UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q10-Q/A

(Amendment No.1 to Form 10-Q)

[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended MarchDecember 31, 2022

OR

[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission File Number: 000-56006

GALAXY NEXT GENERATION, INC.

(Exact Name of Registrant as Specified in Its Charter)

(706) 391-5030

(Registrant's telephone number, including area code)

SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT: (None)

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

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes[X] No[ ]

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

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

Indicate by check mark whether the registrant is a shell Company (as defined in Rule 12b-2 of the Act). Yes [ ] No [X]

The number of shares outstanding of the issuer's Common Stock, as of May 12, 2022February 13, 2023 was 17,469,128.69,872,693.

EXPLANATORY NOTE: The Amendment no. 1 to Form 10-Q is being filed to include the iXBRL Interactive Table Exhibits.

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The accompanying unaudited interim condensed consolidated financial statements included herein, have been prepared by Galaxy Next Generation, Inc. (the "Company") pursuant to the rules and regulations of the Securities and Exchange Commission ("SEC"). Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to such rules and regulations. These condensed consolidated statements have been prepared in accordance with the Company's accounting policies described in the Company's Annual Report on Form 10-K for the year ended June 30, 20212022 and should be read in conjunction with the audited consolidated financial statements and the notes thereto included in that report. Unless the context indicates otherwise, references to the "Company," "we, " "us," "our" or "Galaxy" means Galaxy Next Generation, Inc. and its subsidiaries.

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PART I – FINANCIAL INFORMATION

ITEM 1. UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS AND FOOTNOTES

The following unaudited condensed consolidated financial statements are included herein:

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 See accompanying notes to the condensed consolidated financial statements (unaudited).

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GALAXY NEXT GENERATION, INC.

Condensed Consolidated Statements of Operations (Unaudited)

See accompanying notes to the condensed consolidated financial statements (unaudited).

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See accompanying notes to the condensed consolidated financial statements (unaudited).

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(1) All share amounts, including those in the accompanying notes, have been adjusted to reflect a 1:200 reverse split effective March 7, 2022.

See accompanying notes to the condensed consolidated financial statements (unaudited).

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GALAXY NEXT GENERATION, INC.

(1) All share amounts, including those in the accompanying notes, have been adjusted to reflect a 1:200 reverse split effective March 7, 2022.

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See accompanying notes to the condensed consolidated financial statements (unaudited).

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GALAXY NEXT GENERATION, INC.

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See accompanying notes to the condensed consolidated financial statements (unaudited).

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Note 1 -– Summary of Significant Accounting Policies

Corporate History, Nature of Business, Mergers and Acquisitions

Galaxy is a manufacturer and U.S. distributorNext Generation LTD CO. ("Galaxy CO") was organized in the state of interactive learning technology hardware and software that allowsGeorgia in February 2017 while R&G Sales, Inc. ("R&G") was organized in the presenter and participantstate of Georgia in August 2004. Galaxy CO merged with R&G ("common controlled merger") on March 16, 2018, with R&G becoming the surviving company. R&G subsequently changed its name to engage in a fully collaborative instructional environment. Galaxy's products include Galaxy's own private-label interactive touch screen panel as well as numerous other national and international branded peripheral and communication devices. New technologies like Galaxy's own touchscreen panels are sold along with renowned brands such as Google Chromebooks, Microsoft Surface Tablets, Lenovo and Acer computers, Verizon  WiFi and more. Galaxy's distribution channel consists of approximately 37 resellers across the U.S. who primarily sell its products within the commercial and educational market. Galaxy does not control where the resellers focus their resell 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 also possesses its own reseller channel where it sells directly to the K-12 market, primarily throughout the Southeast region of the United States.Next Generation, Inc. ("Private Galaxy").

FullCircle Registry, Inc., ("FLCR") is a holding company created for the purpose of acquiring small profitable businesses to provide exit plans for those company's owners. FLCR's subsidiary, FullCircle Entertainment, Inc. ("Entertainment" or "FLCE"), owned and operated Georgetown 14 Cinemas, a fourteen-theater movie complex located in Indianapolis, Indiana.

On June 22, 2018, Private Galaxy consummated a reverse triangular merger whereby Private Galaxy merged with and into FLCR by the stockholders of Private Galaxy transferring all of the shares of stock of Private Galaxy into a newly formed subsidiary which was formed specifically for the transaction ("Private Galaxy MS") and the stockholders receiving shares of stock of FLCR. The merger resulted in Private Galaxy MS becoming a wholly-owned subsidiary of FLCR. For accounting purposes, the acquisition of Private Galaxy by FLCR is considered a reverse acquisition, an acquisition transaction where the acquired company, Private Galaxy, is considered the acquirer for accounting purposes, notwithstanding the form of the transaction. The primary reason the transaction is being treated as a purchase by Private Galaxy rather than a purchase by FLCR is that FLCR is a public reporting company, and Private Galaxy's stockholders gained majority control of the outstanding voting power of FLCR's equity securities. Consequently, the assets and liabilities and the operations that are reflected in the historical financial statements of the Company prior to the merger are those of Private Galaxy. The financial statements after the completion of the merger included the combined assets and liabilities of the combined company (collectively Private Galaxy, FLCR and FLCE).

In recognition of Private Galaxy's merger with FLCR, several things occurred: (1) FLCR amended its articles of incorporation to change its name from FullCircle Registry, Inc. to Galaxy Next Generation, Inc.; (2) the Companychanged its fiscal year end to June 30, effective June 2018; (3) the Company's authorized shares of preferred stock were increased to 200,000,000 and authorized shares of common stock were increased to 4,000,000,000, (prior to the Reverse Stock Split) both with a par value of $0.0001; and (4) the Board of Directors and Executive Officers appointed Gary LeCroy, President and Director; Magen McGahee, Secretary and Director; and Carl Austin, Director; and (5) the primary business operated by the combined company became the business that was operated by Private Galaxy.

On September 3, 2019, Galaxy acquired 100% of the stock of Interlock Concepts, Inc. ("Concepts") and Ehlert Solutions Group, Inc. ("Solutions"). The purchase price for the acquisition was 1,350,000 (6,750 post March 7, 2022 reverse stock split) shares of common stock and Interlocka two year note payable to the seller for $3,000,000. The note payable to the seller is subject to adjustment based on the achievement of certain future gross revenues and successful completion of certain pre-acquisition withholding tax issues of Concepts Inc. ("Concepts")and Solutions.

Solutions and Concepts are Arizona-basedUtah-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. Solutions and Concepts' 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, Galaxy acquired the assets of Classroom Technologies 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 (50,000 post March 7, 2022 reverse stock split) shares 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 the Company 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.

Galaxy is a manufacturer and U.S. distributor of interactive learning technologies and enhanced audio solutions. Galaxy is engaged in a full range of activities: marketing and sales, engineering and product design and development, manufacturing, and distributing. Galaxy develops both hardware and software that allows the presenter and participant to engage in a fully collaborative instructional environment. Galaxy also develops award winning classroom audio solutions, school public address (“PA”) and intercom products, and emergency communication applications creating a full line card offering for classrooms to its channel partners. Its product offerings include its own private-label interactive touch screen panel, its own intercom, bell, and paging solution, as well as an audio amplification line of products that is currently supported by both direct sales and through original equipment manufacturer (“OEM”) relationships. Its distribution channel consists of a direct sales model, as well as in excess of 40 resellers across the U.S. that primarily sell the products offered by us 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 its products comprising nearly 90% of our sales. In addition, its OEM division manufactures products for other vendors in our industry and white labels the products under other brands.

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The Entertainment segment was sold on February 6, 2019 in exchange for 193 (post March 7, 2022 reverse stock split) Galaxy common shares.

Impact COVID-19 UpdateAid, Relief and Economic Security Act

The Cares Act allowed employers to defer the deposit and payment of the employer’s share of Social Security taxes from March 27, 2020 through December 31, 2021. The deferred deposits of the employer’s share of Social Security tax must be deposited 50% by December 31, 2021, and 50% by December 31, 2022. The Company’s remaining deferred deposits and current payments due amounted to approximately $868,482 and $490,790 at December 31, 2022 and June 30, 2022, respectively.

During the three and six months ended December 31, 2022 and 2021, the Company applied for Employee Retention Credits and has recognized approximately $0 and $40,000 as a reduction to operating expenses in the consolidated statements of operations.

The Covid-19 pandemic that began in early 2020 caused shelter-in-place policies, unexpected factory closures, supply chain disruptions, and market volatilities across the globe. As a result of the economic disruptions and unprecedented market volatilities and uncertainties driven by the Covid-19 outbreak, the Company experienced some supply chain disruptions. However, theThe Company has not experienced any significant payment delays or defaults by our customers ascontinues to experience supply chain disruption resulting in a result of the COVID-19 pandemic.decrease in revenue and increases in deferred revenue.

The full impact of the Covid-19 outbreak continues to evolve as of the date of this report. The depth and duration of the pandemic remains unknown. Despite the availability of vaccines, recent surges in the infection rate and the detection of new variants of the virus have reinforced the general consensus that the containment of Covid-19 remains a challenge. Management is actively monitoring the global situation and its effect on its financial condition, liquidity, operations, suppliers, industry, and workforce.

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Basis of Presentation and Interim Financial InformationPrinciples of Consolidation

The accompanying Unaudited Condensed Consolidated Financial Statementsconsolidated financial statements have been prepared in accordanceconformity with accounting principles generally accepted in the United States of America. Any reference in these footnotes to applicable guidance is meant to refer to the authoritative U.S. generally accepted accounting principles ("GAAP") as found in the Accounting Standards Codification ("ASC") and applicable rules and regulationsAccounting Standards Update ("ASU") of the Securities and Exchange Commission (the "SEC") pertaining to interim financial information. Accordingly, these interim financial statements do not include all information or footnote disclosures required by GAAP for complete financial statements and, therefore, should be read in conjunction with the Consolidated Financial Statements and notes thereto in the Company’s  June 30, 2021 Annual Report on Form 10-K and other current filings with the SEC. In the opinion of management, all adjustments, consisting of those of a normal recurring nature, necessary to present fairly the results of the periods presented have been included. The results of operations for the interim periods presented may not necessarily be indicative of the results to be expected for the full year.

Principles of ConsolidationAccounting Standards Board ("FASB").

The financial statements include the consolidated assets and liabilities of the combined company (collectively Galaxy Next Generation, Inc., Classroom Technology Solutions Inc., Interlock Concepts, Inc. ("Interlock")., and Ehlert Solutions Group, Inc. ("Solutions"), and Classroom Technologies Solutions,Inc., referred to collectively as the "Company"). See Note 12.

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

The Company’s common stockCompany is traded on thean over-the-counter public company traded under the stock symbol listing GAXY (formerly FLCR).

Use of Estimates

The preparation of consolidated financial statements in accordance with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

Significant estimates used in preparing the consolidated financial statements include those assumed in computing valuation of goodwill and intangible assets, valuation of convertible notes payable and warrants, and the valuation of deferred tax assets. It is reasonably possible that the significant estimates used will change within the next year.

Reverse Stock Split

Unless otherwise noted, all share and per share data referenced in the consolidated financial statements and the notes thereto have been retroactively adjusted to reflect the one-for-two hundred reverse stock split effective March 4,7, 2022 of our authorized and outstanding shares of common stock. As a result of the reverse stock split, certain amounts in the consolidated financial statements and the notes thereto may be slightly different than previously reported due to rounding of fractional shares, and certain amounts withinadjustment for the consolidated balance sheets were reclassified between common stock and additional paid-in capital.reverse split.

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Capital Structure

The Company's capital structure is as follows:

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Authorized common stock increased from 20,000,000 to 200,000,000 on August 31, 2022. There was a 1:200 reverse split of the authorized and outstanding shares of common stock that was effective on March 7, 2022.

There is no publicly traded market for the preferred shares.

The Preferred Series D and E were retired in December 2021.

There are 5,295,849 common shares reserved at March 31, Preferred Series G were issued in June 2022, under terms of convertible debt agreements, the Stock Plan and the Amended and Restated Equity Purchase Agreement, dated December 29, 2020, with Tysadco Partners LLC ( the “Equity Purchase Agreement”) (see Notes 6, 11 and 13)pursuant to Employment Agreements (Note 11).

There are 1,084,861139,786,708 common shares reserved at December 31, 2022 under terms of notes payable agreements, and the Stock Plan (see Notes 4, 6 and 12).

There are 28,804,235 issued common shares that are restricted as of MarchDecember 31, 2022. The shares maywill become free-trading upon satisfaction of certain terms and regulatory conditions.within the debt agreements or within free trading rules related to SEC Rule 144 six month hold.

Authorized common stock increased from 200,000,000 to 3,000,000,000 on January 31, 2023 following approval of the holders of a majority of the Company’s voting power.

Supplier Agreement

Contract assets and contract liabilities are as follows:

For the three months ended MarchDecember 31, 2022 and 2021, the Company recognized $463,301$0 and $214,992$219,309 of revenues related to supplier agreements. For the ninesix months ended MarchDecember 31, 2022 and 2021 the Company recognized $1,116,219$0 and $715,067$637,746 of revenues related to supplier agreements.

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Accounts Receivable

Management deemed no allowance for doubtful accounts was necessary at MarchDecember 31, 2022 and June 30, 2021.2022. At MarchDecember 31, 2022 and June 30, 2021, $02022, $627,560 and $190,779$175,436 of total accounts receivable were considered unbilled and recorded as deferred revenue.

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Inventories

Management estimates $67,635$116,362 and $116,362 of inventory reserves at MarchDecember 31, 2022 and June 30, 2021,2022, respectively.

Goodwill, Intangible Assets and Product Development Costs

Goodwill, intangible assets, and product development costs are comprised of the following at MarchDecember 31, 2022:

Goodwill, intangible assets, and product development costs are comprised of the following at June 30, 2021:2022:

Intangible assets such as customer lists and vendor relationships are stated at the lower of cost or fair value. They are amortized on a straight-line basis over periods ranging from three to six years, representing the period over which the Company expects to receive future economic benefits from these assets. The Company acquired certain intangible assets. During the year ended June 30, 2022, the Company impaired $37,885 of the intangible assets related to the acquisition of Classroom Tech. Amortization of these intangible assets amounted to $68,000 and $70,343$44,700 for the three months ended MarchDecember 31, 2022 and 2021. Amortization of these intangible assets amounted to $186,243$136,000 and $208,296$118,243 for the ninesix months ended MarchDecember 31, 2022 and 2021.

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Costs incurred in designing and developing classroom technology products are expensed as research and development until technological feasibility has been established. Technological feasibility is established upon completion of a detail product design, or in its absence, completion of a working model. Upon the achievement of technological feasibility, development costs are capitalized and subsequently reported at the lower of unamortized cost or net realizable value. Management's judgment is required in determining whether a product provides new or additional functionality, the point at which various products enter the stages at which costs may be capitalized, assessing the ongoing value and impairment of the capitalized costs and determining the estimated useful lives over which the costs are amortized.

Annual amortization expense is calculated based on the straight-line method over the product's estimated economic lives, which are typically three to six years. Amortization of product development costs incurred begins when the related products are available for general release to customers. Amortization of product development costs of $69,042$105,216 and $26,436$44,761 for the three months ended MarchDecember 31, 2022 and 2021,2021. Amortization of product development cost of $204,399 and $184,176 and $59,364$115,134 for the ninesix months ended MarchDecember 31, 2022 and 2021, is included in cost of revenues in the Company's unaudited condensed consolidated statements of operations.

Estimated amortization expense related to finite-lived intangible assets for the next five years is: $603,836$607,641 for fiscal year 2023, $470,584$411,454 for fiscal year 2024, $272,139$140,115 for fiscal year 2025, $60,292$100,158 for fiscal year 2026, and $44,389$39,045 for fiscal year 2027 and $24,748$12,624 thereafter.

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Recent Accounting Pronouncements

The Company has implemented all new applicable accounting pronouncements that are in effect and applicable. These pronouncements did not have any material impact on the consolidated financial statements unless otherwise disclosed, and the Company does not believe that there are any other new accounting pronouncements that have been issued that might have a material impact on its financial position or results of operations.

In December 2019, the FASB issued ASU No. 2019-12 Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes ("ASU 2019-12") by removing certain exceptions to the general principles. The amendments will be effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2021. Early adoption of the amendments is permitted. Depending on the amendment, adoption may be applied on a retrospective, modified retrospective or prospective basis. The Company adopted the new guidance on July 1, 2022 in its consolidated financial statements.

Note 2 - Property and Equipment

Property and equipment are comprised of the following at:

Note 3 - Lines of Credit

The Company had $1,000,000 available under a line of credit bearing interest at prime plus 0.5% (3.75% at June 30, 2021) which expired October 29, 2021. The bank provided a 30-day grace period to repay the line to November 29, 2021. The line of credit was collateralized by certain real estate owned by stockholders and a family member of a stockholder, 7,026,894 shares of the Company's common stock owned by two stockholders, personal guarantees of two stockholders, and a key man life insurance policy. In addition, a 20% curtailment of the outstanding balance may occur any time prior to maturity. The outstanding balance was $0 and $991,598 at March 31, 2022 and June 30, 2021, respectively. The line of credit was completely paid off in November of 2021.

The Company has up to $1,000,000 available credit line under an accounts receivable factoring agreement through July 30, 2022. This agreement automatically renews for a two year period unless notice is given. Total available credit under the factoring agreement was $989,680$775,593 and $1,000,000$989,680 as of MarchDecember 31, 2022 and June 30, 2021,2022, respectively. See Note 11.

-13-On August 31, 2022, the Company received proceeds of $155,837 under an equity line of credit with a bank. The $160,000 line of credit bears interest at prime plus 1% and matures August 25, 2027. Collateral on the line of credit includes certain fixed asset of the Company. The outstanding balance was $155,500 and $0 at December 31, 2022 and June 30, 2022, respectively.

On November 1, 2022, the Company entered into financing and security agreement with a financial technology company. Collateral on the line includes inventory and certain fixed assests of the Company. Each draw on the line of credit bears interest at a variable rate based on the date of draw, plus a fee and matures in six months. The outstanding balance was $196,785 at December 31, 2022.

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Note 4 - Notes Payable

Long Term Notes Payable

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Future minimum principal payments on the long-term notes payable to unrelated parties are as follows: