Entertainment Gaming Asia Announces Conclusion of the Civil Action Complaint against the Company with All Claims Dismissed
January 21 2014 - 9:00AM
Business Wire
Company Announces $2.5 Million Non-cash
Impairment Charge for its Dreamworld Casino Operations in Pailin
Cambodia
Entertainment Gaming Asia Inc. (NASDAQ: EGT) (“Entertainment
Gaming Asia” or “the Company”), a leading gaming company focused on
emerging gaming markets in Pan-Asia, today announced that the civil
action complaint filed against the Company and certain of its
current and former directors and officers on March 26, 2010 (as
subsequently amended on May 28, 2010 and December 20, 2011) by
certain former shareholders of the Company including Prime Mover
Capital Partners L.P., Strata Fund L.P., Strata Fund Q.P. L.P., and
Strata Offshore Fund, Ltd (collectively, the “Plaintiffs”) in the
United States District Court for the Southern District of New York
(the “Complaint”) has been concluded with all claims dismissed
against all parties.
As previously announced, on December 18, 2013, the Second
Circuit had affirmed by Summary Order the District Court’s
September 28, 2012 judgment granting the dismissal of the
Plaintiffs’ Complaint. The Plaintiffs did not request a rehearing
of the Summary Order in the permitted time and therefore, the civil
action has been concluded. A detailed summary of the Complaint can
be found in the Company's Quarterly Report on Form 10-Q filed with
the SEC on November 14, 2013.
Also today, the Company announced that it is in the final stages
of its annual valuation review of its Dreamworld Pailin facility
and gaming assets in compliance with U.S. Generally Accepted
Accounting Principles (GAAP). While operating losses for this
property have narrowed in recent months due to strategic
improvements in the operating model, the future outlook remains
challenging. As a result, on January 17, 2014, the board of
directors of the Company concluded that the Company is required
under GAAP to record an impairment charge of approximately $2.5
million as of December 31, 2013 related to the Company’s Dreamworld
Pailin operations.
Dreamworld Pailin, a casino developed and operated by the
Company, opened in May 2012. It is located in an emerging
gaming market in the Pailin Province of Northwestern Cambodia next
to the Thailand border. The Company saw the opportunity in this
regional market but has determined that there is presently an
insufficient level of natural player traffic.
Given the high costs associated with acquiring a quality player
base in this market, in September 2013, the Company began to
transition to a leasing model for its table games at Dreamworld
Pailin in an effort to provide recurring revenue and reduce
operating costs. Presently, the Company has eleven gaming tables
leased on an initial short-term basis to a third-party operator for
a monthly rental fee. Under current market conditions, the Company
is reliant on the third-party rental income and slot revenue to
cover its cash operating costs. However, at the present time, these
operations do not generate positive cash flow and Management does
not see an avenue to improve profitability under this model.
Therefore, the Company intends to record a non-cash impairment
charge of approximately $2.5 million as of December 31, 2013. The
impairment charge represents the entire capital expenditure
incurred by the Company for the property as of December 31, 2013,
with the exception of those assets that the Company believes could
be redeployed to other existing properties.
The Company is reviewing all potential options for the
Dreamworld Pailin operations, which include seeking additional
leasing contracts with third-party table game operators, subletting
the entire facility or exiting the Dreamworld Pailin operations
altogether. The Company remains committed to its gaming operations
development strategy and is actively working to secure new,
larger-scale projects located in more established gaming markets in
Indo-China.
About Entertainment Gaming Asia Inc.
Entertainment Gaming Asia Inc. (NASDAQ: EGT) is a
leading gaming company in Pan-Asia engaged in the
development and operation of casinos and gaming venues in the
Indo-China region under its “Dreamworld” brand as well as the
leasing of electronic gaming machines on a revenue sharing basis to
the gaming industry. The Company also manufactures and sells RFID
and traditional gaming chips and plaques to major casinos under its
“Dolphin” brand. For more information please visit
www.EGT-Group.com.
Forward Looking Statements
This press release contains forward-looking statements
concerning Entertainment Gaming Asia within the meaning of Section
27A of the Securities Act of 1933, as amended, and Section 21E of
the Securities Exchange Act of 1934, as amended. Those
forward-looking statements include statements regarding
expectations for the Company’s ability to secure new table game
leasing agreements for its Dreamworld Pailin operations or sublet
the premises if necessary and the Company’s ability to secure new
casino and gaming projects and fund those projects. Such statements
are subject to certain risks and uncertainties, and actual
circumstances, events or results may differ materially from those
projected in such forward-looking statements. Factors that could
cause or contribute to differences include, but are not limited to,
risks set forth in the Company’s annual report on Form 10-K for the
year ended December 31, 2012 filed with the SEC on March 28, 2013
and subsequently filed quarterly reports on Form 10-Q. The Company
cautions readers not to place undue reliance on any forward-looking
statements. The Company does not undertake, and specifically
disclaims any obligation to update or revise such statements to
reflect new circumstances or unanticipated events as they
occur.
Entertainment Gaming Asia Inc.Traci
Manginitracimangini@EGT-Group.com312/867-0848
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