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We operate in a highly competitive industry.

The interactive learning technology industry in which we operate is highly competitive and characterized by frequent product introductions and rapid technological advances that have substantially increased the capabilities and use of interactive projectors, interactive whiteboards, and microcomputer-based logging technologies and combinations of them. We face substantial competition from developers, manufacturers and distributors of interactive learning products and solutions, including interactive projectors, interactive whiteboards, and microcomputer data logging products.

Many of these competitors have, and our potential competitors may have, significantly greater financial and other resources than we do and have spent, and may continue to spend, significant amounts of resources to try to enter or expand their presence in the market. These companies may manufacture and/or distribute new, disruptive or substitute products that compete for the pool of available funds that previously could have been spent on interactive displays and associated products. In addition, low costlow-cost competitors have appeared in China and other countries. We may not be able to compete effectively against these current and future competitors. Increased competition or other competitive pressures have and may continue to result in price reductions, reduced margins, or loss of market share, any of which could have a material adverse effect on our business, financial condition or results of operations.

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Some of our customers are required to purchase equipment by soliciting proposals from a number of sources and, in some cases, are required to purchase from the lowest bidder. While we attempt to price our products competitively based upon the relative features they offer, our competitors' prices and other factors, we are often not the lowest bidder and, in such cases, may lose sales. For example, we have observed sales of tablet computers by competitors to school districts in the U.S. whose technology budgets could otherwise have been used to purchase interactive displays.

Competitors may be able to respond to new or emerging technologies and changes in customer requirements more effectively and faster than we can or devote greater resources to the development, promotion, and sale of products than we can. Current and potential competitors may establish cooperative relationships among themselves or with third parties, including through mergers or acquisitions, to increase the ability of their products to address the needs of customers. If these interactive display competitors or other substitute or alternative technology competitors acquire significantly increased market share, it could have a material adverse effect on our business, financial condition, or results of operations.

If we are unable to continually enhance our products and to develop, introduce and sell new technologies and products at competitive prices and in a timely manner, our business will be harmed.

Our future success will depend upon our ability to enhance our products and to develop, introduce and sell new technologies and products offering enhanced performance and functionality at competitive prices and in a timely manner and market acceptance of any new products. If we are unable, for any reason, to enhance, develop, introduce, and sell new products in a timely manner, or at all, in response to changing market conditions or customer requirements or otherwise, our business will be harmed.

The development of new technologies and products involves time, substantial costs, and risks. Our ability to successfully develop new technologies will depend in large measure on our ability to maintain a technically skilled research and development staff and to adapt to technological changes and advances in the industry. The success of new product introductions depends on a number of factors, including timely and successful product development, market acceptance, the effective management of purchase commitments and inventory levels in line with anticipated product demand, the availability of components in appropriate quantities and costs to meet anticipated demand, the risk that new products may have quality or other defects and our ability to manage distribution and production issues related to new product introductions. If we are unsuccessful in selling the new products that we develop and introduce, or any future products that we may develop, we may carry obsolete inventory and have reduced available working capital for the development of other new technologies and products.

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We rely on highly skilled personnel, and, if we are unable to attract, retain or motivate qualified personnel, we may not be able to operate our business effectively.

If any of our employees leaves us, and we fail to effectively manage a transition to new personnel, or if we fail to attract and retain qualified and experienced professionals on acceptable terms, our business, financial condition and results of operations could be adversely affected. Our success depends in large part on continued employment of senior management and key personnel who can effectively operate our business, as well as our ability to attract and retain skilled employees. Competition for highly skilled management, technical, research and development and other employees is intense in the high-technology industry and we may not be able to attract or retain highly qualified personnel in the future. In making employment decisions, particularly in the high-technology industry, job candidates often consider the value of the equity awards they would receive in connection with their employment.

Inasmuch as our products are installed in many states throughout the United States, our employment needs include the hiring of skilled installers in several states and we are subject to the employment laws of many states. Our long-term incentive programs may not be attractive enough or perform sufficiently to attract or retain qualified personnel.

Our success also depends on our having highly trained financial, technical, recruiting, sales and marketing personnel. We will need to continue to hire additional personnel as our business grows. A shortage in the number of people with these skills or our failure to attract them to our company could impede our ability to increase revenues from our existing products and services, ensure full compliance with federal and state regulations, or launch new product offerings and would have an adverse effect on our business and financial results.

Our businesses are geographically concentrated and could be significantly affected by any adverse change in the regions in which we operate.

Historically, our business operations have been located primarily throughout the Southeast region of the United States. While we expand our business to new geographic areas, we are still highly concentrated in the United States. Because we derived all of our total revenues on a consolidated basis for the years ended June 30, 20212022 and 20202021 from our operations in the United States, our business is exposed to adverse regulatory and competitive changes, economic downturns and changes in political conditions in the United States. If we are unable to identify and successfully manage or mitigate these risks, our businesses, financial condition, results of operations and prospects could be materially adversely affected.

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For the years ended June 30, 2022 and 2021, we generated a significant portion of our revenue from a limited number of customers.

For the years ended June 30, 2022 and 2021, three customers that accounted for approximately 66% and two customers that accounted for approximately 50%, respectively of our revenue and 77% and 73%, respectively of our accounts receivable. If we were to lose either of these customers our business would be significantly adversely impacted.

We are dependent upon oura limited number of third party manufacturers and key suppliers for the components used in our products. Our suppliers may not be able to always supply components or products to us on a timely basis and on favorable terms, and as a result, our dependency on third party suppliers has adversely affected our revenue and may continue to do so.

We are subject to disruptions in our operations if our sole or limited supply contract manufacturers decrease or stop production of components and products, or if such suppliers and contract manufacturers do not produce components and products of sufficient quantity. We do not manufacture any of the raw materials for the products we sell and distribute and are dependent upon a limited number of suppliers for all products and components. We depend on obtaining adequate supplies of quality components on a timely basis with favorable terms, and some of those components, as well as certain complete products that we sell are provided to us by only one supplier or contract manufacturer. Alternative sources for our components are not always available. Approximately 60% of our products and components are manufactured overseas, so they have long lead times, and events such as local disruptions, natural disasters or political conflict may cause unexpected interruptions to the supply of our products or components.

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For the years ended June 30, 2022 and 2021, we had three vendors that accounted for approximately 83% and 75% of purchases.

We are currently subject to market prices for the components that we purchase, which are subject to fluctuation beyond our control. An increase in the price of components used in our products could result in an increase in costs to our customers and could have a material adverse effect on our revenues and demand for our products.

Interruptions in our ability to procure needed components for our systems, whether due to discontinuance by our suppliers, delays or failures in delivery, shortages caused by inadequate production capacity, the COVID-19 pandemic or unavailability, financial failure, manufacturing quality, or for other reasons, would adversely affect or limit our sales and growth. There is no assurance that we will continue to find qualified manufacturers on acceptable terms and, if we do, there can be no assurance that product quality will continue to be acceptable, which could lead to a loss of sales and revenues.

Our business is subject to the risks associated with doing business in China.

As a result of ourIn addition, reliance on third-party manufacturers and suppliers located in China, our results of operations, financial condition, and prospects are subject to a significant degree to economic, political, and legal developments in China including government control over capital investments or changes in tax regulations that are applicable to us. China's economy differs from the economies of most developed countries in many respects, including with respect to the amount of government involvement, level of development, growth rate and control of foreign exchange, and allocation of resources. Since we rely on a third-party manufacturer located in China for certain of our parts, our business is subject to the risks associated with doing business in China, including:

These risks are likely to be exacerbated by our limited experience with our current products and manufacturing processes. If demand for our products materializes, we may have to invest additional resources to purchase materials, hire and train employees, and enhance our manufacturing processes. It may not be possible for us to manufacture our product at a cost or in quantities sufficient to make our product commercially viable. Any of these factors may affect our ability to manufacture our products and could reduce gross margins and profitability.

We rely on third party manufacturers and if they do not perform in a satisfactory manner, it may harm our business.

Reliance on third-party manufacturers and suppliers entails risks to which we would not be subject if we manufactured the components for our products ourselves, including:

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If our contract manufacturer or its suppliers fail to deliver the required commercial quantities of our components required for our products on a timely basis and at commercially reasonable prices, and we are unable to find one or more replacement manufacturers or suppliers capable of production at a substantially equivalent cost, in substantially equivalent volumes and quality, and on a timely basis, we would likely be unable to meet demand for our products, and we would lose potential revenue. It may also take a significant period of time to establish an alternative source of supply for our components.components

In the past, the U.S. Government has imposed tariffs on products manufactured in China and imported into the United States causing the prices for such products to increase. This could cause customer demand for our products to decrease.

Although the components of our products that are manufactured in China are currently exempt from the tariffs on products manufactured in China, if the exemption were to no longer be available to such products, the imposition of tariffs on our products would most likely cause prices to rise, which would generally increase the price for our products, potentially impact our gross margins, all of which may cause a reduction in demand.

Our facilities and information systems and those of our key suppliers could be damaged as a result of disasters or unpredictable events, which could have an adverse effect on our business operations.

Our logistics are currently provided by our Toccoa, Georgia, our Broomfield, Colorado, our Peoria, Arizona and our Jacksonville, Florida facilities and multiple import and freight carriers throughout the United States. Our suppliers for original design manufacturing ("ODM") and original equipment manufacturing ("OEM") are located in the United States, China, and Taiwan. If major disasters such as earthquakes, fires, floods, wars, terrorist attacks, computer viruses, transportation disasters or other events occur in any of these locations, or our information systems or communications network or those of any of our key component suppliers breaks down or operates improperly as a result of such events, our facilities or those of our key suppliers may be seriously damaged, and we may have to stop or delay production and shipment of our products. We may also incur expenses relating to such damages. If production or shipment of our products or components is stopped or delayed or if we incur any increased expenses as a result of damage to our facilities, our business, operating results, and financial condition could be materially adversely affected.

Increases in component costs, longLong lead times, supply shortages, and supply changes could disrupt our supply chain and have an adverse effect on our business, financial condition, and operating results.

Meeting customer demand partially depends on our ability to obtain timely and adequate delivery of components for our products. As demand for our products increases, in part due to the COVID-19 pandemic, we have experienced temporary supply chain delays also related to the COVID-19 pandemic. Some of the components that go into the manufacturing of our products are sourced from a limited number of third-party suppliers. Our manufacturers generally purchase these components on our behalf, subject to certain approved supplier lists, and neither we do notnor our manufacturers  have long-term arrangements with most of our component suppliers. We are therefore subject to the risk of shortages and long lead times in the supply of these components and the risk that our suppliers discontinue or modify components used in our products. In addition, the lead times associated with certain components are lengthy and preclude rapid changes in design, quantities, and delivery schedules. We may in the future experience component shortages, and the predictability of the availability of these components may be limited. In the event of a component shortage or supply interruption from suppliers of these components, we may not be able to develop alternate sources in a timely manner. Developing alternate sources of supply for these components may be time-consuming, difficult, and costly and we may not be able to source these components on terms that are acceptable to us, or at all, which may undermine our ability to fill our orders in a timely manner. Any interruption or delay in the supply of any of these parts or components, or the inability to obtain these parts or components from alternate sources at acceptable prices and within a reasonable amount of time, would harm our ability to meet our scheduled product deliveries to our customers.

Moreover, volatile economic conditions may make it more likely that our suppliers may be unable to timely deliver supplies, or at all, and there is no guarantee that we will be able to timely locate alternative suppliers of comparable quality at an acceptable price. The loss of a significant supplier, an increase in component costs, or delays or disruptions in the delivery of components, could adversely impact our ability to generate future revenue and earnings and have an adverse effect on our business, financial condition, and operating results.

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We are currently subject to market prices for the components that we purchase, which are subject to fluctuation beyond our control. An increase in the price of components used in our products could result in an increase in costs to our customers and could have a material adverse effect on our revenues and demand for our products.

Interruptions in our ability to procure needed components for our systems, whether due to discontinuance by our suppliers, delays or failures in delivery, shortages caused by inadequate production capacity, the COVID-19 pandemic or unavailability, financial failure, manufacturing quality, or for other reasons, would adversely affect or limit our sales and growth. There is no assurance that we will continue to find qualified manufacturers on acceptable terms and, if we do, there can be no assurance that product quality will continue to be acceptable, which could lead to a loss of sales and revenues.

Our business is subject to the risks associated with doing business in China.

As a result of our reliance on third-party manufacturers and suppliers located in China, our results of operations, financial condition, and prospects are subject to a significant degree to economic, political, and legal developments in China including government control over capital investments or changes in tax regulations that are applicable to us. China’s economy differs from the economies of most developed countries in many respects, including with respect to the amount of government involvement, level of development, growth rate and control of foreign exchange, and allocation of resources. Since we rely on a third-party manufacturer located in China for certain of our parts, our business is subject to the risks associated with doing business in China, including:

These risks are likely to be exacerbated by our limited experience with our current products and manufacturing processes. If demand for our products materializes, we may have to invest additional resources to purchase materials, hire and train employees, and enhance our manufacturing processes. It may not be possible for us to manufacture our product at a cost or in quantities sufficient to make our product commercially viable. Any of these factors may affect our ability to manufacture our products and could reduce gross margins and profitability.

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In the past, the U.S. Government has imposed tariffs on products manufactured in China and imported into the United States causing the prices for such products to increase. This could cause customer demand for our products to decrease.

Although the components of our products that are manufactured in China are currently exempt from the tariffs on products manufactured in China, if the exemption were to no longer be available to such products, the imposition of tariffs on our products would most likely cause prices to rise, which would generally increase the price for our products, potentially impact our gross margins, all of which may cause a reduction in demand.

Changes in general economic conditions, geopolitical conditions, domestic and foreign trade policies, monetary policies and other factors beyond our control may adversely impact our business and operating results.

Our operations and performance depend on global, regional and U.S. economic and geopolitical conditions. Russia’s invasion and military attacks on Ukraine have triggered significant sanctions from U.S. and European leaders. These events are currently escalating and creating increasingly volatile global economic conditions. Resulting changes in U.S. trade policy could trigger retaliatory actions by Russia, its allies and other affected countries, including China, resulting in a “trade war.” Furthermore, if the conflict between Russia and Ukraine continues for a long period of time, or if other countries, including the U.S., become further involved in the conflict, we could face significant adverse effects to our business and financial condition.

The above factors, including a number of other economic and geopolitical factors both in the U.S. and abroad, could ultimately have material adverse effects on our business, financial condition, results of operations or cash flows, including the following:

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Our facilities and information systems and those of our key suppliers could be damaged as a result of disasters or unpredictable events, which could have an adverse effect on our business operations.

Our logistics are currently provided by our Toccoa, Georgia, our Broomfield, Colorado, our Peoria, Arizona and our Jacksonville, Florida facilities and multiple import and freight carriers throughout the United States. Our suppliers for original design manufacturing (“ODM”) and original equipment manufacturing (“OEM”) are located in the United States, China, and Taiwan. If major disasters such as earthquakes, fires, floods, wars, terrorist attacks, computer viruses, transportation disasters or other events occur in any of these locations, or our information systems or communications network or those of any of our key component suppliers breaks down or operates improperly as a result of such events, our facilities or those of our key suppliers may be seriously damaged, and we may have to stop or delay production and shipment of our products. We may also incur expenses relating to such damages. If production or shipment of our products or components is stopped or delayed or if we incur any increased expenses as a result of damage to our facilities, our business, operating results, and financial condition could be materially adversely affected.

The loss of key management personnel could adversely affect our business.

Our business is significantly dependent upon Gary LeCroy and Magen McGahee, who are primarily responsible for our day-to-day operations and we believe our success depends in part on our ability to retain our executive officers, to compensate our executive officers at attractive levels, and to continue to attract additional qualified individuals to our management team. We cannot guarantee continued service by our key executive officers. The loss or limitation of the services of any of our executive officers or the inability to attract additional qualified management personnel could have a material adverse effect on our business, financial condition, or results of operations.

Our Chief Executive Officer and Director and our Chief Financial Officer and Director will have significant influence over us.

Our Chief Executive Officer and our Chief Financial Officer/Chief Operating Officerinitially were issued 85% of our outstanding voting stock.  Pursuant to the employment agreements that we entered into with each of them in January 2020, as amended, we issued to them 51 shares of Series G Preferred Stock collectively, such that they together maintain 51% of our outstanding voting securities.  Therefore, our Chief Executive Officer and our Chief Financial Officerwill have the ability to control our business affairs.

Product liability, warranty, and recall claims may materially affect our financial condition and damage our reputation.

We are engaged in a business that exposes us to claims for product liability and warranty claims in the event our products actually or allegedly fail to perform as expected or the use of our products results, or is alleged to result, in property damage, personal injury or death. Although we maintain product and general liability insurance of the types and in the amounts that we believe are customary for the industry, we are not fully insured against all such potential claims. Any judgment or settlement for personal injury or wrongful death claims could be more than our assets and, even if not justified, could prove expensive to contest.

We may experience legal claims in excess of our insurance coverage or claims that are not covered by insurance, either of which could adversely affect our business, financial condition and results of operations. Adverse determination of material product liability and warranty claims made against us could have a material adverse effect on our financial condition and harm our reputation. In addition, if any of our products or components in our products are, or are alleged to be, defective, we may be required to participate in a recall of that product or component if the defect or alleged defect relates to safety. Any such recall and other claims could be costly to us and require substantial management attention.

Significant product repair and/or replacement due to product warranty claims or product recalls could have a material adverse impact on our results of operations.

We offer limited warranties on our products, ranging for 0 to 5 years against failure due to defective parts of workmanship. To date expenses due to warranty claims have been minimal.

Although we employ quality control procedures, sometimes a product is distributed that needs repair or replacement. The repair and replacement costs we could incur in connection with a recall could adversely affect our business. In addition, product recalls could harm our reputation and cause us to lose customers, particularly if recalls cause consumers to question the safety or reliability of our products.

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Risks Related to our Industry and Regulations

Decreases in, or stagnation of, spending or changes in the spending policies or budget priorities for government funding of schools, colleges, universities, other education providers or government agencies may have a material adverse effect on our revenue.

Any decrease in, stagnation of or adverse change in national, federal, state, provincial or local funding for primary and secondary schools, colleges, universities, or other education providers or other industries that use our products could cause our current and prospective customers to reduce their purchases of our products, which could cause us to lose revenue. Our customers include primary and secondary schools, colleges, universities, other education providers which depend heavily on government funding. Many federal, state, and local governments have limited fiscal capacity and have experienced recent declines in tax revenues. Many of those governments have reacted to the decreases in tax revenues and could continue to react to the decreases in tax revenues by cutting funding to educational institutions. If our products are not a high priority expenditure for such institutions, or if such institutions allocate expenditures to substitute or alternative technologies, we could lose revenue. In addition, a specific reduction in governmental funding support for products such as ours could also cause us to lose revenue.

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If our products fail to comply with consumer product or environmental laws, it could materially affect our financial performance.

If our products do not meet applicable safety or regulatory standards, we could experience lost sales, diverted resources and increased costs, which could have a material adverse effect on our financial condition and results of operations. Our products are subject to environmental regulations in some jurisdictions in which we will do business, we are and will be required to comply with a variety of product safety, product testing and environmental regulations, including compliance with applicable laws and standards with respect to lead content and other child safety and environmental issues. Events that give rise to actual, potential or perceived product safety or environmental concerns could expose us to government enforcement action or private litigation and result in product recalls and other liabilities. In addition, negative consumer perceptions regarding the safety of our products could cause negative publicity and harm our reputation.

If we are unable to anticipate consumer preferences and successfully develop attractive products, we might not be able to maintain or increase our revenue or achieve profitability.

If we are unable to introduce new products or technologies in a timely manner or our new products or technologies are not accepted by our customers, our competitors may introduce more attractive products which would adversely impact our competitive position. Failure to respond in a timely manner to changing consumer preferences could lead to, among other things, lower revenues and excess inventory positions of outdated products. Our success depends on our ability to identify and originate product trends as well as to anticipate and react to change demands and preferences of customers in a timely manner.

We may be unable to keep pace with changes in technology as our business and market strategy evolves.

There can be no assurance that we will be able to respond successfully to technological change. We will need to respond to technological advances and emerging industry standards in a cost-effective and timely manner in order to remain competitive. The need to respond to technological changes may require us to make substantial, unanticipated expenditures.

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Risks Related to Our Intellectual Property and Technology

We have limited protection for our intellectual property, which could impact our competitive position.

We intend to rely on a combination of common law copyright, patent, trademark, and trade secret laws and measures to protect our proprietary information. We currently have obtainedtwo issued patent protection for certain of our products;and two pending patent applications; however, such protection does not prevent unauthorized use of such technology. Trademark and copyright protections may be limited, and enforcement could be too costly to be effective. It may also be possible for unauthorized third parties to copy aspects of, or otherwise obtain and use, our proprietary information without authorization, including, but not limited to, product design, software, customer and prospective customer lists, trade secrets, copyrights, patents and other proprietary rights and materials. Other parties can use and register confusingly similar business, product, and service names, as well as domain names, which could divert customers, resulting in a material adverse effect on our business, operating results, and financial condition.

Intellectual property rights may also be unavailable or limited in some foreign countries, which could make it easier for competitors to capture market share. Many companies have encountered significant problems in protecting and defending intellectual property rights in foreign jurisdictions. The legal systems of certain countries, particularly certain developing countries, do not favor the enforcement of patents, trade secrets and other intellectual property protection, particularly those relating to biotechnology products,, which could make it difficult for us to stop the infringement of our patents or marketing of competing products in violation of our proprietary rights generally. Many countries have compulsory licensing laws under which a patent owner may be compelled to grant licenses to third parties. In addition, many countries limit the enforceability of patents against government agencies or government contractors. In these countries, the patent owner may have limited remedies, which could materially diminish the value of the relevant patent rights. If we or any of our licensors isare forced to grant a license to third parties with respect to any patents relevant to our business, our competitive position may be impaired, and our business, financial condition, results of operations, and prospects may be adversely affected.

If we fail to successfully enforce our intellectual property rights, our competitive position could suffer, which could harm our operating results. Competitors may challenge the validity or scope of our patents or future patents we may obtain. In addition, our licensed patents may not provide us with a meaningful competitive advantage. We may be required to spend significant resources to monitor and police our licensed  intellectual property rights. We may not be able to detect infringement and our competitive position may be harmed. Proceedings to enforce our patent rights in foreign jurisdictions could result in substantial costs and divert our efforts and attention from other aspects of our business, could put our patents at risk of being invalidated or interpreted narrowly and our patent applications at risk of not issuing and could provoke third parties to assert claims against us. We may not prevail in any lawsuits that we initiate, and the damages or other remedies awarded, if any, may not be commercially meaningful. In addition, competitors may design around our technology or develop competing technologies.

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We may not be able to obtain patents or other intellectual property rights necessary to protect our proprietary technology and business.

Our commercial success depends to a significant degree upon our ability to develop new or improved technologies and products, and to obtain patents or other intellectual property rights or statutory protection for these technologies and products in the United States and other countries. We will seek to patent concepts, components, processes, designs and methods, and other inventions and technologies that we consider have commercial value or that will likely give us a technological advantage. Despite devoting resources to the research and development of proprietary technology, we may not be able to develop technology that is patentable or protectable. Patents may not be issued in connection with pending patent applications, and claims allowed may not be sufficient to allow us or our customers to use the inventions that created exclusively. Furthermore, any patents issued could be challenged, re-examined, held invalid or unenforceable or circumvented and may not provide sufficient protection or a competitive advantage. In addition, despite efforts to protect and maintain patents, competitors and other third parties may be able to design around our patents or develop products similar to our products that are not within the scope of our patents.

Finally, patents provide certain statutory protection only for a limited period of time that varies depending on the jurisdiction and type of patent. The statutory protection term of certain patents may expire and, thereafter, the underlying technology of such patents can be used by any third-party including competitors.

Prosecution and protection of the rights sought in patent applications and patents can be costly and uncertain, often involve complex legal and factual issues and consume significant time and resources. In addition, the breadth of claims allowed in our patents, their enforceability, and our ability to protect and maintain them cannot be predicted with any certainty. The laws of certain countries may not protect intellectual property rights to the same extent as the laws of the United States. Even if our patents are held to be valid and enforceable in a certain jurisdiction, any legal proceedings that we may initiate against third parties to enforce such patents will likely be expensive, take significant time and divert management's attention from other business matters. We cannot assure that any of the issued patents or pending patent applications will provide any protectable, maintainable, or enforceable rights or competitive advantages to us.

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In addition to patents, we will rely on a combination of copyrights, trademarks, trade secrets and other related laws and confidentiality procedures and contractual provisions to protect, maintain and enforce our proprietary technology and intellectual property rights. However, our ability to protect our brands by registering certain trademarks may be limited. In addition, while we will generally enter into confidentiality and nondisclosure agreements with our employees, consultants, contract manufacturers, distributors, and resellers and with others to attempt to limit access to and distribution of our proprietary and confidential information, it is possible that:

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We cannot assure that we will be successful in protecting, maintaining or enforcing our intellectual property rights. If we are unsuccessful in protecting, maintaining, or enforcing our intellectual property rights, then our business, operating results and financial condition could be materially adversely affected, which could:

If it is determined that we have infringed, violated or are infringing or violating a patent or other intellectual property right of any other person or if we are found liable in respect of any other related claim, then, in addition to being liable for potentially substantial damages, we may be prohibited from developing, using, distributing, selling or commercializing certain of our technologies and products unless we obtain a license from the holder of the patent or other intellectual property right. We cannot assure that we will be able to obtain any such license on a timely basis or on commercially favorable terms, or that any such licenses will be available, or that workarounds will be feasible and cost-efficient. If we do not obtain such a license or find a cost-efficient workaround, our business, operating results and financial condition could be materially adversely affected, and we could be required to cease related business operations in some markets and restructure our business to focus on our continuing operations in other markets.

Our business may suffer if it is alleged or determined that our technology or another aspect of our business infringes the intellectual property of others.

The markets in which we will compete are characterized by the existence of a large number of patents and trade secrets and by litigation based on allegations of infringement or other violations of intellectual property rights. Moreover, in recent years, individuals and groups have purchased patents and other intellectual property assets for the purpose of making claims of infringement to extract settlements from companies like ours. Also, third parties may make infringement claims against us that relate to technology developed and owned by one of our suppliers for which our suppliers may or may not indemnify us. Even if we are indemnified against such costs, the indemnifying party may be unable to uphold its contractual obligations and determining the extent such of such obligations could require additional litigation. Claims of intellectual property infringement against us or our suppliers might require us to redesign our products, enter into costly settlements or license agreements, pay costly damage awards or face a temporary or permanent injunction prohibiting us from marketing or selling our products or services. If we cannot or do not license the infringed intellectual property on reasonable terms or at all, or substitute similar intellectual property from another source, our revenue and operating results could be adversely impacted. Additionally, our customers and distributors may not purchase our offerings if they are concerned that they may infringe third party intellectual property rights. Responding to such claims, regardless of their merit, can be time consuming, costly to defend in litigation, divert management's attention and resources, damage our reputation, and cause us to incur significant expenses. The occurrence of any of these events may have a material adverse effect on our business, financial condition, and operating results.

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If we are unable to anticipate consumer preferences and successfully develop attractive products, we might not be able to maintain or increase our revenue or achieve profitability

If we are unable to introduce new products or technologies in a timely manner or our new products or technologies are not accepted by our customers, our competitors may introduce more attractive products which would adversely impact our competitive position. Failure to respond in a timely manner to changing consumer preferences could lead to, among other things, lower revenues and excess inventory positions of outdated products. Our success depends on our ability to identify and originate product trends as well as to anticipate and react to change demands and preferences of customers in a timely manner.

We may be unable to keep pace with changes in technology as our business and market strategy evolves.

There can be no assurance that we will be able to respond successfully to technological change. We will need to respond to technological advances and emerging industry standards in a cost-effective and timely manner in order to remain competitive. The need to respond to technological changes may require us to make substantial, unanticipated expenditures.

The loss of key management personnel could adversely affect our business.

Our business is significantly dependent upon Gary LeCroy and Magen McGahee, who are primarily responsible for our day-to-day operations and we believe our success depends in part on our ability to retain our executive officers, to compensate our executive officers at attractive levels, and to continue to attract additional qualified individuals to our management team. We cannot guarantee continued service by our key executive officers. The loss or limitation of the services of any of our executive officers or the inability to attract additional qualified management personnel could have a material adverse effect on our business, financial condition, or results of operations.

Our Chief Executive Officer and Director and our Chief Financial Officer and Director will have significant influence over us.

Our Chief Executive Officer and our Chief Financial Officer/Chief Operating Officerinitially were issued 85% of our outstanding voting stock.  The employment agreements that we entered into with each of them in January 2020, as amended, provides that we will issue to them preferred stock such that they together maintain 51% of our outstanding voting securities.  Upon issuance of such preferred stock, our Chief Executive Officer and our Chief Financial Officerwill have the ability to control our business affairs.

Risks Related to Our Common Stock

Future sales of our common stock could adversely affect our share price, and any additional capital raised by us through the sale of equity or convertible debt securities may dilute your ownership in us and may adversely affect the market price of our common stock.

We intend, from time to time, to seek additional equity or debt financing to finance working capital requirements, continue our expansion, develop new products, or make acquisitions or other investments. In addition, we have issued convertible securities that are convertible into shares of our common stock. In addition, if our business plans change, general economic, financial or political conditions in our industry change, or other circumstances arise that have a material effect on our cash flow, the anticipated cash needs of our business, as well as our conclusions as to the adequacy of our available sources of capital, could change significantly. Any of these events or circumstances could result in significant additional funding needs, requiring us to raise additional capital. If additional funds are raised through the issuance of equity shares, preferred shares or debt securities, the terms of such securities could impose restrictions on our operations and would reduce the percentage ownership of our existing stockholders. If financing is not available on satisfactory terms, or at all, we may be unable to expand our business or to develop new business at the rate desired and our results of operations may suffer.

The market price of our common stock may be volatile, which could cause the value of your investment to fluctuate and possibly decline significantly.

The market price of our common stock may be highly volatile and subject to wide fluctuations. Our financial performance, government regulatory action, tax laws and market conditions in general could have a significant impact on the future market price of our common stock. Investors may not be able to resell your shares at or above the current price due to a number of factors such as those listed under this "Risk Factors" section. Some of the factors that could negatively affect our share price or result in fluctuations in the price of our stock include:

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Furthermore, the stock market has recently experienced volatility that, in some cases, has been unrelated or disproportionate to the operating performance of particular companies. These broad market and industry fluctuations may adversely affect the market price of our common stock, regardless of our actual operating performance.

In the past, following periods of market volatility, stockholders have instituted securities class action litigation. If we were involved in securities litigation, it could have a substantial cost and divert resources and the attention of executive management from our business regardless of the outcome of such litigation.

Certain Provisions of Nevada law may have anti-takeover effects.

Certain provisions of Nevada law applicable to our company could also delay or make more difficult a merger, tender offer or proxy contest involving our Company, including Sections 78.411 through 78.444 of the Nevada Revised Statutes, which prohibit a Nevada corporation from engaging in any business combination with any "interested stockholder" (as defined in the statute) for a period of two years unless certain conditions are met. In addition, our senior management is entitled to certain payments upon a change in control and certain of the restricted shares we have granted provide for the acceleration of vesting in the event of a change in control of our Company.

We have no intention of declaring dividends in the foreseeable future.

The decision to pay cash dividends on our common stock rests with our board of directors and will depend on our earnings, unencumbered cash, capital requirements and financial condition. We do not anticipate declaring any dividends in the foreseeable future, as we intend to use any excess cash to fund our operations. Investors in our common stock should not expect to receive dividend income on their investment, and investors will be dependent on the appreciation of our common stock to earn a return on their investment.

The exercise or conversion of currently outstanding debt, warrants or preferred stock would further dilute holders of our common stock.

We currently have outstanding debt that could convert into shares of our common and preferred stock, and preferred stock that converts into shares of our common stock. Our Series D Preferred Stock converts into twenty percent of the number of shares that are outstanding on the date of conversionstock and our Series E Preferred Stock converts into 1,190,476warrants exercisable for shares of our common stock. Our Series F Preferred Stock is convertible into shares of Common Stock at the fixed price of $0.37 per share, subject to adjustments. Our Board of Directors has authority, without action or vote of our shareholders, to issue shares of common and preferred stock. Our outstanding notes contain provisions that provide for the adjustment of the conversion price under certain circumstances.  In addition, the securities purchase agreement that we entered into also provides for the issuance of additional commitment shares under certain circumstances. We may issue shares of our common stock or preferred stock to complete a business combination or to raise capital. Such stock issuances could be made at a price that reflects a discount from the then-current trading price of our common stock. These conversions and issuances would dilute our stockholders' ownership interest, which among other things would have the effect of reducing their influence on matters on which our stockholders vote. In addition, our stockholders and prospective investors may incur additional dilution if holders of stock options and warrants, whether currently outstanding or subsequently granted, exercise their options or warrants to purchase shares of our common stock or if our convertible debt holders convert their debt.

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ITEM 1B.Future sales of common stock by our officers and directors and principal stockholders or others of our common stock, or the perception that such sales may occur, could depress the market price of our common stock.

Sales of a substantial number of shares of our common stock, particularly sales by our directors, executive officers and principal stockholders could adversely affect the market price of our common stock and may make it more difficult to sell common stock at a time and price that you deem appropriate.

Certain Provisions of Nevada law may have anti-takeover effects.

Certain provisions of Nevada law applicable to our company could also delay or make more difficult a merger, tender offer or proxy contest involving our Company, including Sections 78.411 through 78.444 of the Nevada Revised Statutes, which prohibit a Nevada corporation from engaging in any business combination with any “interested stockholder” (as defined in the statute) for a period of two years unless certain conditions are met. In addition, our senior management is entitled to certain payments upon a change in control and certain of the restricted shares we have granted provide for the acceleration of vesting in the event of a change in control of our Company.

Anti-takeover provisions in our charter documents, and under Nevada law, could make an acquisition of our company more difficult, limit attempts by our stockholders to replace or remove our current management and limit the market price of our common stock.

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Provisions in our amended and restated articles of incorporation and bylaws may have the effect of delaying or preventing a change of control or changes in our management. Our amended and restated certificate of incorporation and amended and restated bylaws will include provisions that:

Any of the foregoing provisions could limit the price that investors might be willing to pay in the future for shares of our common stock, and they could deter potential acquirers of our company, thereby reducing the likelihood that you would receive a premium for your shares of our common stock in an acquisition.

Our amended and restated articles of incorporation and bylaws provide for indemnification of officers and directors at our expense, which may result in a major cost to us and hurt the interests of our stockholders because corporate resources may be expended for the benefit of officers or directors.

Our amended and restated articles of incorporation and bylaws provide that any person who was or is a party or was or is threatened to be made a party to any threatened, pending, or completed action, suit, or proceeding, whether civil, criminal, administrative, or investigative by reason of the fact that he is or was a director, officer, employee, or agent of the Company, or is or was serving at the request of the Company as a director, officer, employee, or agent of another corporation, partnership, joint venture, trust, or other enterprise, shall be entitled to be indemnified by the Company to the fullest extent then permitted by the laws of the State of Nevada against reasonably incurred expenses of suit, litigation or other proceedings which is specifically permissible under applicable law, except with respect to matters as to which it is adjudged that such person was liable to the Company for negligence or misconduct in the performance of his duty. These indemnification obligations may result in a major cost to us and hurt the interests of our stockholders because corporate resources may be expended for the benefit of officers or directors.

We have been advised that, in the opinion of the SEC, indemnification for liabilities arising under federal securities laws is against public policy as expressed in the Securities Act and is, therefore, unenforceable. In the event that a claim for indemnification for liabilities arising under federal securities laws, other than the payment by us of expenses incurred or paid by a director, officer or controlling person in the successful defense of any action, suit or proceeding, is asserted by a director, officer or controlling person in connection with our activities, we will (unless in the opinion of our counsel, the matter has been settled by controlling precedent) submit to a court of appropriate jurisdiction, the question whether indemnification by us is against public policy as expressed in the Securities Act and will be governed by the final adjudication of such issue. The legal process relating to this matter if it were to occur is likely to be very costly and may result in us receiving negative publicity, either of which factors is likely to materially reduce the market and price for our shares.

We do not intend to pay dividends in the foreseeable future. As a result, your ability to achieve a return on your investment will depend on appreciation in the price of our common stock.

We have never declared or paid any cash dividends on our common stock. We currently intend to retain all available funds and any future earnings for use in the operation of our business and do not anticipate paying any dividends on our common stock in the foreseeable future. Any determination to pay dividends in the future will be at the discretion of our board of directors. Consequently, your only opportunity to achieve a return on your investment in our company will be if the market price of our common stock appreciates and you sell your shares at a profit. For additional information about our dividend policy, see the section entitled “Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchase of Equity—Dividend Policy” elsewhere in this Annual Report.

ITEM1B. UNRESOLVED STAFF COMMENTS.

Not applicable.None.

ITEM 2. PROPERTIES.PROPERTIES

 Facilities

Our principal offices are located at 285 Big A Road, Toccoa, GA 30577.  Our corporate telephone number is (706) 391-5030. As of June 30, 2021,2022, we maintained the following operating facilities:

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In the opinion of our management, our property was adequate for itsour present needs atas of June 30, 2021.2022. We do not anticipate difficulty in renewing the existing leases as they expire or in finding alternative facilities if necessary. We believe all of our assets are adequately covered by insurance. There have been no changes to the leased locations since June 30, 2021.2022. Please refer to refer to NoteNotes 6 and 7 in the financial statements on page F-21 and F-22 for more information.

ITEM 3. LEGAL PROCEEDINGS.PROCEEDINGS

We are involved in a variety of legal actions relating to various matters during the normal course of business. Although we are unable to predict the ultimate outcome of these legal actions, it is the opinion of management that the disposition of these matters, taken as a whole, will not have a material adverse effect on our financial condition or results of operations.

ITEM 4. MINE SAFETY DISCLOSURES.DISCLOSURES

Not applicable.

PART II

ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES.

Market Information

As of June 30, 2021,2022, our common stock trades on the OTCQB and is quoted on the OTC Market under the trading symbol GAXY.  There is no established public markets for our common stock.“GAXY.”  Any over-the-counter market quotations reflect inter-dealer prices, without retail mark-up, mark-down or commission and may not necessarily represent actual transactions. The last reported sales price of our common stock on the OTC Market was $0.0103$0.08 on September 13, 2021.21, 2022.

Dividend Policy

We have never declared or paid any cash dividends on our common stock and we do not anticipate paying any cash dividends on our common stock in the foreseeable future. The payment of dividends, if any, in the future is within the discretion of our Board of Directors and will depend on our earnings, capital requirements, financial condition, and other relevant facts. We currently intend to retain all future earnings, if any, to finance the development and growth of our business.

Holders

The number of record holders of our common stock at June 30, 20212022 was 388.392.

ITEM 6. SELECTED FINANCIAL DATA[RESERVED]

The information under this Item is not required to be provided by smaller reporting companies.

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ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.OPERATIONS

TheYou should read the following discussion and analysis should be read in conjunctionof our financial condition and results of operations together with our consolidated financial statements and notes thereto and the other financial datarelated notes appearing elsewhere in this Annual Report. References in this Management’s Discussion and Analysis of Financial Condition and Results of Operations to “us,” “we,” “our,” and similar terms refer to Galaxy Next Generation, Inc., a Nevada corporation, and its subsidiaries. This discussion includes forward-looking statements, as that term is defined in the federal securities laws, based upon current expectations that involve risks and uncertainties, such as plans, objectives, expectations and intentions. Actual results and the timing of events could differ materially from those anticipated in these forward-looking statements as a result of a number of factors. Words such as “anticipate,” “estimate,” “plan,” “continuing,” “ongoing,” “expect,” “believe,” “intend,” “may,” “will,” “should,” “could,” and similar expressions are used to identify forward-looking statements.

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We caution you that these statements are not guarantees of future performance or events and are subject to a number of uncertainties, risks and other influences, many of which are beyond our control, which may influence the accuracy of the statements and the projections upon which the statements are based. See “Special Note Regarding Forward-Looking Statements.” Our actual results could differ materially from those anticipated in the forward-looking statements as a result of certain factors discussed in “Risk Factors” and elsewhere in this Annual Report. Any one or more of these uncertainties, risks and other influences could materially affect our results of operations and whether forward-looking statements made by us ultimately prove to be accurate. Our actual results, performance and achievements could differ materially from those expressed or implied in these forward-looking statements. We undertake no obligation to publicly update or revise any forward-looking statements, whether from new information, future events or otherwise. 

Company Overview

Since we completed a reverse triangular merger in June 2018, we have beenGalaxy is a manufacturer and U.S. distributor of interactive learning technology hardware and software that allows the presenter and participant to engage in a fully collaborative instructional environment. Galaxy's productsproduct offerings include Galaxy's own private-label interactive touch screen panel, its own intercom, bell,Intercom, Bell, and paging solutions,Paging solution, Emergency Communication platform, as well as an audio amplification line of products that is currently supported direct and by OEM relationships. Galaxy's distribution channel consists of a direct sales model, as well as approximately 44 resellers across the U.S. who primarily sell the products offered by Galaxy within the commercial and educational market. Galaxy does not control where the resellers focus their reselling efforts; however, the K-12 education market is the largest customer base for Galaxy products comprising nearly 90% of Galaxy's sales. In addition, Galaxy’s OEM division also manufacturers products for other vendors in its industry and white labels the products under other brands.

We believe the market space for interactive technology in the classroom is a perpetual highway of business opportunity, especially in light of the COVID-19 pandemic as school systems have sought to expand their ability to operate remotely. Public and private school systems are in a continuous race to modernize their learning environments. Our goal is to be an early provider of the best and most modern technology available.

We are striving to become the leader in the market for interactive flat panel technology, associated software, and peripheral devices for classrooms. Our goal is to provide an intuitive system to enhance the learning environment and create easy to use technology for the teacher, increasing student engagement and achievement. Our products are developed and backed by a multitudemanagement team with more than 30 combined years in the classroom technology space.

We were originally organized as a corporation in 2001. Our principal executive offices are located at 285 Big A Road Toccoa, Georgia 30577, and our telephone number is (706) 391-5030. Our website address is www.galaxynext.us. Information contained in our website does not form part of servicesthis Annual Report and is intended for informational purposes only.

On June 22, 2018, we consummated a reverse triangular merger whereby Galaxy Next Generation, Inc., a private company (co-founded by our now executives, Gary LeCroy (CEO) and Magen McGahee (CFO)), merged with and into our newly formed subsidiary, Galaxy MS, Inc. (Galaxy MS or Merger Sub), which was formed specifically for the transaction. Under the terms of the merger, the private company shareholders transferred all their outstanding shares of common stock to Galaxy MS, in return for shares of our customers, including installation, training,Series C Preferred Stock. Prior to the merger, we operated under the name Full Circle Registry, Inc.’s (FLCR) and maintenance.  In Septemberour operations were based upon our ownership of Georgetown 14 Cinemas, a fourteen-theater movie complex located on approximately seven acres in Indianapolis, Indiana. Prior to the merger, our sole business and source of revenue was from the operation of the theater, and as part of the merger agreement, we had the right to spinout the theater to the prior shareholders of FLCR. Effective February 6, 2019, we sold our interest in the theater to focus our resources on our technology operations.

On September 3, 2019, we acquired 100% of the outstanding capital stock of both Interlock Concepts, Inc. (Concepts) and Ehlert Solutions Group, Inc. (Solutions). In pursuant to the terms of a stock purchase agreement that we entered into with Concepts and Solutions. The purchase price for the acquisition was 1,350,000 shares of common stock and a two year note payable to the seller in the principal amount of $3,000,000. The note payable to the seller is subject to adjustment based on the achievement of certain future earnings goals and successful completion of certain pre-acquisition withholding tax issues of Concepts and Solutions. The note has been adjusted and is reflecting under related party notes payable in the consolidated financial statements.

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Solutions and Concepts are Arizona-based audio design and manufacturing companies creating innovative products that provide fundamental tools for building notification systems primarily to K-12 education market customers located primarily in the north and northwest United States. These products and services allow institutions access to intercom, scheduling, and notification systems with improved ease of use. The products provide an open architecture solution to customers which allows the products to be used in both existing and new environments. Intercom, public announcement (PA), bell and control solutions are easily added and integrated within the open architecture design and software model. These products combine elements over a common internet protocol (IP) network, which minimizes infrastructure requirements and reduces costs by combining systems.

On October 15, 2020, we acquired the assets of Classroom TechnologyTechnologies Solutions, Inc. ("Classroom Tech") for consideration of (a) paying off a secured Classroom Tech loan, not to exceed the greater of 50% of the value of the Classroom Tech assets acquired or $120,000; (b) the issuance of a promissory note in the amount of $44,526 to a Classroom Tech designee; and (c) the issuance of 10 million shares (50,000 shares after reverse split) of common stock to the seller of Classroom Tech. Classroom Tech provides cutting-edge presentation products to schools, training facilities, churches, corporations and retail establishments. Their high-quality solutions are customized to meet a variety of needs and budgets in order to provide the best in education and presentation technology. Classroom Tech direct-sources and imports many devices and components which allows us to be innovative, nimble, and capable of delivering a broad range of cost-effective solutions. Classroom Tech also offers in-house service and repair facilities and carries many top brands.

This Management's DiscussionAnnual Report contains references to our trademarks and Analysisto trademarks belonging to other entities. Solely for convenience, trademarks and trade names referred to in this Annual Report, including logos, artwork and other visual displays, may appear without the ® or TM symbols, but such references are not intended to indicate, in any way, that we will not assert, to the fullest extent under applicable law, our rights or the rights of Financial Conditionthe applicable licensor to these trademarks and Resultstrade names. We do not intend our use or display of Operations (MD&A) includesother companies' trade names or trademarks to imply a discussionrelationship with, or endorsement or sponsorship of us by, any other companies.

The financial statements after the completion of the merger and acquisition include the consolidated assets and liabilities of the combined company (collectively Galaxy Next Generation, Inc., Interlock Concepts, Inc., Ehlert Solutions Group, Inc. and Classroom Tech referred to collectively as the “Company”).

All intercompany transactions and accounts have been eliminated in the consolidation.

Our common stock is traded on over-the-counter markets under the stock symbol “GAXY.”

Reverse Stock Split

Effective March 7, 2022, we effected a one-for-two hundred reverse stock split of our operationsauthorized and outstanding shares of common stock. All per share numbers reflect the one-for-two hundred reverse stock split.

Recent Events

On August 31, 2022, we entered into a Securities Purchase Agreement (the “Securities Purchase Agreement”) with an investor pursuant to which we issued a 12% promissory note in the principal amount of $900,000 (the “Note”) for the years ended June 30, 2021 and 2020. The discussionnet proceeds of $765,000, together with a warrant (the “Warrant”) to purchase 1,000,000 shares of our operations forcommon stock (the “Warrant Shares”) and an agreement to issue 3,000,000 shares of our common stock to the year ended June 30, 2020 includes the resultsinvestor as commitment fee shares (the “Commitment Fee Shares”) in respect of operations of Concepts and Solutions for parta $450,000 commitment fee.  We applied $400,000 of the fiscal year as Concepts and Solutions were acquired in September 2019 and does not includeproceeds from the operations of Classroom Technology Solutions since its assets were acquired the following fiscal year. The discussionsale of the operations for the year ended June 30, 2021 includes the operations of Concepts and Solutions for the full year since they were acquired in September 2019Note and the operationsWarrant to repay principal and interest obligations accrued under a 12% Promissory Note, dated June 21, 2022, issued by us in the principal amount of Classroom Technology Solutions for$600,000 to the investor.

The Note bears interest at 12% per annum and is due and payable on August 31, 2023 (the “Maturity Date”). Any amount of principal or interest on the Note which is not paid when due will bear default interest at the rate of the lesser of (i) eighteen percent (18%) per annum and (ii) the maximum amount permitted under law. In the event we receive gross proceeds of at least $5,000,000 in connection with any debt or equity financing, we have agreed to apply a portion of the year since it was acquiredproceeds from such financing to repay the Note in October 2020. Accordingly,full.

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The Note is convertible in the resultsevent of operations reported fora default into common stock at a conversion price (the “Conversion Price”) equal to the years ended June 30, 2021 and 2020 and are not comparable.

Withlowest trading price (i) during the global spreadprevious twenty (20) trading day period ending on the date of issuance of the ongoing novel coronavirus ("COVID-19") pandemic sinceNote, or (ii) during the first quarter of 2020, we have implemented business continuity plans designed to address and mitigateprevious twenty (20) trading day period ending on the impact ofconversion date. If in the COVID-19 pandemic on our employees and business.  While our revenue has not been negatively impacted at this time and demand for our products has increased, given the global economic slowdown, and the other risks and uncertainties associated with the pandemic, we have experienced supply chain issues resulting from the pandemic which could impact our business, financial condition, results of operations and growth prospects. The extent to which the COVID-19 pandemic impacts our business,  the business of our suppliers and other commercial partners, our corporate development objectives and the value of and market forcase that our common stock is not deliverable by DWAC, an additional 10% discount will depend onapply for all future developmentsconversions until DWAC delivery becomes available. If in the case that are highly uncertainour common stock is “chilled” for deposit into the DTC system and only eligible for clearing deposit, an additional 15% discount will apply for all future conversions under all Note until such chill is lifted. Additionally, if we cease to be a 1934 Act reporting company or if the Note cannot be predictedconverted into free trading shares after one hundred eighty-one (181) days from the issue date (other than as a result of the holder’s status as our affiliate), an additional 15% discount will be attributed to the conversion price. If we fail to maintain its status as “DTC Eligible” for any reason, the principal amount of the Note will increase by $5,000 and the conversion price will be redefined to mean 70% multiplied by the market price of the common stock.

So long as the Note is outstanding, upon any issuance by us or any of our subsidiaries of any security with confidenceany term more favorable to the holder of such security or with a term in favor of the holder of such security that was not similarly provided to the holder of the Note, then we  shall notify the holder of such additional or more favorable term and such term, at thisholder’s option, will become a part of the transaction documents with the holder. If while the Note is outstanding a third party has the right to convert monies owed into common stock at a discount to market greater than the Conversion Price in effect at that time (before all other applicable adjustments in the Note), then the holder, in holder’s sole discretion, may utilize such greater discount percentage. In no event will the holder be entitled to convert any portion of the Note in excess of that portion which would result in beneficial ownership by the holder and its affiliates of more than 9.99% of the outstanding shares of common stock.

So long as we have any obligation under the Note, we may not, without the holder’s written consent, create, incur, assume guarantee, or otherwise become liable upon the obligation of any person or entity, except by the endorsement of negotiable instruments for deposit or collection, or suffer to exist any liability for borrowed money, except (a) borrowings in existence or committed on the date the Note was issued and of which the Company has informed holder, (b) indebtedness to trade creditors financial institutions or other lenders incurred in the ordinary course of business, (c) borrowings, the proceeds of which shall be used to repay the Note, or (d) borrowings which are expressly subordinated to the Note.

Upon the occurrence of certain events of default specified in the Note, such as a failure to honor a conversion request, failure to maintain our listing or our failure to comply with its obligations under Securities Exchange Act of 1934, as amended, 200% of all amounts owed to holder under the ultimate durationNote, including default interest if any, shall then become due and payable. Upon the occurrence of other events of default specified in the Note, such as a breach of the pandemic, travel restrictions, quarantines, social distancingCompany’s representations or covenants or the failure register the Commitment Fee Shares as required by the Securities Purchase Agreement or the Warrant Shares as required by the Warrant, all amounts owed to holder under the Note, including default interest if any, shall then become due and business closure requirementspayable. Further, if we fail to maintain its listing, fail to comply with its obligations under Securities Exchange Act of 1934, as amended, or lose the “bid” price for its common stock for a period of five (5) days after written notice thereof to us, after the nine-month anniversary of the Note, then the principal amount of the Note will increase by $15,000 and the holder shall be entitled to use the lowest trading price during the delinquency period as a base price for the conversion and the conversion price shall be redefined to mean forty percent (40%) multiplied by the market price of the common stock.

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The Warrant is exercisable, commencing on the earlier of (i) the date that is one hundred eighty-one (181) calendar days after its issuance date or (ii) the date that we consummate an Uplist Offering (as defined in this Warrant), for a period of five years at an initial exercise price of $.01, subject to adjustment for stock splits, stock dividends or similar event, provided, however, that if we consummates an Uplist Offering on or before the date that is one hundred eighty (180) calendar days after the issuance date, then the exercise price will equal the lower of (i) offering price per share of common stock (or unit, if units are offered in the United StatesUplist Offering) at which the Uplist Offering is made or (ii) the exercise price of any warrant(s) issued by us in connection with the Uplist Offering. If while the Warrant is outstanding, we issue or sell, or are deemed to have issued or sold, any warrant or option to purchase common stock and/or common stock equivalents other than in connection with an exempt issuance (as defined), with a purchase price per share less than the exercise price in effect immediately prior to such issuance or sale or deemed issuance or sale, then immediately after such issuance or sale or deemed issuance or sale, the exercise price then in effect will be reduced to an amount equal to the new issuance price. In the event the Company fails to timely file a registration statement for the shares issuable upon exercise of the Warrant the Warrant may be exercised on a cashless basis. In no event will the holder be entitled to exercise any portion of the Warrant in excess of that portion which would result in beneficial ownership by the holder and other countries,its affiliates of more than 9.99% of the outstanding shares of common stock.

We agreed to include the shares exercisable upon exercise of the Warrant and the effectivenessCommitment Fee Shares in a registration statement filed by us no later than the date that is thirty (30) days following the later of actions taken globally(i) the consummation of the Uplist Offering, or (ii) the Maturity Date, and to contain and treatcause the disease.  registration statement to be declared effective within ninety (90) days of its filing.

The global economic slowdownSecurities Purchase Agreement provides that if we issue any shares of common stock at a price per share of less than $0.15 during the period beginning on the date which is the six (6) month anniversary of the closing date (the “Adjustment Period”), we will issue to investor additional Commitment Fee Shares such that the price per share of the aggregate amount of Commitment Fee Shares (including such additional Commitment Fee Shares) equals such lower price per share. The Securities Purchase Agreement further provides that the investor may elect during the Adjustment Period to provide us with a reconciliation statement showing the net proceeds actually received from the sale of the Commitment Fee Shares (the “Sale Reconciliation”). If, as of the date of the delivery by investor of the Sale Reconciliation, the investor has not realized net proceeds from the sale of such Commitment Fee Shares equal to at least the Commitment Fee, then the Company is obligated to pay, within five (5) business days, the applicable shortfall amount in cash or immediately take all required action necessary to cause the issuance of additional shares of common stock to the investor in an amount sufficient such that, when sold and the other risks and uncertainties associated with the pandemic could have a material adverse effect on our business, financial condition, results of operations and growth prospects. In addition,net proceeds thereof are added to the extentnet proceeds from the ongoing COVID-19 pandemic adversely affects our business and resultssale of operations, it may also have the effect of heightening manyany of the other riskspreviously issued and uncertainties which we face.sold Commitment Fee Shares, the investor will have received total net funds equal to the Commitment Fee. The Securities Purchase Agreement provides that the Commitment Fee Shares shall be issued to the investor upon the earlier of: (i) the consummation of the Uplist Offering, (ii) August 31, 2023, or (iii) the repayment in full of the Company’s obligations under the Note.

Critical Accounting Policies and Estimates

Management's Discussion and Analysis discusses our consolidated financial statements which have been prepared in accordance with United States Generally Accepted Accounting Principles (U.S. GAAP). The preparation of these consolidated financial statements requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the balance sheet date and reported amounts of revenue and expenses during the reporting period. On an ongoing basis, we evaluate our estimates and judgments. We base our estimates and judgments on historical experience and on various other factors that 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.

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We believe the following critical accounting policies affect our more significant judgments and estimates used in the preparation of our consolidated financial statements.

Revenue recognition

We recognize revenue to depict the transfer of promised goods to the customer in an amount the reflects the consideration to which we expect to be entitled in exchange for those goods in accordance with the provisions of ASC 606, "Revenue“Revenue from Contracts with Customers".Customers.”

Stock Compensation

We record stock-based compensation in accordance with the provisions set forth in ASC 718. ASC 718 requires companies to recognize the cost of employee services received in exchange for awards of equity instruments based upon the grant date fair value of those awards. We, from time to time, may issue common stock to acquire services or goods from non-employees. Common stock issued to persons other than employees or directors are recorded on the basis of their fair value.

Business Combinations

We account for business combinations under the acquisition method of accounting. Under this method, acquired assets, including separately identifiable intangible assets, and any assumed liabilities are recorded at their acquisition date estimated fair value. The excess of purchase price over the fair value amounts assigned to the assets acquired and liabilities assumed represents the goodwill amount resulting from the acquisition. Determining the fair value of assets acquired and liabilities assumed involves the use of significant estimates and assumptions.

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Goodwill

Goodwill is not amortized, but is reviewed for impairment at least annually, or more frequently when events or changes in circumstances indicate that the carrying value may not be recoverable. Judgements regarding indicators of potential impairment are based on market conditions and operational performance of the business. If management concludes, based on its assessment of relevant events, facts and circumstances that it is more likely than not that a reporting unit's carrying value is greater than its fair value, then a goodwill impairment charge is recognized for the amount in excess, not to exceed the total amount of goodwill allocated to that reporting unit.

Our management determined that a triggering event to assess goodwill impairment occurred during the year ending June 30, 2020 due to the separation of a key executive associated with the acquisition of Concepts and Solutions. While there was no single determinative event, the consideration in totality of several factors that developed during the year of 2020 led management to conclude that it was more likely than not that the fair values of certain intangible assets and goodwill acquired as part of that acquisition were below their carrying amounts. These factors included: a) former key executive separating from us; b) respective former key executive violating his noncompete changing the use and value of it; c) sustained decrease in our share price which reduced market capitalization; and d) uncertainty in the United States and global economies beginning in March 2020 due to COVID-19. As a result of the impairment test, an impairment loss of $2,000,287, including $800,287 related to goodwill and $1,200,000 related to finite-lived intangible assets was recorded during the year ended June 30, 2020.

Intangible Assets

Intangible assets are stated at the lower of cost or fair value. Intangible assets are amortized on a straight- line basis over periods ranging from two to fivesix years, representing the period over which we expect to receive future economic benefits from these assets.

As noted above, we determined certain intangible assets were impaired during the year ended June 30, 2020.

Derivative Liabilities

We classify warrants and embedded conversion features on convertible debt as derivative liabilities due to protection provisions within the agreements. Such financial instruments are initially recorded at fair value using the Monte Carlo model and subsequently adjusted to fair value at the close of each reporting period. The derivative liabilities represent a Level 3 financial instrument. We account for derivative instruments and debt instruments in accordance with ASC 815, ASU 2017-11, and associated pronouncements related to the classification and measurement of warrants and instruments with conversion features. ASU 2020-06, Complex Financial Instruments, changes the way we account for derivative liabilities and will be adopted early on July 1, 2021, as permitted by the ASU. The impact of adopting ASU 2020-06 will be disclosed in the financial statement footnotes, as well as on our next quarterly report.

Recent Accounting Pronouncements Accounting Pronouncements Not Yet Adopted

For a description of recent accounting pronouncements, including the expected dates of adoption and estimated effects, if any, on our consolidated financial statements, see Part II, Item 8, Note 1, "Summary“Summary of Significant Accounting Policies"Policies” to the consolidated financial statements in this Annual Report.

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Results of Operations for the Years Ended June 30, 20212022 and 20202021

Financial Results and Performance Metrics Overview

The tablestable below presentpresents an analysis of selected line items period-over-period in our Consolidated Statements of Operations for the periods indicated. The first table is a representation of our quarter-over-quarter performance to break out the activity in Q4 which is reported within the year end data of the financial reports. The second table represents an annual comparison as noted below.

Revenue

Total revenues recognized were $3,773,605$3,941,832 and $2,319,852$3,773,605 for the years ended June 30, 20212022 and 2020,2021, respectively, an increase of 63%4%. Additionally, deferred revenue amounted to $453,862$175,436 and $1,133,992$453,862 as of June 30, 20212022 and 2020,2021, respectively. Revenues during the years ended June 30, 20212022 and 20202021 substantially consisted of revenues from sales of technology interactive panels and related products, bell paging and intercom installs,system installations, and audio amplification OEM sales.  Revenues increased during the year ended June 30, 20212022 due to the increases in the customer base for our products, partially as a result of the pandemic, as well as additional revenues received through our OEM channel.

Cost of Sales and Gross Profit

Our cost of sales was $2,077,342$3,387,490 and $1,136,126$2,077,342 for the years ended June 30, 20212022 and 2020,2021, respectively, an increase of approximately 83%63%. Cost of sales for the yearyears ended June 30, 2022 and 2021 consists primarily of manufacturing, freight, amortization of capitalized development costs, delivery and installation costs. Cost of sales for the years ended June 30, 2020 consists primarily of manufacturing, freight, and installation costs.  Cost of sales increased during the year ended June 30, 2021 consistent with the increase in revenues.installation. Gross profit decreased slightly due to amortization of capitalized development costs.costs and increased costs for freight and delivery. In addition, we reduced pricing on certain products due to competition and our product mix changed to lower margin items in the current year. Our gross profit as a percentage of total revenues was 45%14% and 51%45% for the years ended June 30, 2022 and 2021, and 2020, respectively.

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General and Administrative

The tables below represent a quarterly comparison as well as thean annual comparison discussed in the financial statementsstatements:

Total general and administrative expenses (including stock compensationwere $5,281,293 and legal settlement expense) for the quarters were $742,424 and $2,608,897 for the three months ended June 30, 2021 and 2020, respectively, a decrease of approximately 72%.

Total general and administrative expenses (including stock compensation and legal settlement expenses) were $7,868,529 and $10,928,797 for the years ended June 30, 20212022 and 2020,2021, respectively, a decrease of 28%approximately 33%. General and administrative expenses for the years ended June 30, 20212022 and June 30, 20202021 consist primarily of salaries and stock compensation expense, officeissued for consulting services and donation expenses, insurance, rent, marketing, travel, expense, amortization, expense, and professional fees. Of this amount, $172,852 and $2,778,550 and $2,087,425 represent consulting fees and stock compensation and stock issued for consulting services and donations, which did not impact cash, for the years ended June 30, 2022 and 2021, and 2020, respectively. General and administrative expenses for the year ended June 30, 2020 also included a non-cash impairment charge of $2,000,287 and a legal settlement of $2,000,000.

When excluding the non-cash impairment charge taken during the year ended June 30, 2020, general and administrative expenses decreased to $8,928,510 compared to $7,868,529 for the year ended June 30, 2021, a decrease of 12%. The decrease was due to the increase in costs capitalized for product development, offset by a reductionand reductions of costs associated with remote and virtual tradeshows, professional fees and other cost savings strategies implemented by management.  

Interest ExpenseOther Income (Expense)

Interest expense amounted to $8,254,333$1,139,240 and $5,113,902$8,254,333 for the years ended June 30, 20212022 and 2020,2021, respectively. Interest expense related to the equity purchase agreement increaseddecreased to $2,143,500 for the year ended June 30, 2022 as compared to $8,462,297 for the year ended June 30, 2021. The increasedecrease in interest expense was due to the useexpiration of our equity purchase agreement to obtain working capital. During the years ended June 30, 2021 and 2020, we amortized $274,703 and $340,526a reduction of debt discounts to interest expense.notes payable.

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During the years ended June 30, 20212022 and 2020,2021, we amortized $382,436$91,143 and $1,825,506$382,436 of original issue debt discount on derivative instrumentsnotes payable to interest accretion.

Other Income (Expense)

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The outstanding warrants and conversion features in convertible notes meet the definition of a derivative liability instrument because the exercise price of the warrants and the conversion rates are variable. As a result, the outstanding warrants and conversion features of the notes are recorded as a derivative liability at fair value and marked-to-market each period with the change in fair value charged or credited to income. A derivative liability of $1,842,000 and $246,612 is recorded at June 30, 2021 and June 30, 2020. A change in fair value of the derivative instruments was accreted by ($1,619,583) and $2,651,957 during the years ended June 30, 2021 and 2020, respectively, due to the change in our stock price. These amounts do not impact cash. ASU 2020-06, Complex Financial Instruments, changes the way we account for derivative liabilities and will be adopted early on July 1, 2021, as permitted by the ASU. The impact of adopting ASU 2020-06 will be disclosed in the financial statement footnotes, as well as on our next quarterly report.

Net Loss for the Period

As a result of the foregoing, net loss incurred for the years ended June 30, 2022 and 2021 was $6,250,956 and 2020 was $24,434,336, and $14,026,107, respectively, an increasea decrease of 74%. Noncash contributing factors for the net loss incurred for the years ended June 30, 20212022 and 20202021 is as follows:

a) $172,852 and $2,778,550 and $2,087,425 represent consulting fees and stock compensation andrepresenting stock issued for consulting services and donation expenses for the years ended June 30, 2022 and 2021, and 2020, respectively;respectively.

b) amortization of intangible assets and capitalized development costs for the years ended June 30, 2022 and 2021 totaling $525,307 and 2020 totaling $474,635, and $206,563, respectively; and

c) impairment charges taken of $2,000,287$195,346 and $0 on acquired assets for the yearyears ended June 30, 2020.2022 and 2021.

Net loss incurred for the quarters ending June 30, 2021 and 2020 was $641,188 and $3,925,456 respectively, a decrease of 84%. Noncash contributing factors for the net loss incurred for the quarters ending June 30, 2021 and 2020 is as follows:

a) $0 and $31,699 represent consulting fees and stock compensation and stock issued for services for the quarters ended June 30, 2021 and 2020, respectively;

b) amortization of intangible assets and capitalized development costs for the quarters ended June 30, 2021 and 2020 totaling $206,975 and $88,416, respectively; and

Off-Balance Sheet Arrangements

Other than our commitments discussed in NotesNote 10 and 11 on pages F-25 through F-26 to our audited financial statements for the yearyears ended June 30, 2022 and 2021, we did not have any off-balance sheet arrangements as of June 30, 2021.arrangements.

Liquidity and Capital Resources

Since the merger in June 2018,To date our revenues generated from operations have been insufficient to support our operational activities and have been supplemented by the proceeds from the issuance of securities, including equity and debt issuances. As stated in Note 14 of the notes to the consolidated financial statements included in this Annual Report, our ability to continue as a going concern is dependent upon management's ability to raise capital from the sale of its equity and, ultimately, the achievement of operating revenues. If our revenues continue to be insufficient to support our operational activities, we intend to raise additional capital through the sale of equity securities or borrowings from financial institutions and possibly from related and nonrelated parties who may in fact lend to us on reasonable terms. Management believes that its actions to secure additional funding will allow us to continue as a going concern. We currently do not have any committed sources of financing other than our line of credit, the Amended and Restated  Equity Purchase Agreement that we entered into with Tysadco Partners LLC on December 29, 2020, and accounts receivable factoring agreement, each of which requires us to meet certain conditions to utilize. UnderDuring the Amendedyears ended June 30, 2022 and Restated Equity Purchase Agreement,2021, we can issue up to an aggregateraised $500,000 from the sale of $10 million worth of500,000 shares of our common stock at June 30, 2021 over a two-year period. Pursuant to the terms of the Amended and Restated Equity Purchase Agreement, we have the right to direct Tysadco Partners LLC to purchase the lesser of 500,000 shares of its common stock per sale or 300% of the average shares traded for the 10 days prior to the closing request date, atunder a purchase price of 85% of the lowest average daily traded price during the ten trading days commencing on the first trading day following deliveryagreement with an investor and clearing of the delivered shares, with a minimum request of $200,000. We have 205,000,000 shares of our common stock available to issue under the Equity Purchase Agreement at June 30, 2021. During the year ended June 30, 2021, we raised $5,073,438 from the sale of 655,938,6793,279,693 shares of our common stock under the Amended and Restated Equity Purchase Agreement.Agreement with Tysadco Partners LLC. In addition, during the year ended June 30, 2022, we received proceeds of $2,490,500 from the issuance of notes.  There can be no assurance that we will meet all or any of the requirements pursuant to our line of credit, our Equity Purchase Agreement, and accounts receivable factoring agreement, and therefore thosethe financing optionsoption may be unavailable to us. There is no guarantee we will be successful in raising capital outside of our current sources, and if so, that we will be able to do so on favorable terms.

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Our cash totaled $300,899 at June 30, 2022, as compared with $541,591 at June 30, 2021, as compared with $412,391 ata decrease of 44%. Net cash of $1,178,009 was used in operations for the year ended June 30, 2020, an increase of $129,200.2022.  Net cash of $6,316,265 was used in operations for the year ended June 30, 2021. Net cash of $502,658$763,013 was used in investing activities for the year ended June 30, 2021.2022. Net cash of $6,948,123$1,700,330 was provided by financing activities for the year ended June 30, 2021, primarily due to proceeds from our Amended and Restated Equity Purchase Agreement.2022. The majority of this cash was used in the investment of product for orders already received to stay ahead of the potential product shortages we may experience in the future. During the yearyears ended June 30, 2022 and 2021, we raised $5,073,438 from the sale of 655,938,679 shares of our common stock under the Amended and Restated Equity Purchase Agreement$2,490,500 and $2,697,730 from the issuance of convertible notesand nonconvertible notes.

Total liabilities amounted to $8,760,482$6,796,581 and $12,238,073$8,760,482 as of June 30, 20212022 and 2020,2021, respectively, primarily consists of borrowings under notes payable, related party notes payable and a line of credit, derivative liability, accounts payable, and deferred revenue and related party notes payable.revenue.

To implement our business plan, we may require additional financing. Additional financing may come from future equity or debt offerings that could result in dilution to our stockholders. Further, current adverse capital and credit market conditions could limit our access to capital. We may be unable to raise capital or bear an unattractive cost of capital that could reduce our financial flexibility.

Our long-term liquidity requirements will depend on many factors, including the rate at which we grow our business and footprint in the industries. To the extent that the funds generated from operations are insufficient to fund our activities in the long term, we may be required to raise additional funds through public or private financing. No assurance can be given that additional financing will be available or that, if it is available, it will be on terms acceptable to us.

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Non-GAAP Disclosure

Net loss less stock compensation, and general and administrative expense, less stock compensation and impairment expenses, noted below, are non-GAAP measures and do not have standardized definitions under GAAP. The tables below provide a reconciliation of the non-GAAP financial measures, presented herein, to the most directly comparable financial measures calculated and presented in accordance with GAAP. These non-GAAP financial measures are presented because management has evaluated the financial results both including and excluding the adjusted items and believe that the non-GAAP financial measures provide additional perspective and insights when analyzing the core operating performance of the business. The non-GAAP financial measures should not be considered superior to, as a substitute for, or as an alternative to, and should be considered in conjunction with, the GAAP financial measures presented.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.RISK

The information under this Item is not required to be provided by smaller reporting companies.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

Consolidated Financial Statements June 30, 2021 and 2020

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F-1

F-2

F-3

GALAXY NEXT GENERATION, INC.

Consolidated Balance Sheets

June 30, 2021 and 2020

See accompanying notes to the consolidated financial statements.

F-4

GALAXY NEXT GENERATION, INC.

Consolidated Statements of Operations

For the Years Ended June 30, 20212022 and 2020

2021

See accompanying notes to the consolidated financial statements.

F-5

GALAXY NEXT GENERATION, INC.

Consolidated Statement of Changes in Stockholders' Equity (Deficit)Deficit

Year Ended June 30, 2020

2022