historically, these costs have been immaterial and are expensed at time of issuance, however the Company has and will continue to assess
these post-sales costs to determine whether they constitute performance obligations and should be recorded at time of sale. A contract
asset is recorded when the performance obligations of the Company have been met and the customer has not been billed. A contract liability
is recorded when the Company has an obligation to transfer products or services to a customer for which consideration has been received.





21









Research and Development



We expense internally developed software costs in accordance with guidance
by the Financial Accounting Standards Board (“FASB”) with respect to research and development costs. All employee and product
costs associated with the development of our products are expensed until technological feasibility is reached. Technological feasibility
is established when a product design and a working model of the software product have been completed and the completeness of the working
model and its consistency with the product design have been confirmed by testing.



Equity-based Compensation and Warrants



We account for our stock-based employee compensation awards in accordance
with FASB issued guidance on transactions in which an entity exchanges its equity instruments for goods or services. The FASB guidance
also addresses transactions in which an entity incurs liabilities in exchange for goods or services that are based on the fair value of
the entity’s equity instruments. We value stock options issued based upon the Black-Scholes option-pricing model and recognize this
value as an expense over the period in which the options vest.



We estimate the fair value of each option award on the date of grant using
the Black-Scholes option pricing model. Expected volatility is based upon publicly traded companies with similar characteristics as us.
We use historical data to estimate option exercise and employee termination within the valuation model. The expected term of options granted
represents the period of time that options granted are expected to be outstanding. The risk-free rate for periods within the contractual
life of the option is based on the U.S. Treasury yield curve in effect at the time of grant. No stock options were granted during 2023
or 2022.



In connection with loans obtained by the Company, the lender holds a warrant
to purchase 7,000,000 shares of the Company’s common stock at a price of $.05 per share, expiring November 2029. The warrant is
detachable, may be exercised via cashless exercise however may not be exercised until or unless the lender is fully licensed in the Company’s
gaming jurisdictions. The Company classified its warrant as a liability in accordance with the applicable guidance and was initially,
and will subsequently be, measured at its estimated fair value using the Black-Scholes pricing model. The warrant will continue to be
classified as a liability until such time it is exercised, expires or is amended in a manner that would no longer require classification
as a liability.



Income Taxes



We account for income taxes under the asset and liability method. Deferred
tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement
carrying amounts of assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted
tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled.
The effect on deferred tax assets and liabilities of a change in tax rates is recognized in the period that includes the enactment date.
The accounting for income taxes involves significant judgments and estimates and deals with complex tax regulations. When recognizable,
the recoverability of certain deferred tax assets is based in part on estimates of future income and the timing of temporary differences,
and the failure to fully realize such deferred tax assets could result in a higher tax provision in future periods. If, based on available
data, future estimated tax liabilities differ materially from our estimates, the resulting difference will be recorded in the period in
which they become known.



Impairment of Long-lived Assets



The Company reviews its long-lived assets, including property and equipment
and license fees, for impairment whenever events or changes in circumstances indicate that the carrying amount of the assets may not be
fully recoverable. To determine the recoverability of its long-lived assets, including definite lived license fees, the Company evaluates
the probability that future undiscounted net cash flows, without interest charges, will be less than the carrying amount of the assets
or for identifiable intangibles with finite useful lives. In addition, the Company considers changes in our business strategy and the
industry as a whole in assessing recoverability of its long-lived assets. Any resulting impairment loss will be measured and recognized
in the period in which the impairment becomes known. Based on the Company’s evaluation, there were no impairments for 2023 and 2022.





22









Assessment of Going Concern



The Company is required to evaluate whether there are conditions or events,
considered in the aggregate, that raise substantial doubt about its ability to continue as a going concern for a period of one year after
the date that the financial statements are issued, taking into consideration the Company’s current financial condition, conditional
and unconditional obligations due within one year and the funds and cash flow necessary to maintain operations. It is management’s
responsibility to perform an evaluation for every reporting period presented. The financial statements contained herein were prepared
on a going concern basis. The going concern basis assumes that the company will continue in operation for at least the next twelve months
from the date our financial statements are issued and based on management’s evaluation, will be able to realize its assets, discharge
its liabilities and commitments, and maintain positive working capital in the normal course of business.



Recent Accounting Pronouncements



In June 2016, the FASB issued the update Financial Instruments –
Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, which changes the estimation of credit losses from an
“incurred loss” methodology to one that reflects “expected credit losses” (the Current Expected Credit Loss model,
or CECL) which requires consideration of a broader range of reasonable and supportable information to inform credit loss estimates. Measurement
under CECL is based on relevant information about past events, including historical experience, current conditions, and reasonable and
supportable forecasts that affect collectability of reported amounts. The Company adopted this amendment in January 2022 which did not
have a material impact on our consolidated financial statements.



---





Twelve Months Ended December 31, 2023 Compared
to Twelve Months Ended December 31, 2022

(All amounts are rounded to the nearest $1,000)



Revenue



The Company’s revenues for the year ended December 31, 2023 were
$4,633,000 compared to $5,821,000 for the prior year, a decrease of $1,188,000. This decrease is attributable to the decrease in both
lease revenues and sales of slot machines and related parts, which decreased by $590,000 and $599,000, respectively, for the year ended
December 31, 2023 as compared to the year ended December 31, 2022.



Lease and license fees decreased by $590,000 to $3,169,000 for the year
ended December 31, 2023 as compared to $3,759,000 for the year ended December 31, 2022. This decrease was attributable to the decrease
in the average number of slot machines out on lease, the decrease in the average daily rate on our leased slot machines as a result of
the pressure placed on our customers to reduce operating expenses to combat the lingering effects of COVID-19, and the sale of slot machines
previously on lease.



Revenue from slot machine unit sales decreased by $722,000, from $1,956,000
for the year ended December 31, 2022 to $1,235,000 for the year ended December 31, 2023. This decrease is partially offset by the increase
in kiosk sales of $132,000, for a net decrease in unit sales of $590,000. The decrease is unit sales is coupled with the decrease in parts
sales of $9,000, from $106,000 for the year ended December 31, 2023 to $97,000 for the year ended December 31, 2023.







23











Costs of Revenue



Cost of products sold, which consists of the cost of slot machines and
parts inventory sold, for the year ended December 31, 2023 was $553,000 as compared to $1,159,000 for the year ended December 31, 2022,
a decrease of $606,000 as a direct result of the decrease in unit sales as described above.



Depreciation on slot machine units out on lease decreased by $34,000 to
$1,103,000 for the year ended December 31, 2023 from $1,137,000 for the year ended December 31, 2022. This decrease was the result of
slot machine units that were fully depreciated during the year as well as those that were sold that were previously out on lease during
the year ended December 31, 2022 and 2023.



License and service fees increased by $14,000, from $5,000 for the year
ended December 31, 2022 to $19,000 for the year ended December 31, 2023 This is the direct result of the increase in the correlating license
revenues as well as a service fee agreement that was in place during 2023.



Operating Expenses



Operating expenses decreased by $84,000 to $377,000 for the year ended
December 31, 2023, from $461,000 for the year ended December 31, 2022. This decrease was the result of decreases in hardware,
supplies, repairs, conversion costs, and travel during the year ended December 31, 2023, a direct result of the decrease in the number
of leased slot machines during the year.



Research and Development Expenses



Research and development expenses decreased by $17,000 to $625,000 for
the year ended December 31, 2023, from $642,000 for the year ended December 31, 2022. Research and development expenses are related
to the development of gaming equipment and consist mainly of payroll and related expenses for programmers and graphic artists and
the costs to acquire new brands. This decrease is the direct result of the elimination of a contract position and the reduction in the
bonus accrual during the year ended December 31, 2023.



Selling, General and Administrative Expenses



Selling, general and administrative expenses were $2,122,000 for the year
ended December 31, 2023, a decrease of $156,000 from $2,278,000 for the year ended December 31, 2022. This decrease is attributable to
the reduction in payroll and related expenses, travel, meals, and entertainment associated with the elimination of a regional sales director,
the reduction in the bonus accrual, the reduction in license and regulatory fees, and the reduction in trade show and miscellaneous costs,
for a total decrease of $187,000. These decreases were offset by the increase in rent and building costs, attributable to the increase
in the monthly common area maintenance fee and the annual building expense reconciliation charge, totaling $20,000 as well as an increase
in professional fees of $11,000.



Depreciation and Amortization



Depreciation and amortization decreased by $5,000 to $28,000 for the year
ended December 31, 2023 from $33,000 for the year ended December 31, 2022, a result of fully amortized and depreciated assets during the
year.



Gain on Change in Fair Value of Warrant Liability



The estimated fair value of our common stock decreased from $.10 to $.08
per share during the year ended December 31, 2023. This resulted in a gain in fair value of the warrant liability of $214,000 during the
year ended December 31, 2023 versus a gain of $141,000 during the year ended December 31, 2022, for an increase of $73,000.





24











Interest Expense



Interest expense decreased $111,000 from $639,000 for the year ended December
31, 2022 to $528,000 for the year ended December 31, 2023, as a result of the paydown of principal on the notes payable and auto loan.



Interest Income



Interest income decreased $2,000 from $13,000 for the year ended December
31, 2022 to $11,000 for the year ended December 31, 2023 as a result of the one-time interest received on the employee retention tax credit
refunds.



Income from Employee Retention Credits



Income from tax retention credits decreased $231,000, from $231,000 for
the year ended December 31, 2022 to $-0- for the year ended December 31, 2023, the result of the refunds received in June 2022 from the
Employee Retention Tax credits under the CARES Act.



Income Tax Expense



Income tax expense increased to $5,000 for the year ended December 31,
2023 from $2,000 for the year ended December 31, 2022 due to the increase in state minimum income taxes that occurred in 2023.



Liquidity and Capital Resources



We realized a net loss of $494,000 and funded our working capital investments
and capital expenditures associated with our growth strategy with the revenue generated from leases and proceeds from the sales of our
gaming products. These transactions that occurred in 2023 and 2022 are described in more detail following the discussion of cash flows
below:



Discussion of Statement of Cash Flows

|                                          |  | For the year ended December 31, |           |     
|----------------------------------------- |  | ------------------------------- | --------- | ----
|                                          |  | 2023                            |           | 2022
|Net cash provided by operating activities |  | $                               | 1,269,000 |     
|Net cash used in investing activities     |  |                                 | (309,000  | )   
|Net cash used in financing activities     |  |                                 | (725,000  | )   
|Net increase (decrease) in cash           |  |                                 | 235,000   |     
|Cash, beginning of year                   |  |                                 | 1,487,000 |     
|Cash, end of year                         |  | $                               | 1,722,000 |     



For the year ended December 31, 2023, net cash provided by operating activities
increased $349,000 to $1,269,000 as compared to $920,000 for the year ended December 31, 2021. The increase in cash from operating activities
was due to the timing of payments to creditors, suppliers and vendors for inventory purchases and license agreements.



Net cash used in investing activities increased by $4,000 to $309,000 for
the year ended December 31, 2023, from $305,000 for the year ended December 31, 2022. Cash used in investing activities is primarily the
function of the net investment in property and equipment, principally slot machines used in our operations. This increase in cash
used was due to the increase in slot machines built and placed in service during the year.





25









Net cash used in financing activities was $748,000 for the year ended December
31, 2022, versus $725,000 for the year ended December 31, 2023. The amendment of the repayment terms of the loan agreement resulted in
the net decrease in cash used in financing activities of $23,000.





Operations and Liquidity Management



For the year ended December 31, 2023, we sustained a net loss of $494,000
however we generated $1,269,000 in cash from operating activities and maintained and sustained a working capital surplus.



Since 2020 and post the throes of the pandemic COVID-19, pressure has been
placed on casinos to lower operating costs. As such, the Company has been faced with placing slot machines into casinos at reduced or
even $-0- per day rates to attain or even retain space on the casino floor. In addition, certain customers have reduced the number of
leased products on their casino floors as a matter of policy. Furthermore, the personnel vacancy in the Company’s southwestern territories
in 2023, coupled with the factors as listed above, has had a significant impact in the loss of recurring revenue install base in that
territory. These factors have caused the leasing revenues to experience a decline during the year, however sales of slot machines have
helped to fill the gap in revenues and profits. In addition, we continue to employ aggressive expense management to mitigate the impact
these factors have had on our revenues and performance.



The generation of cash flow sufficient to meet our cash needs in the future
will depend on our ability to continue to obtain the regulatory approvals required to distribute our products and successfully market
them to casinos, the development of new slot machine themes and new cabinets that are appealing to our customers and their patrons, and
managing through the lingering effects that COVID-19 has had on us, our customers, and suppliers.



As of December 31, 2023, our cash balance was $1,722,000 and our current
gross cash requirements are approximately $250,000 to $280,000 per month, principally for payroll and related expenses, professional services,
occupancy, and office expenses and $94,000 for debt service. We currently have adequate inventory to meet existing orders awaiting shipment
and expected future orders and believe that the purchase of hardware components for our products will not be necessary for several months.
Based on our cash flow projections and anticipated revenues, we believe we have sufficient cash flow to meet our obligations and support
our operations for the next twelve months.



Our ability to sell or license our products on a large scale in the future
may require additional financing for working capital. There is no assurance that such additional financing would be available to us, if
at all, on reasonable terms, particularly for the reasons discussed above in the “RISK FACTORS” item. Our inability to obtain
such financing on terms that allow us to lease our products profitably would hamper our ability to distribute our products on a large
scale.



Contractual Obligations



The table below sets forth our known contractual obligations as of December
31, 2023:



|                                |  | Total |           | Less than 1 year |  | 1 - 3 years |         | 3 - 5 years |  | More than 5 years
|------------------------------- |  | ----- | --------- | ---------------- |  | ----------- | ------- | ----------- |  | -----------------
|                                |  |       |           |                  |  |             |         |             |  |                  
|Operating lease obligations (1) |  | $     | 271,476   |                  |  | $           | 93,246  |             |  | $                
|Auto loan obligations (2)       |  |       | 36,648    |                  |  |             | 16,380  |             |  |                  
|Debt obligations (3)            |  |       | 3,281,630 |                  |  |             | 689,366 |             |  |                  
|Total                           |  | $     | 3,589,754 |                  |  | $           | 798,992 |             |  | $                





|(1) | Represents operating lease agreement for office and warehouse facility.
|--- | -----------------------------------------------------------------------
|(2) | Represents outstanding amounts on auto loan.                           
|(3) | Represents outstanding amounts on notes payable.                       





26











Off-Balance Sheet Arrangements



As of December 31, 2023, there were no off-balance sheet arrangements.



---





Item 7A. Quantitative and Qualitative Disclosures about Market Risk.



Not Applicable.



---



Item 8. Financial Statements and Supplementary Data.



Report of Independent Registered Public Accounting Firm

The following is a list of financial statements filed herewith:

Consolidated Balance Sheets as of December 31, 2023 and 2022

Consolidated Statements of Operations for the years ended December 31,
2023 and 2022

Consolidated Statements of Changes in Stockholders’ Equity for the
years ended December 31, 2023 and 2022

Consolidated Statements of Cash Flows for the years ended December 31,
2023 and 2022







27















REPORT OF INDEPENDENT
REGISTERED PUBLIC ACCOUNTING FIRM

Opinion on the Financial Statements

We have audited the accompanying consolidated
balance sheet of Lightning Gaming Inc. and Subsidiaries (the Company) as of December 31, 2023 and 2022, and the related consolidated statements
of income, stockholders’ equity, and cash flows for each of the years in the two year period ended December 31, 2023, and the related
notes (collectively referred to as the financial statements). In our opinion, the consolidated financial statements present fairly, in
all material respects, the financial position of the Company as of December 31, 2023 and 2022 and the results of its operations and its
cash flows for each of the years in the two year period ended December 31, 2023, in conformity with accounting principles generally accepted
in the United States of America.

Basis for Opinion

These financial statements are the responsibility
of the Company’s management. Our responsibility is to express an opinion on the Company’s consolidated financial statements
based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB)
and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable
rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the
standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged
to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding
of internal control over financial reporting, but not for the purpose of expressing an opinion on the effectiveness of the Company’s
internal control over financial reporting. Accordingly, we express no such opinion.

Our audits included performing procedures to assess
the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond
to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements.
Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating
the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.

Critical Audit Matters

The critical audit matters are matters arising
from the current period audit of the financial statements that are required to be communicated to the audit committee and that: (1) relate
to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex
judgments. The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole,
and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the
accounts or disclosures to which they relate.

Going Concern



Description of the matter
and considerations leading to the matter



As described in Note 1 to the financial statement
the Company recognized a net loss for the year ended December 31, 2023, however based on their working capital surplus, financial condition,
cash flow projections, and anticipated revenues the Company believes they have sufficient cash flows to support operations for the next
twelve months. The Company is in compliance with its debt covenants at December 31, 2023, however is projecting to fail the covenants
in 2024 based on their projections, which causes risk that the lender may call on payment of the debt balance in full for which the Company
may not have sufficient funds to repay. Management has obtained waivers for the anticipated violation of its bank covenants through September
30, 2024 and based on the Company’s relationship with the lender they anticipate being able to obtain additional waivers as needed.
The Company’s continuance as a going concern is dependent upon these factors, among others.





28









Description of how the matter was addressed



We obtained management’s
assessment of going concern and their analysis as to why the lender will further extend its waiver of the covenants as it has historically
done and why the lender will not call the outstanding debt based on the information available to them at this time. In addition we reviewed
the Company’s plans to meet its financial obligations in the instance the debt was called upon by the lender which included (i)
an analysis showing the estimated fair value of the collateralized assets that exceeds the current loan amount (ii) commitment letter
from the CEO to support the Company with financing if needed; (iii) management’s development of and review of projections showing
increased sales and projected cash flows from operations and (iv) term sheets, bids from other investors showing the ability of the Company
to raise finance if needed.



Conclusion



Based on management’s
plans and related evidence obtained, substantial doubt about the Company’s ability to continue as a going concern is alleviated
and as such, we did not include a going concern emphasis of a matter in our report herein.

|                                                   
|---------------------------------------------------
|                                                   
|We have served as the Company’s auditor since 2020.
|                                                   
|Margate, Florida
    March 29, 2024                



































ASSURANCE DIMENSIONS CERTIFIED PUBLIC ACCOUNTANTS
& ASSOCIATES

also d/b/a McNAMARA and ASSOCIATES, PLLC

TAMPA BAY: 4920 W Cypress Street, Suite
102 | Tampa, FL 33607| Office: 813.443.5048 | Fax: 813.443.5053

JACKSONVILLE: 4720 Salisbury Road, Suite
223 | Jacksonville, FL 32256 | Office: 888.410.2323 | Fax: 813.443.5053

ORLANDO:  1800 Pembrook Drive, Suite
300 | Orlando, FL 32810 | Office: 888.410.2323 | Fax: 813.443.5053

SOUTH FLORIDA:  2000 Banks Road, Suite
218 | Margate, FL 33063 | Office: 754.800.3400 | Fax: 813.443.5053

www.assurancedimensions.com

---





29









Lightning Gaming, Inc. and Subsidiaries

Consolidated Balance Sheets



|                                               |  | December 31, 2023 |           | December 31, 2022
|---------------------------------------------- |  | ----------------- | --------- | -----------------
|Assets                                         |  |                   |           |                  
|Current Assets                                 |  |                   |           |                  
|Cash                                           |  | $                 | 1,722,323 |                  
|Accounts receivable, net                       |  |                   | 544,371   |                  
|Inventory                                      |  |                   | 363,995   |                  
|Prepaid expenses                               |  |                   | 161,483   |                  
|Total Current Assets                           |  |                   | 2,792,172 |                  
|                                               |  |                   |           |                  
|Property and Equipment, net                    |  |                   | 1,030,971 |                  
|                                               |  |                   |           |                  
|Right-of-use asset – building, net             |  |                   | 238,163   |                  
|Long-term accounts receivable                  |  |                   | 150,644   |                  
|Other assets                                   |  |                   | 8,193     |                  
|License fees, net of accumulated amortization  |  |                   | 13,450    |                  
|                                               |  |                   |           |                  
|Total Assets                                   |  | $                 | 4,233,593 |                  
|                                               |  |                   |           |                  
|See Notes to Consolidated Financial Statements |  |                   |           |                  
|                                               |  |                   |           |                  





30











Lightning Gaming, Inc. and Subsidiaries

Consolidated Balance Sheets (Continued)





|                                                                                                                                                                                                  |  | December 31, 2023 |             | December 31, 2022
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ----------------- | ----------- | -----------------
|Liabilities and Stockholders’ Equity                                                                                                                                                              |  |                   |             |                  
|Current Liabilities                                                                                                                                                                               |  |                   |             |                  
|Accounts payable                                                                                                                                                                                  |  | $                 | 86,067      |                  
|Accrued expenses                                                                                                                                                                                  |  |                   | 85,552      |                  
|Accrued interest                                                                                                                                                                                  |  |                   | 64          |                  
|Current portion of lease liability                                                                                                                                                                |  |                   | 93,246      |                  
|Current portion of auto loan                                                                                                                                                                      |  |                   | 16,380      |                  
|Current portion of note payable, net of debt discount                                                                                                                                             |  |                   | 689,366     |                  
|Total Current Liabilities                                                                                                                                                                         |  |                   | 970,675     |                  
|                                                                                                                                                                                                  |  |                   |             |                  
|Long-Term Debt and Other Liabilities                                                                                                                                                              |  |                   |             |                  
|Long-term notes payable, net of debt discount                                                                                                                                                     |  |                   | 2,592,264   |                  
|Long-term portion of auto loan                                                                                                                                                                    |  |                   | 20,268      |                  
|Fair value of warrant liability                                                                                                                                                                   |  |                   | 358,964     |                  
|Long-term lease liability                                                                                                                                                                         |  |                   | 178,230     |                  
|Total Long-Term Debt and Other Liabilities                                                                                                                                                        |  |                   | 3,149,726   |                  
|                                                                                                                                                                                                  |  |                   |             |                  
|Total Liabilities                                                                                                                                                                                 |  |                   | 4,120,401   |                  
|                                                                                                                                                                                                  |  |                   |             |                  
|Commitments and Contingencies (Note 8)                                                                                                                                                            |  |                   |             |                  
|                                                                                                                                                                                                  |  |                   |             |                  
|Stockholders' Equity                                                                                                                                                                              |  |                   |             |                  
|Preferred stock: $0.001 par value; authorized 10,000,000 shares, Series A Nonvoting capital stock 6,000,000 shares authorized, -0- shares issued and outstanding as of December 31, 2023 and 2022 |  |                   | —           |                  
|                                                                                                                                                                                                  |  |                   |             |                  
|Common stock: $0.001 par value; authorized 90,000,000 shares; 4,916,285 shares issued at December 31, 2023 and 2022, 4,649,383 shares outstanding at December 31, 2023 and 2022                   |  |                   | 4,917       |                  
|                                                                                                                                                                                                  |  |                   |             |                  
|Nonvoting common stock: $0.001 par value; authorized 50,000,000 shares; 33,300,000 issued and outstanding at December 31, 2023 and 2022                                                           |  |                   | 33,300      |                  
|                                                                                                                                                                                                  |  |                   |             |                  
|Additional paid in capital                                                                                                                                                                        |  |                   | 30,656,697  |                  
|Accumulated deficit                                                                                                                                                                               |  |                   | (30,560,911 | )                
|Treasury stock, 266,902 shares, at cost                                                                                                                                                           |  |                   | (20,811     | )                
|Total Stockholders’ Equity                                                                                                                                                                        |  |                   | 113,192     |                  
|                                                                                                                                                                                                  |  |                   |             |                  
|Total Liabilities and Stockholders’ Equity                                                                                                                                                        |  | $                 | 4,233,593   |                  
|                                                                                                                                                                                                  |  |                   |             |                  
|See Notes to Consolidated Financial Statements                                                                                                                                                    |  |                   |             |                  





31









---

Lightning Gaming, Inc. and Subsidiaries

Consolidated Statements of Operations





|                                                                         |  | Year Ended       
|------------------------------------------------------------------------ |  | -----------------
|                                                                         |  | December 31, 2023
|                                                                         |  |                  
|Revenues                                                                 |  |                  
|Lease, license and service fees                                          |  | $                
|Sales of gaming products and parts                                       |  |                  
|Total revenues                                                           |  |                  
|                                                                         |  |                  
|Costs of Revenue                                                         |  |                  
|Cost of products sold                                                    |  |                  
|License fees                                                             |  |                  
|Depreciation                                                             |  |                  
|Costs of Revenue                                                         |  |                  
|                                                                         |  |                  
|Gross Profit                                                             |  |                  
|                                                                         |  |                  
|Costs and operating expenses                                             |  |                  
|Operating expenses                                                       |  |                  
|Research and development                                                 |  |                  
|Selling, general and administrative expenses                             |  |                  
|Depreciation and amortization                                            |  |                  
|Total costs and operating expenses                                       |  |                  
|                                                                         |  |                  
|Operating (loss) income                                                  |  |                  
|                                                                         |  |                  
|Non-operating income (expense)                                           |  |                  
|Gain on change in fair value of warrant liability                        |  |                  
|Interest expense                                                         |  |                  
|Interest income                                                          |  |                  
|Income from employee retention credits                                   |  |                  
|Total non-operating (expense)                                            |  |                  
|Net (loss) before income taxes                                           |  |                  
|Income tax expense                                                       |  |                  
|Net (loss)                                                               |  | $                
|Net (loss) per common share - basic                                      |  | $                
|Net (loss) per common share – diluted                                    |  | $                
|Weighted average Series A Nonvoting shares outstanding-basic and diluted |  |                  
|Weighted average Common shares outstanding – basic and diluted           |  |                  
|Weighted average Nonvoting Common shares outstanding – basic and diluted |  |                  
|                                                                         |  |                  
|See Notes to Consolidated Financial Statements                           |  |                  





32









---

Lightning Gaming, Inc. and Subsidiaries

Consolidated Statements of Changes in Stockholders'
Equity

Years Ended December 31, 2023 and 2022





|                          |  | Common Stock |           | Nonvoting Common Stock |  | Additional Paid In |       | Accumulated |  | Treasury Stock |            | Total  
|------------------------- |  | ------------ | --------- | ---------------------- |  | ------------------ | ----- | ----------- |  | -------------- | ---------- | -------
|                          |  | Shares       |           | Amount                 |  | Shares             |       | Amount      |  | Capital        |            | Deficit
|Balance December 31, 2021 |  |              | 4,916,285 |                        |  | $                  | 4,917 |             |  |                | 33,300,000 |        
|Net loss                  |  |              | —         |                        |  |                    | —     |             |  |                | —          |        
|Stock based compensation  |  |              | —         |                        |  |                    | —     |             |  |                | —          |        
|Balance December 31, 2022 |  |              | 4,916,285 |                        |  |                    | 4,917 |             |  |                | 33,300,000 |        
|Net loss                  |  |              | —         |                        |  |                    | —     |             |  |                | —          |        
|Stock based compensation  |  |              | —         |                        |  |                    | —     |             |  |                | —          |        
|Balance December 31, 2023 |  |              | 4,916,285 |                        |  | $                  | 4,917 |             |  |                | 33,300,000 |        







See Notes to Consolidated Financial Statements





33











---

Lightning Gaming, Inc. and Subsidiaries

Consolidated Statements of Cash Flows





|                                                                                |  | Year Ended  
|------------------------------------------------------------------------------- |  | ------------
|                                                                                |  | December 31,
|                                                                                |  | 2023        
|Cash Flows from operating activities                                            |  |             
|Net loss                                                                        |  | $           
|Adjustments to reconcile net loss to net cash provided by operating activities: |  |             
|Depreciation and amortization                                                   |  |             
|Inventory obsolescence                                                          |  |             
|Stock based compensation                                                        |  |             
|Gain on change in fair value of warrant liability                               |  |             
|Amortization of debt discount                                                   |  |             
|Changes in Assets and Liabilities                                               |  |             
|Decrease (increase) in accounts receivable                                      |  |             
|Decrease in inventory                                                           |  |             
|Decrease in prepaid expenses                                                    |  |             
|Net change in right-of-use asset/lease liability                                |  |             
|Increase (decrease) in accounts payable                                         |  |             
|(Decrease) increase in accrued expenses                                         |  |             
|(Decrease) increase in accrued interest                                         |  |             
|Net cash provided by operating activities                                       |  |             
|                                                                                |  |             
|Cash flows from investing activities                                            |  |             
|Purchase of equipment                                                           |  |             
|                                                                                |  |             
|Net cash used in investing activities                                           |  |             
|                                                                                |  |             
|Cash flows from financing activities                                            |  |             
|Repayment on notes payable                                                      |  |             
|Payments on auto loan                                                           |  |             
|Net cash used in financing activities                                           |  |             
|                                                                                |  |             
|Net increase (decrease) in cash                                                 |  |             
|Cash beginning                                                                  |  |             
|Cash ending                                                                     |  | $           
|                                                                                |  |             

See Notes to Consolidated Financial Statements



34













Lightning Gaming, Inc. and Subsidiaries

Consolidated Statements of Cash Flows (Continued)











|                                                          |  | Year Ended       
|--------------------------------------------------------- |  | -----------------
|                                                          |  | December 31, 2023
|Supplemental Disclosure of Non-Cash Investing Activities: |  |                  
|                                                          |  |                  
|Transfers of inventory, licenses and equipment, net       |  | $                
|                                                          |  |                  
|                                                          |  |                  
|                                                          |  |                  
|Supplemental Information:                                 |  |                  
|Cash paid for:                                            |  |                  
|Interest                                                  |  | $                
|Income taxes                                              |  | $                
|                                                          |  |                  









See
Notes to Consolidated Financial Statements





35













---

Lightning Gaming, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

December 31, 2023 and 2022



Note 1. Nature of Business and Summary of Significant Accounting Policies



Nature of Business: Lightning Gaming, Inc. (the “Company”)
was incorporated on March 1, 2007 and on January 29, 2008, completed a merger with Lightning Poker, Inc. (“Lightning Poker”)
which became a wholly owned subsidiary of the Company.



Lightning Poker was formed to manufacture and market a fully automated,
proprietary electronic poker table (the “Poker Table”) to commercial and tribal casinos, card clubs, and other gaming and
lottery venues.



In 2008, the Company, as the sole member, established Lightning Slot Machines,
LLC (“Lightning Slots”) through which it commenced the design, manufacture, marketing, sale, and operation of slot machines
to customers in various gaming jurisdictions.



Our consolidated financial statements
include the accounts of the Company, includingLightning Poker and Lightning Slots. All inter-company
accounts and transactions have been eliminated.



For the year ended December 31, 2023, the Company recognized a net loss
of $494,248 however it generated cash flows from operations, has sufficient inventory to fill outstanding lease and sales orders, and
has maintained and sustained working capital surpluses. Although the Company’s leasing revenues experienced a decline during the
year, sales of slot machines helped to fill the gap in revenues and profits. Aggressive expense management has been and continues to be
employed to mitigate the effects that the lower revenues have had on performance.



Although we realized a net loss for the year ended December 31, 2023, based
on our working capital surplus, financial condition, cash flow projections, anticipated revenues and financing agreements, we believe
we have sufficient cash flows to support our operations for the next twelve months, however if supplemental financing becomes necessary,
there is no assurance that the Company would be able to obtain such financing, on reasonable and feasible terms, or at all. If the Company
needs additional funding and is unable to obtain it, its financial condition would be adversely affected. In that event, it would have
to postpone or discontinue planned operations and projects for expansion. The Company’s continuance as a going concern is dependent
upon these factors, among others. The consolidated financial statements do not include any adjustments that might result from the outcome
of this uncertainty.



A summary of the Company’s significant accounting policies is as
follows:



Revenue Recognition: The Company generates revenue from leasing
and selling slot machines and from sales of parts and certain services relating to the slot machines. Revenue is recognized on sales of
products, net of rebates, discounts and allowances, when an agreement exists, typically an approved sales proposal or contract, or upon
receipt of customer’s purchase order, in which the sales price is fixed or determinable and when the performance obligations under
that agreement have been completed. If multiple units of the products are included in any one sale or lease agreement or ancillary services
are provided such as delivery, installation, or placement of the product on the gaming floor (“placement fees”), revenue is
allocated to each unit or service based upon its respective fair value against the total contract value, and revenue recognition is deferred
on those units or services until each of the performance obligation requirements under the applicable section(s) of that agreement have
been completed.



Revenue generated under operating leases is recognized when the performance
obligation is satisfied. Lease agreements are based on either a fixed daily or monthly rate, or a pre-determined percentage of the monthly
net win or “participation” revenue collected for each slot machine, subject to monthly minimums and maximums. Customers under
fixed daily rate agreements are invoiced on the first day of the month at





36









Lightning Gaming, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

December 31, 2023 and 2022



Note 1. Nature of Business and Summary of Significant Accounting Policies
(Continued)



the agreed upon daily rate per unit for the number of days the unit is
leased during the month, typically the total number of days in the month. Customers under revenue agreements are invoiced when participation
reports are remitted to us detailing the monthly per unit per theme information including coin-in, net win, and days on the floor data.
Revenue under both of these bases is recorded as lease revenue and recognized in the month to which the lease data pertains.



There may be instances in which a lease is offered to a customer with the
option to convert to a sale upon the completion of certain obligations such as a pre-determined paid or reduced-rate lease term and/or
a free-trial period. In addition, circumstances may arise in which a customer wishes to purchase machines after being on lease at their
facility. In all of these situations, the initial revenue is recorded as lease revenue as described above, and the agreed upon sales price
is shown as sales revenue when the lease is converted to a sale and all performance obligations of the sale have been met.



For sales of slot machines, a warranty on parts may be offered which expires
after a defined period of time, usually 90 days after delivery or installation date. One slot machine theme conversion per unit sold may
also be offered during the one-year period beginning upon the delivery and/or installation of the slot machine, and only if the slot game
fails to earn at least eighty percent of the rolling monthly slot machine gaming floor area average for the customer. The game theme must
be of the same category approved in the customer's gaming jurisdiction for use in the slot machine and the customer must provide written
notice requesting the conversion, including certification of the average that serves as the basis for any such game theme conversion.
In addition, the customer must return the original game theme components to the Company upon conversion of the slot game theme.



For the years 2023 and 2022, there was no revenue generated from customers
outside the United States. Four casino customers accounted for 31% and 36% of our revenues for the years ended December 31, 2023 and 2022,
respectively. One casino group represented 15% and 17% of total revenues for each of the years ended December 31, 2023 and 2022, respectively.
For each of the years ended December 31, 2023 and 2022, the Company recorded no revenues related to performance obligations from prior
periods.



Use of Estimates: The preparation of the consolidated financial
statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and
assumptions that affect reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenue and expenses during the reporting period.



Significant estimates include the
recoverable value of long-lived assets, allowance for doubtful accounts, valuation of warrant liability fair value and projected cash
flows.Actual results could differ from those estimates.



Cash: For the purposes of reporting the statement of cash flows,
the Company considers all cash accounts and highly liquid debt instruments purchased with an original maturity of three months or less
to be cash equivalents. The Company maintained and will maintain cash balances with highly reputable financial institutions, which at
times throughout the year exceeded the federally insured amount of $250,000. The Company has not experienced any losses from deposits
above the federally insured amount and the amount of funds in excess of the federally insured amount was $1,086,669 as of December 31,
2023.







37











Lightning Gaming, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

December 31, 2023 and 2022



Note 1. Nature of Business and Summary of Significant Accounting Policies
(Continued)



Concentrations of Credit Risk: Financial instruments that subject
us to credit risk primarily consist of cash and trade receivables. The Company’s credit risk is managed by investing cash primarily
in high-quality financial institutions. Accounts receivable include amounts owed by various customers and groups of customers. No collateral
is required. Accounts receivable are not sold or factored. The Company regularly reviews its trade receivables’ current expected
credit losses in determining its allowance for doubtful accounts and believes its credit and collection polices mitigate its credit risk
relative to accounts receivable.



Receivables and Allowance for Doubtful Accounts: In January 2022,
the Company adopted Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, an
update issued by the Financial Accounting Standards Board (“FASB”). The update changes the estimation of credit losses from
an “incurred loss” methodology to one that reflects “expected credit losses” (the Current Expected Credit Loss
model, or CECL) which requires consideration of a broad range of reasonable and supportable information to inform credit loss estimates.
Measurement under CECL is based on relevant information about past events, including historical experience, current conditions, and reasonable
and supportable forecasts that affect collectability of reported amounts.



The Company regularly evaluates the collectability of its trade receivable
balances based on a combination of factors. When a customer’s account becomes past due, dialogue is initiated with the customer
to determine the cause. If it is determined that the customer will be unable to meet its financial obligation to us, such as in the case
of a bankruptcy filing, deterioration in the customer’s operating results, financial position, or other material events impacting
its business, a specific reserve is recorded for bad debts to reduce the related receivable to the amount expected to be recovered, given
all information presently available. Except for this allowance, the Company believes its receivables are collectible. If circumstances
related to specific customers change, our estimates of the recoverability of receivables could materially change. Recoveries of receivables
previously written off are recorded as revenue when recovered. Delinquency of accounts receivable is determined based on contractual terms,
customer payment history, and current creditworthiness. The Company does not charge interest on its past due receivables.



Under CECL, the Company determined that a weighted average reserve of 0.7%
of the outstanding accounts receivable balance was sufficient to cover unexpected credit losses and maintained an allowance of $6,593
as of December 31, 2023 and 2022, respectively. During each of the years ended December 31, 2023 and 2022, respectively, the Company wrote
off $-0- of accounts receivable considered to be uncollectible.



During the years ended December 31, 2023 and 2022, respectively, sales
contracts totaling $526,000 and $673,500 were sold on an installment basis, with downpayments due upon receipt at 50% of the total contract
amount or a set dollar amount, and the remaining balances due in 24 equal monthly installments. The Company records the installments receivable
net of an implied or stated interest rate, and recognizes interest income as the installments are paid. At December 31, 2023, installments
receivable totaled $346,080, $150,644 of which have maturities greater than one year and are classified as long-term accounts receivable.
At December 31, 2022, installments receivable totaled $370,638 with $96,992 classified as long-term accounts receivable. Interest income
on installments totaled $10,768 and $9,996 for the year ended December 31, 2023 and 2022, respectively.



At December 31, 2023, accounts receivable from two casino customers represented
61% of total accounts receivable. At December 31, 2022, two casino customers represented 54% of total accounts receivable. One customer
represented 49% and 36% of the total accounts receivable balance as of December 31, 2023 and 2022, respectively.









38









Lightning Gaming, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

December 31, 2023 and 2022



Note 1. Nature of Business and Summary of Significant Accounting Policies
(Continued)



License Fees: Licensee fees are amortized on a straight-line basis
over the life of the respective license, which ranges from one to three years.



Patents: The Company expenses legal fees and application costs related
to its patent application process. There is a high degree of uncertainty in the outcome of approval for any of our patents. Once the patents
are approved, any costs incurred to defend and register these patents will be capitalized.



Research and Development: Research and development costs are charged
to expense when incurred and are included in the Statement of Operations until technological feasibility is reached. Technological feasibility
is established when a product design and a working model of the software product have been completed and the completeness of the working
model and its consistency with the product design have been confirmed by testing. These expenses include internally developed software
costs as well as employee and

product costs associated with the development of our products. As of December
31, 2023 and 2022, no amounts had been capitalized.



Inventory: Inventory is stated at the lower of cost using the first-in,
first-out method, or net realizable value.



Fair Value Measurements: Given their short-term nature and expected
maturity, the carrying amounts reported in these financial statements for cash, prepaid and other current assets, accounts payable, and
accrued expenses approximate fair value.



Accounting Standards Codification (“ASC”) 820 – Fair
Value Measurement defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly
transaction between market participants at the measurement date. ASC 820 further establishes a fair value hierarchy that prioritizes the
inputs used in valuation techniques into the following three levels, giving the highest priority to Level 1 inputs and the lowest priority
to Level 3 inputs:



| | · | Level 1: Unadjusted quoted prices in active markets for identical assets and liabilities that the reporting
entity can access at the measurement date;
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------
| | · | Level 2: Inputs other than quoted prices in active markets for identical assets and liabilities that
are observable, either directly or indirectly;   
| | · | Level 3: Unobservable inputs for the asset or liability, including significant assumptions of the reporting
entity and other market participants.     



The fair value of and the methodology used by the Company for the warrant
liability is discussed in Note 9.



Property and Equipment: Property and equipment are recorded at cost.
Depreciation is computed using the straight-line method over estimated useful lives of three to five years. Leasehold improvements are
amortized over the life of the lease or the useful life of the improvement if less.



Income Taxes: Deferred taxes are provided on a liability method
whereby deferred tax assets are recognized for deductible temporary differences and deferred tax liabilities are recognized for taxable
temporary differences. Temporary differences are the differences between the reported amounts of assets and liabilities and their tax
bases. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some
portion or all of the deferred tax assets will not be realized. Deferred tax assets and liabilities are adjusted for the effects of changes
in tax laws and rates on the date of enactment.





39











Lightning Gaming, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

December 31, 2023 and 2022



Note 1. Nature of Business and Summary of Significant Accounting Policies
(Continued)



Income Taxes (Continued)



The Company has assessed its tax position and does not believe there are
any uncertain tax positions. Our policy is to record interest and penalties associated with unrecognized tax benefits as additional income
taxes in the Statement of Operations. The Company has determined that there are no unrecognized tax benefits, and accordingly, has not
recognized any interest or penalties during 2023 and 2022 related to unrecognized tax benefits. There is no accrual for interest or penalties
as of December 31, 2023 and 2022.



The Company files U.S. income tax returns and multiple state income tax
returns. With few exceptions, the U.S. and state income tax returns filed for the tax years ending on December 31, 2020 and thereafter
are subject to examination by the relevant taxing authorities.



Advertising: The Company expenses advertising costs as incurred.
There was no advertising expense in 2023 or 2022.



Impairment of Long-Lived Assets: The Company reviews its long-lived
assets, including property and equipment and license fees, for impairment whenever events or changes in circumstances indicate that the
carrying amount of the assets may not be fully recoverable. To determine the recoverability of its long-lived assets, including
definite lived license fees, the Company evaluates the probability that future undiscounted net cash flows, without interest charges,
will be less than the carrying amount of the assets or for identifiable intangibles with finite useful lives. The evaluation performed
by management for 2023 and 2022 did not result in an impairment.



Liquidity: The
Company evaluates whether there are conditions or events, considered in the aggregate, that raise substantial doubt about its ability
to continue as a going concern for a period of one year after the date that the financial statements are issued, taking into consideration
the quantitative and qualitative information regarding the Company’s current financial condition, conditional and unconditional
obligations due and the funds and cash flow necessary to maintain operations within that time period.



Based on management’s evaluation, the Company will be able to continue
operations on a going concern basis for at least the next twelve months from the date these financial statements are issued.



Stock Option Plans: The Company has equity-based compensation plans
which are more fully described in Note 9. Compensation expense is recognized over the required service period. All options have
been granted with an exercise price equal to the fair value of the Company’s common stock on the date of grant.



Warrants:As explained in further detail in Notes 5and 9,
in connection with loans obtained by the Company, the lender holds a warrant to purchase shares of common stock. The Company accounts
for the value and classification of the warrant in accordance with ASC 480 – Distinguishing Liabilities from Equity, and classified
the warrant as a liability and was initially, and will subsequently be, measured at its estimated fair value using the Black-Scholes pricing
model. The warrant will continue to be classified as a liability until such time it is exercised, expires or is amended in a manner that
would no longer require classification as a liability.



Earnings per share: The Company computes earnings per share in accordance
with generally accepted accounting principles which require presentation of both basic and diluted earnings per share ("EPS")
on the face of the Statement of Operations. Basic EPS is computed by dividing net income available to common shareholders by the weighted-average
number of shares outstanding during the period. Diluted EPS reflects the potential dilution that could occur if securities or other contracts
to issue common stock were exercised or converted to common stock. In computing diluted EPS, the average stock price for the





40









Lightning Gaming, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

December 31, 2023 and 2022



Note 1. Nature of Business and Summary of Significant Accounting Policies
(Continued)



Earnings per share (Continued)



period is used in determining the number of shares assumed to be purchased
from the exercise of stock options and warrants.



The Company uses the two-class method in computing earnings per share.
Under the two-class method, undistributed earnings are allocated among common and participating shares to the extent each security may
share in such earnings.



In computing earnings per share, the Company's Nonvoting Stock is considered
a participating security. Each share of Nonvoting Stock has identical rights, powers, limitations and restrictions in all respects as
each share of common stock of the Company including the right to receive the same consideration per share payable in respect of each share
of common stock, except that holders of Nonvoting Stock shall have no voting rights or powers whatsoever.



The following table summarizes the number of dilutive shares, which may
dilute future earnings per share, outstanding for each of the periods presented:



|              |  | December 31,
2023 |           | December 31,
2022
|------------- |  | ----------------- | --------- | -----------------
|Stock options |  |                   | 2,875,000 |                  
|Warrants      |  |                   | 7,000,000 |                  
|              |  |                   | 9,875,000 |                  
|              |  |                   |           |                  



Note 2. Inventory



Inventory consisted of the following:



|                                          |  | December 31,
2023 |         | December 31, 2022
|----------------------------------------- |  | ----------------- | ------- | -----------------
|Finished products                         |  | $                 | 273,136 |                  
|Raw materials                             |  |                   | 95,069  |                  
|Less allowance for inventory obsolescence |  |                   | (4,210  | )                
|Inventory, net                            |  | $                 | 363,995 |                  



Inventory is stated at the lower of cost using the first-in, first-out
method, or net realizable value.



Slot machine cabinets, which are manufactured by a third-party, include
monitors, toppers, stands and certain electronic components, are shown as finished products. Raw materials primarily consist of the flash
drives, motherboards, spare parts and interchangeable electronic components for the slot machines.



41











Lightning Gaming, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

December 31, 2023 and 2022



Note 3. Property and Equipment



Property and equipment consisted of the following:

|                                        |  | December
31,
2023 |            | December
31,
2022
|--------------------------------------- |  | ----------------- | ---------- | -----------------
|Equipment, principally gaming equipment |  | $                 | 4,945,521  |                  
|Delivery truck                          |  |                   | 78,247     |                  
|Furniture and fixtures                  |  |                   | 88,024     |                  
|Leasehold improvements                  |  |                   | 91,794     |                  
|Property and equipment                  |  |                   | 5,203,586  |                  
|Less accumulated depreciation           |  |                   | (4,172,615 | )                
|Property and equipment, net             |  | $                 | 1,030,971  |                  



Depreciation expense related to the gaming equipment under lease is listed
separately in the consolidated Statements of Operations as costs of revenue. Depreciation expense related to all other property and equipment
included in the consolidated Statements of Operations was $28,093 and $33,144 for the years ended December 31, 2023 and 2022, respectively.



Note 4. License Fees



License fees consist of the following:



|                              |  | December
31,
2023 |          | December 31,
2022
|----------------------------- |  | ----------------- | -------- | -----------------
|Purchased licenses            |  | $                 | 360,160  |                  
|Less accumulated amortization |  |                   | (346,710 | )                
|License fees, net             |  | $                 | 13,450   |                  



Under a patent cross license agreement with a licensor amended on November
30, 2021, the Company is required to pay a per unit license fee on games (slot machines) placed in service, each identifiable by a unique
serial number. In December 2021, the Company paid $32,500 upfront for the first 50 machines deployed under the amended agreement, with
subsequent fees due and payable on a quarterly basis and based on machines initially deployed in the preceding calendar quarter. The $650
per unit fee for the licenses is added to the cost of slot machines as they are built for sale or lease. The remaining per unit license
fees as of December 31, 2023 and 2022 was $13,000 and $12,350, respectively. See Note 8 for further details regarding the patent
cross license agreement.



The weighted average useful life of purchased source code licenses is 3
years. All purchased source code licenses are fully amortized.





42









Lightning Gaming, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

December 31, 2023 and 2022



Note 5.  Notes Payable



On November 27, 2019, the Company entered into a Master Loan Agreement
(the “Loan”) with PDS Gaming – Nevada, LLC (“PDS - Gaming” or the “Lender”) to make a series
of advances under the Loan in the principal amount of up to $7,000,000 in order to (i) re-finance the existing outstanding indebtedness
of the Company under the Prior Loan and Amendment for Advances 1 through 8 which totaled $3,765,792, (ii) finance the Company’s
purchase or manufacturing of equipment and (iii) to be used for general working capital. The Loan is and will be evidenced by Promissory
Notes (each a “Note” and collectively the “Notes”) executed by the Company payable to the order of the Lender,
and is secured by a Security Agreement dated of even date with the Loan, between the Company and the Lender granting a security interest
to the Lender in all of the Company’s right, title and interest in and to personal property, tangible and intangible, wherever located
or situated and whether now owned or acquired or created. The Loan was advanced, in parts, pursuant to the Loan and in the amounts of
each Note during the advance period which ran until November 30, 2020. The initial advance was evidenced by a Note in the principal amount
of $5,000,000 with monthly payments of $91,616 commencing on January 1, 2020 and maturing on December 1, 2024. On January 29, 2020, the
Company closed on Advance 10 under the Loan with PDS Gaming which was evidenced by a Note in the principal amount of $1,000,000. Monthly
payments of $18,309 commenced on March 1, 2020, and the Note matures on February 1, 2025. The Notes are prepayable subject to a sliding
scale prepayment fee, declining 1% from 4% in the first twelve months to 0% after the 48th month, based on the then-outstanding principal
amount of the Note.



As inducement to the Lender to make the Loan, the Company issued to the
Lender a warrant (“Warrant”) entitling the Lender to purchase up to 7,000,000 shares of common stock of the Company which
is equal to 15.6% of the outstanding common stock on the Closing Date. The Warrant is detachable with an exercise price of $0.05 per share
and expires ten years from the Closing Date. The Warrant cannot be exercised until PDS – Gaming is fully licensed in all of the
Company’s gaming jurisdictions. The Company calculated the fair value of the Warrant to be $779,901 at the time of issuance using
the Black-Scholes pricing model, and under ASC 480, recorded the Warrant as a liability. See Note 9 for further details regarding
the Warrant.



On the Closing Date, the Company recorded the percentage of the Loan remaining
for advance in proportion to the total Loan, i.e. 2/7 ($2,000,000/$7,000,000) or 28.6% or $229,829, as a deferred debt commitment fee
which was amortized on a straight-line basis until the end of the advance period which expired on November 30, 2020. In January 2020,
a $10,000 loan fee was paid to the Lender and the fee as well as the proportionate amount of the unamortized deferred fee attributable
to the $1,000,000 advance of $92,845 were reclassified as debt discount and are being amortized over the life of the advance using the
interest method. The balance of the debt discount attributable to the advance taken in January 2020 was $38,006 as of December 31, 2022.



Debt discount of $137,509 was calculated as the cost associated with the
debt in proportion to the total cost of the debt that was refinanced or reacquired and is presented as a direct reduction to the value
of the debt and is being amortized over the life of the advance using the interest method. The balance of the debt discount attributable
to the advance taken on November 27, 2019 was $45,659 as of December 31, 2022.



The Loan is subject to covenant clauses whereby the Company is required
to meet certain key financial ratios. Due to the material effect that COVID-19 had on the Company’s revenues, the Lender amended
the Loan in September 2020, providing a waiver of compliance with the financial ratio covenants and extending and resetting the compliance
with the covenants until the quarter ending June 30, 2021. Due to the continued impact of COVID-19 on the Company’s operations,
the Lender executed a second amendment to the Loan in March 2021, which waived compliance with the financial ratio covenants and further
extended and reset compliance with the covenants commencing with the quarter ending December 31, 2021. In August 2022, the Lender executed
a third amendment which reset the financial ratio covenants through June 30, 2023.





43









Lightning Gaming, Inc. a nd Subsidiaries

Notes to Consolidated Financial Statements

December 31, 2023 and 2022



Note 5.  Notes Payable (Continued)



On June 1, 2023, the Lender agreed to the Fourth Amendment of the Loan
(the “Amendment”) which combined the two notes payable with a total principal balance then outstanding of $3,703,884 into
one, converted the interest rate from a fixed rate of 13% per annum to a floating rate based on the Secured Overnight Financing Rate (“SOFR”)
plus the applicable margin rate, which is defined in the Amendment at 7.95%, and extended the maturity date to November 1, 2027, which
reduced the monthly payment. Per the agreement, the interest rate and monthly payment will be adjusted monthly based upon fluctuation
in the SOFR rate plus the stated applicable margin. The starting rate on June 1, 2023 was 13% and the initial monthly payment of principal
and interest was $92,598. In addition, the Lender waived compliance with certain financial covenants for the period ended March 31, 2023,
and amended and reset the existing financial ratio covenants through and including the quarter ending December 31, 2024.



The Loan remains in full force and effect in all other aspects except as
those defined in the June 1, 2023 Amendment. In addition, there were no changes to the terms or conditions of the Warrant as a result
of the Amendment, and no additional fees were paid or incurred.



Under the guidance of Accounting Standards Code (“ASC”) 470-50-40-10,
the Amendment is considered a modification and therefore, any fees incurred would be capitalized and amortized as part of the effective
yield. Since there were no additional fees incurred, the debt discount remaining as of the Amendment date is considered a cost of the
debt reacquired and is shown as a reduction of the carrying value of the amended debt and is being amortized over the remaining term of
the Loan. The combined balance of the debt discount attributable to the two advances on the Amendment date was $64,064, and the balance
of the debt discount as of December 31, 2023 was $49,522.



As of December 31, 2023 and 2022, Notes payable, net of debt discount,
consist of the following:



|                                    |  | Advance Date |  | Maturity Date |  | Note Amount |           | Monthly Payment |  | Interest Rate |        | December 31, 2023 |  | December 31, 2022
|----------------------------------- |  | ------------ |  | ------------- |  | ----------- | --------- | --------------- |  | ------------- | ------ | ----------------- |  | -----------------
|                                    |  |              |  |               |  |             |           |                 |  |               |        |                   |  |                  
|PDS Gaming Advance 9                |  | 11/27/2019   |  | 12/1/2024     |  | $           | 5,000,000 |                 |  | $             | 91,616 |                   |  |                  
|PDS Gaming Advance 10               |  | 1/29/2020    |  | 2/1/2025      |  | $           | 1,000,000 |                 |  | $             | 18,309 |                   |  |                  
|PDS Gaming Note Payable             |  | 6/1/2023     |  | 11/1/2027     |  | $           | 3,703,884 |                 |  | $             | 93,221 |                   |  |                  
|                                    |  |              |  |               |  |             |           |                 |  |               |        |                   |  |                  
|Total Notes Payable                 |  |              |  |               |  |             |           |                 |  |               |        |                   |  |                  
|Less: amounts classified as current |  |              |  |               |  |             |           |                 |  |               |        |                   |  |                  
|Long-Term Notes Payable             |  |              |  |               |  |             |           |                 |  |               |        |                   |  |                  
|                                    |  |              |  |               |  |             |           |                 |  |               |        |                   |  |                  



*As of December 31, 2023, the total interest rate was calculated at 5.38%
SOFR plus the applicable margin rate of 7.95%.







44











Lightning Gaming, Inc. a nd Subsidiaries

Notes to Consolidated Financial Statements

December 31, 2023 and 2022



Note 5.  Notes Payable (Continued)



The following table lists the future principal payments due on the Note
as of December 31, 2023:



|Year Ending December 31, |      | Amount
|------------------------ | ---- | ------
|                         | 2024 |       
|                         | 2025 |       
|                         | 2026 |       
|                         | 2027 |       
|                         |      |       



The following table provides a breakdown of the interest expense related
to the Notes payable and Auto Loan as included in the consolidated Statements of Operations:



|                                    |   | Year ended December 31, | 
|----------------------------------- | - | ----------------------- | 
|                                    |   | 2023                    | 
|Interest on Notes payable           | $ | 490,928                 | 
|Interest on Auto Loans (See Note 6) |   | 2,470                   | 
|Amortization of debt discount       |   | 34,142                  | 
|                                    | $ | 527,540                 | 



Note 6. Auto Loan



On January 30, 2021, the Company financed the purchase of a 2021 Ford F-650
box truck to be used as its delivery truck. The purchase price of the truck of $78,248 was financed with Ford Credit (“FC”)
for a term of sixty months at an annual percentage rate of 5.54%. Monthly payments of $1,500 commenced March 16, 2021. Interest expense
in the consolidated Statements of Operations related to the auto loan for the years ended December 31, 2023 and 2022, respectively, was
$2,470 and $3,238.



As of December 31, 2023 and 2022, the principal balance of the auto loan
was as follows:



|                                    |  | December 31, 2023 |         | December 31, 2022
|----------------------------------- |  | ----------------- | ------- | -----------------
|Total Auto Loan                     |  | $                 | 36,648  |                  
|Less: amounts classified as current |  |                   | (16,380 | )                
|Long-Term Portion of Auto Loan      |  | $                 | 20,268  |                  
|                                    |  |                   |         |                  



The following table lists the future principal payments due to FC on the
auto loan as of December 31, 2023:



|Year Ending December 31, |      | Amount
|------------------------ | ---- | ------
|                         | 2024 |       
|                         | 2025 |       
|                         | 2026 |       
|                         |      |       





45











Lightning Gaming, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

December 31, 2023 and 2022



Note 7. Leases



In November 2009, the Company entered into a lease agreement for its corporate
office and warehouse facility which became effective in January 2010 for a term of sixty-seven months. In September 2014, the lease was
amended to include the following: 1) an extension of the lease term to February 28, 2021; 2) modification of the minimum annual and monthly
rents for the extended lease term; 3) a rent abatement period of six months commencing October 1, 2014; and 4) an option to extend the
term for a period of five years. In August 2020, a second amendment to the lease was executed to include: 1) an extension of the lease
term to August 31, 2026; 2) modification of the minimum annual and monthly rents for the second extended lease term; 3) a rent abatement
period of six months commencing October 1, 2020; and 4) removal of the option to extend the term beyond the amended expiration date.



On September 30, 2020, the right-of-use asset and corresponding lease liability
of $462,858 were recorded to account for the second amendment to the lease.



The following table summarizes the right-of-use asset and lease liability
as of December 31, 2023:



|Office lease right-of-use asset |  | $ | 462,858  |  
|------------------------------- |  | - | -------- | -
|Less accumulated amortization   |  |   | (224,695 | )
|Balance of right-of-use asset   |  | $ | 238,163  |  



|Lease Liability |  |  
|--------------- |  | -
|Current         |  | $
|Long-term       |  |  
|                |  | $



Lease expense for the years ended December 31, 2023 and 2022 was $174,128
and $157,004, respectively.



The following table summarizes the Company’s scheduled future minimum
lease payments as of December 31, 2023:



|Year Ended December 31:                     |  |  
|------------------------------------------- |  | -
|2024                                        |  | $
|2025                                        |  |  
|2026                                        |  |  
|Minimum lease payments                      |  |  
|Less: imputed interest                      |  |  
|Present value of minimum lease payments     |  |  
|Less: current maturities of lease liability |  |  
|Long-term lease liability                   |  | $



As of December 31, 2023 and 2022, the weighted-average remaining lease
term for the building lease was 2.7 years and 3.7 years, respectively. Due to the fact that we do not have access to the rate implicit
in the lease, we utilized our incremental borrowing rate as the discount rate. The weighted average discount rate associated with the
lease as of December 31, 2023 and 2022 was 8%.





46











Lightning Gaming, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

December 31, 2023 and 2022



Note 8. Commitments and Contingencies



The Company routinely enters into license agreements for the use
of intellectual properties and technologies. These agreements generally provide for license fee payments when the agreements are signed
and minimum commitments, which are cancellable in certain circumstances.

On March 10, 2020 and October 13, 2020, the Company and a licensor amended
the terms under a patent cross license agreement which required the Company to pay an upfront per unit license fee on games (slot machines)
placed in service after the agreement date and for a period of five years. The March 2020 amendment removed the upfront per unit license
fee in the original agreement and replaced it with a quarterly un-recoupable fee of $45,000 payable within fifteen days after the end
of each calendar quarter and removed all audit provisions. The amendment was to terminate after five years from October 1, 2019, or September
30, 2024. The October 2020 amendment allowed the Company to defer the payment of the quarterly fees according to the deferred payment
schedule delineated in the amendment, extended the termination of the agreement to December 31, 2024, increased the final four quarterly
payments to $50,000 and extended the final four quarterly payments beyond the termination date to 2025.



On November 30, 2021, the agreement was further amended reverting to a
per unit fee on games and stipulates that fees are due and payable on a quarterly basis based on games initially deployed in the preceding
calendar quarter. See Note 4 for further details regarding the patent cross license agreement.



Note 9. Stockholders’ Equity



Stock Option Plan: In order to provide an incentive to designated
employees, officers, directors, consultants, independent contractors and other service providers who perform services contributing to
the growth of the Company, and by aligning the interests of participants with the interests of stockholders, the Board declared it advisable
and in the Company’s best interest and on May 25, 2016, approved the 2016 Stock Option Plan (the “2016 Plan”). The 2016
Plan permits the granting of nonqualified stock options. The shares underlying the options will be shares of the Company’s nonvoting
common stock, par value $0.001 per share, and the total aggregate number of shares that may be issued under the 2016 Plan is 5,700,000
shares. The purchase price of each option will be determined by the Board at the time the option is granted, but in no event will be less
than 100% of the fair market value of the common stock at the time of grant. Options granted will not be exercisable after 10 years from
the grant date.



The fair value of each option award is estimated on the date of grant using
the Black-Scholes option pricing model. Expected volatility is based upon publicly traded companies with characteristics similar
to those of the Company. The Company uses historical data to estimate option exercise and employee termination within the valuation
model. The expected term of options granted represents the period of time that options granted are expected to be outstanding. The
risk-free rate for periods within the contractual life of the option is based on the U.S. Treasury yield curve in effect at the time of
grant.



On March 8, 2017, the Board of Directors approved by unanimous written
consent, the authorization to grant to employees with at least one year of service, non-qualified stock options to purchase 4,015,000
shares of nonvoting common stock of the Company under its 2016 Plan. The options were issued at an exercise price of $.28 per share and
vest ratably over five years. The options are subject to the terms and conditions of the 2016 Plan and each individual’s stock option
agreement.









47











Lightning Gaming, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

December 31, 2023 and 2022



Note 9. Stockholders’ Equity (Continued)



Stock Option Plan (Continued)



On November 30, 2018, the Board of Directors, based on current valuation
information available, authorized the reduction of the option exercise price to $.13 per share which was determined to be the market price
of the Company’s stock on that date. The Company calculated the incremental fair value by calculating the fair value of the options
immediately before and immediately after the modification. The fair value of the options immediately before the repricing is based on
assumptions (e.g., volatility, expected term, etc.) reflecting the current facts and circumstances on the modification date and therefore,
differs from the fair value calculated on the grant date.



A summary of option transactions in 2023 and 2022 under the 2016 Plan is
as follows:

|                                                                     |  | Shares |           | Weighted Average Exercise Price
|-------------------------------------------------------------------- |  | ------ | --------- | -------------------------------
|Options outstanding at December 31, 2021                             |  |        | 2,975,000 |                                
|Options granted                                                      |  |        | —         |                                
|Options exercised                                                    |  |        | —         |                                
|Options cancelled                                                    |  |        | —         |                                
|Options outstanding at December 31, 2022                             |  |        | 2,975,000 |                                
|Options granted                                                      |  |        | —         |                                
|Options exercised                                                    |  |        | —         |                                
|Options cancelled                                                    |  |        | (100,000  | )                              
|Options outstanding at December 31, 2023                             |  |        | 2,875,000 |                                
|Options available for grant under the 2016 Plan at December 31, 2023 |  |        | 2,825,000 |                                



Stock-based compensation expense is recognized in the Statements of Operations
based on awards ultimately expected to vest and is adjusted for estimated forfeitures. The additional compensation expense arising from
the modification of the exercise price is being recognized over the vesting period. Expense relating to the stock option plans was $326
and $8,862 for the years ended December 31, 2023, and 2022, respectively.



The following table summarizes information with respect to stock options
outstanding at December 31, 2023:



|          |        | Options Outstanding |          | Vested Options
|--------- | ------ | ------------------- | -------- | --------------
|          |        | Weighted            |          |               
|          |        | Average             | Weighted |               
|          |        | Remaining           | Average  | Aggregate     
|          |        | Contractual         | Exercise | Intrinsic     
|          | Number | Life (Years)        | Price    | Value         
|2016 Plan |        | 2,875,000           | 3.3      | $0.13         



The following table summarizes information with respect to stock options
outstanding at December 31, 2022:



|          |        | Options Outstanding |          | Vested Options
|--------- | ------ | ------------------- | -------- | --------------
|          |        | Weighted            |          |               
|          |        | Average             | Weighted |               
|          |        | Remaining           | Average  | Aggregate     
|          |        | Contractual         | Exercise | Intrinsic     
|          | Number | Life (Years)        | Price    | Value         
|2016 Plan |        | 2,975,000           | 4.3      | $0.13         





48









Lightning Gaming, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

December 31, 2023 and 2022



Note 9. Stockholders’ Equity (Continued)



Stock Option Plan (Continued)



As of December 31, 2023, there was approximately $465 of total unrecognized
compensation cost related to nonvested share-based compensation arrangements granted under the 2016 Plan. The cost is expected to be recognized
over a weighted-average period of 2.6 years at an estimated forfeiture rate of 0% for executives and 20% for non-executives.



Warrant: On November 27, 2019 in connection with the Loan obtained
by the Company, the Company issued to PDS Gaming a Warrant entitling the Lender to purchase up to 7,000,000 shares of (voting) common
stock of the Company at an exercise price of $.05 per share, expiring 120 months* after the issue date. The Warrant cannot be exercised
until PDS Gaming is licensed in all of the Company’s gaming jurisdictions and cannot be exercised in a cashless exercise within
the first six months following issuance.



*The “Expiration Date” was initially defined under the Warrant
as 36 months. The Warrant was revoked, amended and reissued on December 27, 2019 and defined the Expiration Date as 119 months from date
of issuance of the amended Warrant, which was the original intent between the Company and the Lender.



The Warrant contains a put feature providing the right to the holder, i.e.
the Lender, for a net cash settlement in the event of a fundamental transaction which is defined under the Warrant as a sale of all of
the stock, voting stock, or all, or substantially all, of the assets of the Company. Under such a transaction, the holder can require
the Company to purchase any unexercised shares under the Warrant at the pro-rata share of the sales price or calculated value less the
exercise price of the Warrant share.



The fair value of the warrant is estimated using the Black-Scholes pricing
model and is recognized as a liability in the accompanying consolidated Balance Sheets. The following assumptions were used to determine
the fair value of the Warrant at December 31, 2023 and 2022:



|                                         |  | December 31, 2023 |      | December 31,
2022
|---------------------------------------- |  | ----------------- | ---- | -----------------
|Stock price                              |  | $                 | 0.08 |                  
|Exercise price                           |  | $                 | 0.05 |                  
|Weighted average volatility              |  |                   | 50.5 | %                
|Expected dividend yield                  |  |                   | —    |                  
|Expected term (in years)                 |  |                   | 5.9  |                  
|Weighted average risk-free interest rate |  |                   | 3.8  | %                



There currently is no public market for the Company’s stock price.
The valuation of the Company was determined by utilizing a formula of six (6) times the Company’s Earnings Before Interest Taxes,
Depreciation and Amortization (“EBITDA”) for the prior twelve (12) month period minus all outstanding debt of the Company
plus all cash and cash equivalents owned by the Company which is defined in the Warrant agreement as the Calculated Value (“CV”)
of the Company. Volatility is based on the average stock price of comparable public companies in the industry.



Based on the volatility in stock price of the comparable public companies
and the calculation of the CV per the formula above, the resulting stock price of $0.08 and $0.10 price per share was used in the Black
Scholes model to determine fair value of the Warrant at December 31, 2023 and 2022, respectively.







49











Lightning Gaming, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

December 31, 2023 and 2022



Note 9. Stockholders’ Equity (Continued)



Warrant (Continued)



The following table reconciles the change in the fair value of the warrant
liability classified as Level 3 in the fair value hierarchy:



|                             |  | Warrant Liability
|---------------------------- |  | -----------------
|Balance at December 31, 2021 |  | $                
|Net change in fair value     |  |                  
|Balance at December 31, 2022 |  |                  
|Net change in fair value     |  |                  
|Balance at December 31, 2023 |  | $                



The following table is a summary of the Warrant activity for the years
ended December 31, 2023 and 2022:



|                                          |  | Shares |           | Weighted
                                                                                Average
                                                                                Exercise
                                                                                price
|----------------------------------------- |  | ------ | --------- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Warrants at December 31, 2021             |  |        | 7,000,000 |                                                                                                                                                                                                                                                                                
|Warrants granted                          |  |        | —         |                                                                                                                                                                                                                                                                                
|Warrants exercised                        |  |        | —         |                                                                                                                                                                                                                                                                                
|Warrants cancelled                        |  |        | —         |                                                                                                                                                                                                                                                                                
|Warrants at December 31, 2022             |  |        | 7,000,000 |                                                                                                                                                                                                                                                                                
|Warrants granted                          |  |        | —         |                                                                                                                                                                                                                                                                                
|Warrants exercised                        |  |        | —         |                                                                                                                                                                                                                                                                                
|Warrants cancelled                        |  |        | —         |                                                                                                                                                                                                                                                                                
|Warrants at December 31, 2023             |  |        | 7,000,000 |                                                                                                                                                                                                                                                                                
|Warrants exercisable at December 31, 2023 |  |        | 7,000,000 |                                                                                                                                                                                                                                                                                
|                                          |  |        |           |                                                                                                                                                                                                                                                                                



The following table summarizes information with respect to the Warrant
outstanding at December 31, 2023:

|Warrant Outstanding |             
|------------------- | ------------
|                    | Weighted    
|                    | Average     
|                    | Remaining   
|                    | Contractual 
|Shares              | Life (Years)
|7,000,000           | 5.9         



The following table summarizes information with respect to the Warrant
outstanding at December 31, 2022:

|Warrant Outstanding |             
|------------------- | ------------
|                    | Weighted    
|                    | Average     
|                    | Remaining   
|                    | Contractual 
|Shares              | Life (Years)
|7,000,000           | 6.9         





50









Lightning Gaming, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

December 31, 2023 and 2022



Note 10. Revenue



The following table provides a breakdown of the revenue by category as
included in the consolidated Statements of Operations:



|                                 |  | Year ended December 31,
|-------------------------------- |  | -----------------------
|                                 |  | 2023                   
|Lease, license and service fees: |  |                        
|Flat daily rate lease            |  | $                      
|Participation lease              |  |                        
|Placement and license fees       |  |                        
|                                 |  | $                      
|                                 |  |                        



The following table provides a breakdown of the sales of gaming products
and parts as included in the consolidated Statements of Operations:



|                                    |  | Year ended December 31,
|----------------------------------- |  | -----------------------
|                                    |  | 2023                   
|                                    |  |                        
|Sales of gaming products and parts: |  |                        
|Slot machine sales                  |  | $                      
|Kiosk sales                         |  |                        
|Parts and ancillary items sales     |  |                        
|                                    |  | $                      
|                                    |  |                        
|                                    |  |                        



Note 11. Income from Employee Retention Credits



The Coronavirus Aid, Relief, and Economic Security (“CARES”)
Act enacted in March 2020 contained a provision that provided an Employee Retention Credit (“ERC”) against certain employment
taxes equal to 50% of eligible wages. Qualified wages were capped at $10,000 per employee for wages paid from March 13, 2020 to December
31, 2020 for eligible employers, for a maximum credit of $5,000 per employee for the year. Under the Taxpayer Certainty and Disaster Tax
Relief Act of 2020 (“Tax Relief Act”) enacted in December 2020, certain provisions of the CARES Act were modified with respect
to the ERC. The Tax Relief Act increased the credit to 70% of eligible wages capped at $10,000 per employee per quarter or $7,000, extended
the application of the ERC to wages paid after December 31, 2020 and before July 1, 2021, and retroactively removed the ERC exclusion
for entities that had received PPP loans with the stipulation that wages used for forgiveness under the PPP loan were barred as qualified
wages for use in application of the ERC. Under these revised provisions, the Company qualified for application of the ERC. The calculation
of qualified wages, which included qualified health plan expenses, for the period March 13, 2020 through June 30, 2021 was completed in
February 2022 and the respective employer quarterly federal tax claim for refund forms were submitted. In June 2022, the Company received
refunds for the full amount of the ERC claimed of $231,059 plus interest income of $2,756.





51









Lightning Gaming, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

December 31, 2023 and 2022



Note 12. Income Taxes



The components of the income tax provision for the years ended December
31, 2023 and 2022 are as follows:

|                      |  | Year ended December 31,
|--------------------- |  | -----------------------
|                      |  | 2023                   
|Current tax expense:  |  |                        
|Federal               |  | $                      
|State                 |  |                        
|                      |  | $                      
|                      |  |                        
|Deferred tax benefit: |  |                        
|Federal               |  | $                      
|State                 |  |                        
|Valuation allowance   |  |                        
|                      |  | $                      
|                      |  |                        
|                      |  |                        



Net deferred tax assets consist of the following components as of December
31, 2023 and 2022:



|                                |  | Year ended December 31,
|------------------------------- |  | -----------------------
|                                |  | 2023                   
|Deferred tax asset:             |  |                        
|Net operating loss carryforward |  | $                      
|Accounts receivable allowance   |  |                        
|Property and equipment          |  |                        
|Accrued expenses                |  |                        
|Impairment charge               |  |                        
|Start-up costs                  |  |                        
|Stock based compensation        |  |                        
|Inventory allowance             |  |                        
|Other                           |  |                        
|                                |  |                        
|Less valuation allowance        |  |                        
|Net deferred taxes              |  | $                      



A reconciliation of income tax expense at statutory rates to the income
tax expense reported in the Statements of Operations is as follows for the years ended December 31, 2023 and 2022.



|                                       |  | Year ended December 31,
|-------------------------------------- |  | -----------------------
|                                       |  | 2023                   
|Federal tax benefit at statutory rate  |  | $                      
|State tax benefit net of federal taxes |  |                        
|Warrant valuation                      |  |                        
|Other                                  |  |                        
|Increase in valuation allowance        |  |                        
|Income tax expense                     |  | $                      





52













Lightning Gaming, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

December 31, 2023 and 2022



Note 12. Income Taxes (Continued)



As of December 31, 2023, the Company has available, for federal and state
income tax purposes, net operating loss (“NOL”) carryforwards of approximately $14,997,000. $12,773,000 of the NOL carryforwards
expire at various times through 2038 and $2,224,000 of the NOLs can be carried forward indefinitely. The utilization of the NOL carryforwards
is dependent upon the ability of the Company to generate sufficient taxable income during the carryforward periods. The NOL carryforwards
are also subject to certain limitations on their utilization should changes in Company ownership occur. The Company has not recognized
any NOL carryforward benefits or other net deferred tax assets in the current financial statements.



The current tax expense represents the amount of estimated minimum state
taxes payable.



Note 13. Recently Issued Pronouncements



In June 2016, the FASB issued the update Financial Instruments –
Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, which changes the estimation of credit losses from an
“incurred loss” methodology to one that reflects “expected credit losses” (the Current Expected Credit Loss model,
or CECL) which requires consideration of a broader range of reasonable and supportable information to inform credit loss estimates. Measurement
under CECL is based on relevant information about past events, including historical experience, current conditions, and reasonable and
supportable forecasts that affect collectability of reported amounts. The amendments in the update became effective for fiscal years beginning
after December 15, 2021, including interim periods within those fiscal years. In January 2022, the Company adopted this update which did
not have a material impact on our financial statements.



All new accounting pronouncements issued but not yet effective are not
expected to have a material impact on our results of operations, cash flows or financial position. There have been no new accounting pronouncements
not yet effective that have significance to our consolidated financial statements.



Note 14. Subsequent Event



As disclosed in Note 5. Notes Payable, the Company is required to
meet certain key financial ratios under covenant clauses in its Master Loan Agreement (the “Loan”) and as modified in subsequent
amendments to the Loan. Subsequent to December 31, 2023 and for the quarter ending March 31, 2024, the Company anticipates that it will
be noncompliant with the financial ratios specified in the Loan, however in March 2024, the Company obtained waivers from its Lender on
the financial ratio covenants through and including the quarter ending September 30, 2024 at which time the ratios will be revisited.
In addition, the Company has determined that it has sufficient cash flows and working capital to satisfy its obligations for a period
of one year beyond the issuance of these financial statements.



---



53











|Item 9. | Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.
|------- | -------------------------------------------------------------------------------------



We have no disagreements, transactions or events to report under this item.



---



Item 9A. Controls and Procedures.



Disclosure Controls and Procedures



We maintain disclosure controls and procedures (as defined in Exchange
Act Rules 13a-15(e) and 15d-15(e)) that are designed to ensure that information required to be disclosed in our reports filed or submitted
under the Exchange Act are recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and
forms, and that such information is accumulated and communicated to our management including our CEO, as appropriate, to allow timely
decisions regarding required disclosure.



In designing and evaluating our disclosure controls and procedures, our
management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance
of achieving the desired control objectives, and management necessarily is required to apply its judgment in evaluating the cost-benefit
relationship of possible controls and procedures.



As of December 31, 2023, we conducted an evaluation, under the supervision
and with the participation of our management including our CEO and Controller, of the effectiveness of our disclosure controls and procedures.
Based on that evaluation, our CEO and Controller have concluded that as of December 31, 2023, our disclosure controls and procedures were
effective at the reasonable assurance level.



Internal Control Over Financial Reporting



Internal control over financial reporting (as defined in Exchange Act Rules
13a-15(f) and 15d-15(f)) refers to the process designed by, or under the supervision of, our CEO and Controller, or affected by our Board
of Directors, management and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the
preparation of financial statements for external purposes in accordance with GAAP. Management is responsible for establishing and maintaining
adequate internal control over our financial reporting.



All internal controls, no matter how well designed, have inherent limitations
and may not prevent or detect all misstatements and fraud. Even those internal controls that are determined to be effective can only provide
reasonable assurance with respect to financial statement preparation and presentation. Additionally, judgments in decision-making can
be faulty and breakdowns in internal control can occur because of simple errors or mistakes that are not detected on a timely basis. Furthermore,
over time, controls that were previously determined to be effective may become inadequate due to changes in conditions or deterioration
in the degree of compliance with internal policies and procedures.



We have evaluated the effectiveness of our internal control over financial
reporting as of December 31, 2023. This evaluation was performed using the criteria set forth in the Internal Control - Integrated
Framework (the “Framework”) developed by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”)
updated in 2013. Based on such evaluation, our management has concluded that our internal control over financial reporting was effective
as of December 31, 2023.



This annual report does not include an attestation report of the Company’s
registered public accounting firm regarding internal control over financial reporting. Management’s report was not subject to attestation
by the Company’s registered public accounting firm pursuant to Regulation S-K Item 308(b) that permits the Company to provide only
management’s report in this annual report.



---



Item 9B. Other Information.



None.



---



54







PART III



Item 10. Directors, Executive Officers and Corporate Governance.



Below is certain information regarding our directors and executive officers.
All of the Company’s directors took office on January 29, 2008, except Mr. Haveson, who became a director of the Company on September
6, 2007.







|Name            |  | Age |    | Position Held with the Company
|--------------- |  | --- | -- | ------------------------------
|Brian Haveson   |  |     | 59 |                               
|Donald Caldwell |  |     | 77 |                               
|Frederick Tecce |  |     | 88 |                               



Brian Haveson



Mr. Haveson has served as CEO of the Company since August 2007, CEO of
Lightning Poker since October 1, 2006, President of the Company from August 2007 to December 2009, President of Lightning Poker from March
2008 to December 2009 and a director of Lightning Poker since June 2005. Since September 2018, Mr. Haveson has been serving as a member
of the board of directors of CCA Industries, Inc. From 1994 through 2002, Mr. Haveson served as CFO and CEO of Nutri/System, Inc. Prior
to that he was a manager for 4 years with Arthur Andersen in its Turnaround Group. Mr. Haveson received a bachelor of Science degree in
Aerospace Engineering from the University of Maryland and a Masters in Management from Purdue University. Mr. Haveson’s successful
tenure as the CEO of Nutri/System and his consulting role at Arthur Andersen provide our Company with a seasoned and experienced CEO.



Donald Caldwell



Mr. Caldwell has been a director of Lightning Gaming, Inc. (formerly Lightning
Poker) since June 2005. He is the founder, Chairman and CEO of Cross Atlantic Capital Partners Inc. ("Cross Atlantic") and has
oversight responsibility for its multiple funds.



Mr. Caldwell serves on the board of several publicly and privately held
companies and civic organizations, including: Quaker Chemical Corporation (NYSE); Voxware, Inc.; Haverford Trust Company; StoneRidge Investment
Partners, LLC/Beltraith Capital, LLC; the South Australia Venture Capital Fund; the Pennsylvania Academy of the Fine Arts (Chairman Emeritus)
and The Andalusia Foundation (Trustee). In addition to his role of director, Mr. Caldwell is the Lead Director at Quaker Chemical Corporation.



Until March 1, 1999, he was President and Chief Operating Officer of Safeguard
Scientifics, Inc., where he also previously served as Executive Vice President. Prior to joining Safeguard in 1993, Mr. Caldwell held
a number of executive and financial positions, including Chief Administrative Officer of Cambridge Technology Partners, Inc. (Massachusetts),
a provider of information technology consulting and software development; Executive Vice President and then President of Atlantic Financial;
and as a partner in the national office of Arthur Young & Co., a predecessor to Ernst & Young, LLP. He holds a Bachelor of Science
degree from Babson College and a Master of Business Administration from the Graduate School of Business at Harvard University. Mr. Caldwell
is a retired New York state Certified Public Accountant.



Mr. Caldwell’s extensive experience in the financial markets, venture
capital arena and service on corporate boards provide us with significant, well-respected financial and management leadership in addition
to his strong corporate governance background.





55









Frederick Tecce



Mr. Tecce has been a director since June 2005. Prior to his retirement
in 2020, Mr. Tecce had previously been managing director and Of Counsel to Cross Atlantic where he worked closely with Mr. Caldwell on
fundraising, as well as overseeing Cross Atlantic's legal issues, including contracts and intellectual property rights. Mr. Tecce was
also Of Counsel to the law firm Buchanan, Ingersoll & Rooney PC, retiring in 2020.



Mr. Tecce has served on the board of the Pennsylvania Public School Employees'
Retirement System Board, where he was appointed by Governor Tom Ridge in 1995, serving as chairman of the finance committee for five years.
Mr. Tecce also served on the board of another publicly-reporting company, InsPro Technologies Corp, until its sale in 2020. In addition,
he previously served on the boards of Profectus BioSciences, Inc.and Nterra, Inc.



Most of Mr. Tecce's professional career has been spent as a principal in
a company that pioneered and licensed new technology in the textile industry. This involved managing a long-term, complex, multi-party
lawsuit directed to enforcing patent rights. His experience in managing complex litigation was also the basis for his engagement with
two other significant businesses whose existence was threatened by lawsuit disputes. In addition, Mr. Tecce has launched several new businesses
from the seed stage and has been an investor and active participant in several emerging growth companies.

Mr. Tecce holds a B.A. from the University of Pennsylvania and J.D. from
the Dickinson School of Law of Pennsylvania State University. Mr. Tecce’s broad legal and business experience brings insight and
a seasoned view to our board.



Director Independence



The NASDAQ listing standards define an "independent director"
generally as a person, other than an executive officer or employee of the Company or an individual who has a relationship that, in the
opinion of the Company's Board of Directors, would interfere with the director's exercise of independent judgment. Under NASDAQ Rule 4350(c),
a Controlled Company is exempt from certain independent director requirements set forth in this rule. The Company is relying on the Controlled
Company exemption under NASDAQ Rule 4350(c) with respect to Mr. Caldwell and Mr. Tecce and as such, the independent director requirements
do not apply.



Mr. Caldwell and Mr. Tecce serve as the members of the audit committee
of the Board of Directors.



Involvement in Certain Legal Proceedings



To the best of our knowledge, during the past ten years, none of the following
occurred with respect to our directors or executive officers: (1) any bankruptcy petition filed by or against any business of which such
person was a general partner or executive officer at or within two years before the time of the filing; (2) any conviction in a criminal
proceeding or being subject to a pending criminal proceeding (excluding traffic violations and other minor offenses); (3) being subject
to any order, judgment or decree, not subsequently reversed, suspended or vacated, of any court of competent jurisdiction, permanently
or temporarily enjoining, barring, suspending or otherwise limiting his involvement in any type of business, securities, commodities or
banking activities; (4) being found by a court of competent jurisdiction (in a civil action), the SEC or the Commodities Futures Trading
Commission to have violated a federal or state securities or commodities law, and the judgment has not been reversed, suspended or vacated;
(5) being the subject of, or party to, a judicial or administrative order, judgment, decree or finding, not subsequently reversed, suspended
or vacated, relating to an alleged violation of law or regulation pertaining to securities or commodities, financial institution or insurance
company regulation, or mail or wire fraud or fraud in connection with any business entity; or (6) being the subject of, or party to any
sanction or order, not subsequently reversed, suspended or vacated, of any self-regulatory organization ( as defined in the Exchange Act),
registered entity (as defined in the Commodities Exchange Act) or equivalent exchange, association, entity or organization.







56









Section 16(a) Beneficial Ownership Reporting Compliance



Section 16(a) of the Exchange Act requires our directors and executive
officers and persons who beneficially own more than 10% of our common stock (“10% Shareholders”) to file with the SEC certain
reports regarding their stock ownership and stock transactions (“Section 16(a) Reports”). Such persons are required to furnish
us with copies of all Section 16(a) Reports they file. Based solely on our review of such reports (and amendments thereto) that were furnished
to us and written representations made to us by reporting persons in connection with certain of these reporting requirements, we believe
that all reporting persons met their Section 16(a) reporting obligations on a timely basis during our last fiscal year.



Code of Ethics



We have adopted a code of ethics that applies to our principal executive
officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions. We undertake
to provide to any person without charge, upon request, a copy of our code of ethics. Such request should be directed to us in writing
as follows: Mr. Brian Haveson, Chief Executive Officer, Lightning Gaming, Inc., 23 Creek Circle, Suite 400, Boothwyn, PA 19061.



Audit Committee



We have a separately designated standing audit committee. Mr. Caldwell
and Mr. Tecce are the audit committee members. The Board of Directors has determined that Mr. Caldwell is an “audit committee financial
expert,” as defined in Item 407(d)(5)(ii) of SEC Regulation S-K.



---





Item 11. Executive Compensation.



The following Summary Compensation Table reports compensation we paid in
2023 and 2022 to Brian Haveson, our and Lightning Poker’s principal executive officer (our “named executive officer”).
The average compensation paid to Mr. Haveson in 2023 and 2022 was $355,945.



SUMMARY COMPENSATION TABLE



|Name & Principal Position       |  | Year |                                                                                           | Salary ($) |  | Bonus ($) (1)                                                                                     |  | Stock Awards ($) |  | Option Awards ($) |                                                                                      | Non-Equity Incentive Plan Compensation ($)                                            |  | Nonqualified Deferred Compensation Earnings ($)                                       |  | All Other Compensation ($) (2)                                     |  | Total ($)      
|------------------------------- |  | ---- | ----------------------------------------------------------------------------------------- | ---------- |  | ------------------------------------------------------------------------------------------------- |  | ---------------- |  | ----------------- | ------------------------------------------------------------------------------------ | ------------------------------------------------------------------------------------- |  | ------------------------------------------------------------------------------------- |  | ------------------------------------------------------------------ |  | ---------------
|Brian Haveson, Director and CEO |  |      | 2023
                                                                                2022 |            |  | $340,836
                                                                                $328,521 |  |                  |  | $- $14,000        | $
                                                                                $- | $-
                                                                                $- |  | $-
                                                                                $- |  | $-
                                                             $- |  | $14,193 $14,340
|                                |  |      |                                                                                           |            |  |                                                                                                   |  |                  |  |                   |                                                                                      |                                                                                       |  |                                                                                       |  |                                                                    |  |                

NOTES:

|    |                                                                                                                                                                                                                                                   
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | Mr. Haveson was awarded a $14,000 bonus as part of the bonus plan and pool approved by the Executive Compensation Committee based on a percentage of 2022 EBITDA. The 2022 bonus was accrued as of December 31, 2022 and paid on January 31, 2023.
|(2) | Includes employer contributions to 401K plan that is available to all employees. Does not include premiums for health insurance that is available on a non-discriminatory basis to all full-time employees.                                       





57









Outstanding Equity Awards at Fiscal Year-End



The following table contains information concerning all unexercised common
stock options granted to our named executive officers, which were outstanding on December 31, 2023.



OUTSTANDING EQUITY AWARDS AT FISCAL YEAR-END



| |  | Option Awards | 
| |  | ------------- | 



|Name              |  | Number of Securities Underlying Unexercised Options (#) Exercisable |           |  | Number of Securities Underlying Unexercised Options (#) Unexercisable |  |   | Equity Incentive
    Plan Awards:
    Number of Securities Underlying Unexercised Unearned
    Options (#) |  |  | Option
    Exercise Price ($) |  | Option Expiration Date
    (mo/day/year)
|----------------- |  | ------------------------------------------------------------------- | --------- |  | --------------------------------------------------------------------- |  | - | ---------------------------------------------------------------------------------------------------------- |  |  | ----------------------------- |  | ----------------------------------------
|Brian Haveson (1) |  |                                                                     | 2,000,000 |  |                                                                       |  | - |                                                                                                            |  |  | -                             |  |                                         
|                  |  |                                                                     |           |  |                                                                       |  |   |                                                                                                            |  |  |                               |  |                                         



NOTES:

|(1) | At December 31, 2023, Mr. Haveson held options to purchase an aggregate of 2,000,000 shares under the 2016 Plan which vested at 400,000 shares each year until fully vested in March 2022.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



The 2016 Plan permits the granting of nonqualified stock options. The shares
underlying the options will be shares of the Company’s nonvoting common stock, par value $0.001 per share, and the total aggregate
number of shares that may be issued under the 2016 Plan is 5,700,000 shares. The purchase price of each option will be determined by the
Board at the time the option is granted, but in no event will be less than 100% of the fair market value of the common stock at the time
of grant. Options granted will not be exercisable after 10 years from the grant date.



Director Compensation



Our directors, excluding directors who are named executive officers, did
not receive compensation during 2023.



---



Item 12. Security Ownership of Certain Beneficial Owners and Management
and Related



Stockholder Matters.



The following table indicates how many shares of our (voting) Common Stock
and Nonvoting Common Stock were beneficially owned as of March 29, 2024 by (1) each person known by us to be the beneficial owner of more
than 5% of our common stock (“5% Shareholder”), (2) our directors, (3) our executive officers, and (4) all of our directors
and executive officers as a group. In general, “beneficial ownership” includes those shares a person has sole or shared power
to vote or transfer (whether or not owned directly) and rights to acquire such power, such as through the exercise of options, warrants,
or convertible debt within 60 days. Except as indicated otherwise below, to our knowledge the persons named in the table below have sole
voting power (for common stock) and investment power with respect to all shares shown as beneficially owned by them. To calculate the
percentage of outstanding common stock owned by each named person or the group reported in the table below, we added shares of common
stock that the named person or group (as the case may be) can acquire within 60 days to both (a) the number of shares of common stock
actually outstanding (4,649,383) and (b) the number of other shares of common stock (if any) actually held by that named person or the
group (as the case may be).



See Part II, Item 5 of this report for further information on securities
authorized for issuance under our equity compensation plan.





58









The address of each of the directors and executive officers listed below
is c/o Lightning Gaming, Inc., 23 Creek Circle, Suite 400, Boothwyn, Pennsylvania 19061.



|                                                            |  | Common Stock                        |  | Nonvoting Common Stock
|----------------------------------------------------------- |  | ----------------------------------- |  | ----------------------
|Directors and Executive Officers:                           |  | Number of Shares Beneficially Owned |  | Percent of Class      
|Donald Caldwell (1)                                         |  |                                     |  |                       
|Fredrick C. Tecce (1)                                       |  |                                     |  |                       
|Brian Haveson                                               |  |                                     |  |                       
|All directors and executive officers as a group (3 persons) |  |                                     |  |                       
|                                                            |  |                                     |  |                       
|5% Shareholders:                                            |  |                                     |  |                       
|CI II and related parties (1) (2)                           |  |                                     |  |                       
|PDS Gaming - Nevada, LLC                                    |  |                                     |  |                       



|(1) | CI II is managed by Cross Atlantic of which Mr. Caldwell is Chairman and CEO and Mr. Tecce is a retired managing director and former counsel. Consequently, Cross Atlantic, Mr. Caldwell, and Mr. Tecce may be deemed the beneficial owners of the shares that CI II beneficially owns.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(2) | Includes 181,000 shares owned by CI II.                                                                                                                                                                                                                                                
|(3) | Includes 50,000 shares beneficially owned by Mr. Tecce’s wife.                                                                                                                                                                                                                         
|(4) | Consists of options to purchase 2,000,000 shares under the 2016 Stock Option Plan.                                                                                                                                                                                                     
|(5) | The address of CI II and its manager, Cross Atlantic, is PO Box 410, Haverford, PA 19041-0410.                                                                                                                                                                                         
|(6) | Includes an aggregate of 2,000,000 shares that can be acquired through the exercise of options.                                                                                                                                                                                        
|(7) | Consists of 7,000,000 shares that can be acquired through the exercise of warrants.                                                                                                                                                                                                    









---





Item 13. Certain Relationships and Related Transactions, and Director
Independence.



We are reporting the information below based on the following relationships:
(1) CI II is managed by Cross Atlantic and is a 5% Shareholder; and (2) Mr. Caldwell is the founder and CEO and Mr. Tecce is a retired
managing director and former counsel to Cross Atlantic.



As of December 31, 2023, CI II owns 3.89% of the (voting) Common Stock
and 100% of the Nonvoting Common Stock of the Company. CI II is managed by Cross Atlantic Capital Partners, wholly owned by Donald Caldwell,
who is a Director and Shareholder of the Company. Frederick Tecce is also a Director and Shareholder of the Company and is the retired
Managing Director of Cross Atlantic Capital Partners. Our Nonvoting Common Stock participates with, and is identical to, our common stock
except for the lack of voting rights.



For the years ended December 31, 2023 and 2022, the Company had no material
related party transactions which were required to be disclosed in accordance with SEC rules.



---



Item 14. Principal Accountant Fees and Services.



Our audit committee selected, and our Board of Directors approved, the
firm of Assurance Dimensions, Inc. (“ADI”) as our principal accountant and registered public accounting firm to audit our
annual consolidated financial statements and perform quarterly financial statement review services for the fiscal year ended December
31, 2023.



Our policy is that before we engage our principal accountants annually
to render audit or non-audit services, the engagement is reviewed and approved by our audit committee. All of our principal accountant’s
services for our last two fiscal years, which consisted solely of audit services, were within the scope of the engagement that our audit
committee approved before we entered into the engagement.



The aggregate fees billed to us for the audit of our annual consolidated
statements by ADI were $66,000 and $63,000, respectively, for the years ended December 31, 2023 and 2022. All of ADI’s billings
were for audit services, which consisted of the audit of our annual consolidated financial statements and review of our quarterly consolidated
financial statements included in our Form 10-Q filings during 2023 and 2022.





59









---



Item 15. Exhibits and Financial Statement Schedules.



(a)(1) Financial Statements

Included in Part II of this report:

Report of Independent Registered Public Accounting Firm

Consolidated Balance Sheets at December 31, 2023 and 2022

Consolidated Statements of Operations for the Years Ended December 31,
2023 and 2022

Consolidated Statements of Changes in Stockholders’ Equity for the
Years Ended December 31, 2023 and 2022

Consolidated Statements of Cash Flows for the Years Ended December 31,
2023 and 2022

Notes to Consolidated Financial Statements



(a)(2) and (c) Financial Statement Schedules

II Valuation and Qualifying Accounts

All other schedules are omitted because of the absence of conditions under
which they are required or because the required information is given in the financial statements or notes thereto.



---



Item 16. Form 10-K Summary



None



---



60









(a)(3) and (b) Exhibits



|EXHIBIT NUMBER |  | EXHIBIT DESCRIPTION                                                                                                                                                                                                                                                                                                                                                                                        
|-------------- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|2.1*           |  | Agreement and Plan of Merger by and among Lightning Gaming, Inc. (the “Company”), LPI Acquisition Corp. and Lightning Poker, Inc.(“Lightning Poker”) (see Exhibit 10.1 to Form 8-K filed October 4, 2007)                                                                                                                                                                                                  
|3.1*           |  | Articles of Incorporation of the Company (see Exhibit 3.1 to Form 10-K filed March 31, 2010)                                                                                                                                                                                                                                                                                                               
|3.2*           |  | Bylaws of the Company (see Exhibit 3.2 to Form 10-SB filed April 23, 2007)                                                                                                                                                                                                                                                                                                                                 
|3.3*           |  | Certificate of Amendment to Articles of Incorporation (See Exhibit 3.1 to Form 8-K filed on July 27, 2015)                                                                                                                                                                                                                                                                                                 
|10.1*          |  | Distribution Agreement dated January 22, 2007, between Lightning Poker and Shuffle Master, Inc. (see Exhibit 10.1 to Form 8-K filed January 30, 2008) [Portions have been omitted pursuant to a request for confidential treatment.]                                                                                                                                                                       
|10.2*          |  | Lease Agreement with Windsor at Namaan’s Creek LP for office and warehouse at 23 Creek Circle, Boothwyn, Pa 19061 (see Exhibit 10.2 to Form 10-K filed March 31, 2010)                                                                                                                                                                                                                                     
|10.3*(A)       |  | 2007 Equity Incentive Plan of the Company (see Exhibit A to Schedule 14C filed October 29, 2007)                                                                                                                                                                                                                                                                                                           
|10.4*          |  | Lightning Poker Warrant for Stock issued to Lance Funston dated April 19, 2007 (see Exhibit 10.8 to Form 8-K filed January 30, 2008)                                                                                                                                                                                                                                                                       
|10.5*          |  | Lightning Poker Warrant for Stock issued to Robert Paul dated April 19, 2007 (see Exhibit 10.9 to Form 8-K filed January 30, 2008)                                                                                                                                                                                                                                                                         
|10.6*          |  | Lightning Poker Warrant for Stock (30,000 shares) issued to Frederick A. Tecce dated July 23, 2007 (see Exhibit 10.15 to Form 8-K filed January 30, 2008)                                                                                                                                                                                                                                                  
|10.7*(A)       |  | The Company's 2007 Equity Incentive Plan form of Incentive Stock Option Agreement (see Exhibit 10.1 to Form 10-Q filed August 14, 2008)                                                                                                                                                                                                                                                                    
|10.8*(A)       |  | The Company's 2007 Equity Incentive Plan form of Nonqualified Stock Option Agreement (see Exhibit 10.2 to Form 10-Q filed August 14, 2008)                                                                                                                                                                                                                                                                 
|10.9*(A)       |  | Lightning Poker employment agreement with Christopher Strano dated June 9 - June 15, 2009 (see Exhibit 10.31 to Form 10-K filed March 31, 2010)                                                                                                                                                                                                                                                            
|10.10*         |  | Modification of Distribution Agreement, dated January 22, 2007, between Lightning Poker and Shuffle Master, Inc., referenced in Exhibit 10.1 to this Form 10-K (see Exhibit 10.54 to Form 10-K filed April 7, 2011) [Portions have been omitted pursuant to a request for confidential treatment.]                                                                                                         
|10.11*         |  | Debt Conversion Agreement between the Company and CI II dated August 6, 2015 (see Exhibit 10.1 to Form 8-K filed August 6, 2015)                                                                                                                                                                                                                                                                           
|10.12*         |  | Amended and Restated Voting Agreement between the Company and the Stock Holders dated August 6, 2015 (see Exhibit 10.2 to Form 8-K filed August 6, 2015)                                                                                                                                                                                                                                                   
|10.13*         |  | Cancellation of Amended and Restated Voting Agreement between the Company and the Stock Holders dated September 28, 2015 (see Exhibit 10.1 for Form 8-K filed September 28, 2015)                                                                                                                                                                                                                          
|10.14*         |  | Changes in Registrant’s Certifying Accountant, Dismissal of Previous Independent Registered Public Accounting Firm dated November 16, 2015 and Engagement of New Independent Registered Public Accounting Firm dated November 17, 2015 (see Exhibit 16.1 for form 8-K/A as amended filed November 23, 2015)                                                                                                
|10.15*(A)      |  | 2016 Stock Option Plan of the Company (see Exhibit A to Schedule 14C filed August 9, 2016)                                                                                                                                                                                                                                                                                                                 
|10.16*         |  | Master Loan Agreement between the Company and PDS Gaming LLC dated July 17, 2018 (see Exhibit 99.1 to Form 8-K filed July 18, 2018)                                                                                                                                                                                                                                                                        
|10.17*         |  | Security Agreement between the Company and PDS Gaming LLC dated July 17, 2018 (see Exhibit 99.2 to Form 8-K filed July 18, 2018)                                                                                                                                                                                                                                                                           
|10.18*         |  | Promissory Note issued by the Company to PDS Gaming LLC dated July 17, 2018 (see Exhibit 99.3 to Form 8-K filed July 18, 2018)                                                                                                                                                                                                                                                                             
|10.19*         |  | Master Loan Agreement between the Company and PDS Gaming – Nevada, LLC dated November 27, 2019 (see Exhibit 99.1 to Form 8-K filed December 3, 2019)                                                                                                                                                                                                                                                       
|10.20*         |  | Security Agreement between the Company and PDS Gaming – Nevada, LLC dated November 27, 2019 (see Exhibit 99.2 to Form 8-K filed December 3, 2019)                                                                                                                                                                                                                                                          
|10.21*         |  | Promissory Note issued by the Company to PDS Gaming – Nevada, LLC dated November 27, 2019 (see Exhibit 99.3 to Form 8-K filed December 3, 2019)                                                                                                                                                                                                                                                            
|10.22*         |  | Lightning Gaming, Inc. Warrant to Purchase Voting Common Stock (7,000,000 shares) issued to PDS Gaming – Nevada, LLC dated November 27, 2019 (see Exhibit 99.4 to Form 8-K filed December 3, 2019)                                                                                                                                                                                                         
|10.23*         |  | Changes in Registrant’s Certifying Accountant, Declination to stand for reelection of Previous Independent Registered Public Accounting Firm dated March 30, 2020 and Engagement of New Independent Registered Public Accounting Firm dated April 8, 2020 (see Exhibit 16.1 for form 8-K filed April 9, 2020)                                                                                              
|21.1           |  | List of subsidiaries                                                                                                                                                                                                                                                                                                                                                                                       
|31.1           |  | Certification of Principal Executive Officer pursuant to Exchange Act Rule 13a-14(a)                                                                                                                                                                                                                                                                                                                       
|31.2           |  | Certification of Principal Financial Officer pursuant to Exchange Act Rule 13a-14(a)                                                                                                                                                                                                                                                                                                                       
|32.1           |  | Certification of Principal Executive Officer and Principal Financial Officer pursuant to Exchange Act Rule 13a-14(b) and 18 U.S.C. 1350                                                                                                                                                                                                                                                                    
|101            |  | The following materials from this Annual Report on Form 10-K for the year ended December 31, 2023 formatted in XBRL (eXtensible Business Reporting Language): (i) Consolidated Balance Sheets, (ii) Consolidated Statements of Operations, (iii) Consolidated Statements of Changes in Stockholders' Equity, (iv) Consolidated Statements of Cash Flows, and (v) Notes to Consolidated Financial Statements

|(A) | Management contract or compensatory plan or arrangement.
|--- | --------------------------------------------------------



* These documents are incorporated herein by reference as exhibits hereto.
Following the description of each such exhibit is a reference to the document as it appeared in a specified report previously filed with
the SEC, to which there have been no amendments or changes unless otherwise indicated. The Commission File No. for all such filings is
000-52575.



---



61









SIGNATURES



Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.



Lightning Gaming, Inc.

By:/s/Brian Haveson

Brian Haveson, President and Chief Executive Officer



Dated: March 29, 2024



Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.



|Signature            |  | Title                                        |  | Date          
|-------------------- |  | -------------------------------------------- |  | --------------
|                     |  |                                              |  |               
|/s/Brian Haveson     |  | Chief Executive Officer, Director            |  | March 29, 2024
|Brian Haveson        |  | (Principal Executive Officer)                |  |               
|                     |  |                                              |  |               
|/s/Brian Haveson     |  | Chief Financial Officer                      |  | March 29, 2024
|Brian Haveson        |  | (Principal Financial and Accounting Officer) |  |               
|                     |  |                                              |  |               
|/s/Donald Caldwell   |  | Director                                     |  | March 29, 2024
|Donald Caldwell      |  |                                              |  |               
|                     |  |                                              |  |               
|/s/Fredrick C. Tecce |  | Director                                     |  | March 29, 2024
|Fredrick C. Tecce    |  |                                              |  |               





62