Entertainment Gaming Asia Inc.

- Record gaming participation revenue and continued strict cost control drive positive GAAP earnings and cash flow for the Quarter –

HONG KONG - October 27, 2010 - Entertainment Gaming Asia Inc. (NYSE Amex: EGT) (“Entertainment Gaming Asia” or “the Company”), formerly known as Elixir Gaming Technologies, Inc., a leading provider of electronic gaming machines on a participation basis to the Pan-Asian gaming industry, today reported operating results for the third quarter ended September 30, 2010 and reviewed recent corporate progress.

Net income was $725,000 or $0.01 per share for the third quarter of 2010 compared to a net loss of $0.01 per share in the second quarter of 2010 and a net loss of $0.03 per share in the third quarter of 2009.
Consolidated adjusted EBITDA (earnings before interest, taxes, depreciation, amortization, and non-cash charges) was $3.0 million for the third quarter of 2010, up from $1.4 million in the second quarter of 2010 and $338,000 in the third quarter of 2009.
Total net revenue from gaming machines on participation for the third quarter of 2010 was a record $4.1 million, an increase of 16% from the second quarter of 2010 and 123% from the third quarter of 2009, reflecting both a higher average win per unit per day (WUD) and gaming machine installed base.
Average consolidated WUD for the third quarter of 2010 was $125, an increase of 9% from the second quarter of 2010 and 45% from the third quarter of 2009.
As of September 30, 2010, total installed gaming machine seats in operation were 1,525 in eight venues, comprised of six venues in the Philippines with a total of 846 seats and two venues in Cambodia with a total of 679 seats.
Cash selling, general and administrative (SG&A) expense was $1.3 million for the third quarter of 2010, which was below the guidance range of $1.5 to $1.8 million and down 10% from the second quarter of 2010 and 11% from the third quarter of 2009.
Cash balances of $8.8 million, including $1.0 million held in an escrow account for a potential new casino project in the Indo-China market, as of September 30, 2010, up from $6.4 million as of June 30, 2010 and $4.2 million as of December 31, 2009.

Clarence Chung, Chairman and Chief Executive Officer of Entertainment Gaming Asia, commented, “Our third quarter performance marks a new chapter for Entertainment Gaming Asia with the achievement of positive GAAP earnings. The achievement of this important milestone reflects our successful efforts over the last two years to refocus our operations and dramatically improve our cost structure. With strong contribution from our 670 gaming machine seats in operation at NagaWorld in Cambodia, in the third quarter we more than doubled our adjusted EBITDA on a quarterly sequential basis and have greatly improved our annualized adjusted EBITDA run rate going forward. With solid recurring cash flow contribution from our core gaming participation operations, we believe that we are positioned to execute on our expansion plans and achieve our goal of becoming a leading regional casino owner and operator in select emerging gaming markets in Asia. We are actively pursuing attractive casino projects in our target markets and are in late stage discussions with one particular project.”

Total net revenue from gaming machines on participation for the third quarter of 2010 was a record $4.1 million, an increase of 16% from the second quarter of 2010 and 123% from the third quarter of 2009, reflecting improved consolidated average WUD and a higher installed gaming machine base.

During the third quarter of 2010, Entertainment Gaming Asia increased its total gaming machine seats in operation by 2% to 1,525 seats in a total of eight venues in operation, comprised of six venues in the Philippines with a total of 846 seats and two venues in Cambodia with a total of 679 seats (including ten gaming machine seats in operation during the soft opening of one venue) as of September 30, 2010. This compares to 1,502 seats in a total of seven venues in operation, comprised of six venues in the Philippines with a total of 878 seats and one venue in Cambodia with a total of 624 seats as of June 30, 2010.

The Company’s machine placements at NagaWorld, the Company’s principal venue in operation in Cambodia, have increased dramatically since its first placements in this venue in January 2009 and have reached approximately 670 seats in operation. In the Philippines, the Company continues to refine and redeploy its gaming assets in order to focus on higher-performing venues.

Consolidated average WUD for the third quarter of 2010 was $125, up 9% from $115 in the second quarter of 2010 and up 45% from $86 in the third quarter of 2009. WUD figures do not include ten gaming machine seats in operation at one venue in Cambodia during the venue’s soft opening period. The increase was driven by improvement in WUD in Cambodia and the continuously rising percentage contribution from the Company’s machine placements at NagaWorld.

Average WUD for the third quarter of 2010 for Cambodia was $219, up 12% from $196 in the second quarter of 2010 and 17% from $187 in the third quarter of 2009. The improvement was driven by our proactive and targeted marketing initiatives, which more than offset the impact of the increasing machine installed base. Average WUD for the third quarter of 2010 for the Philippines was $56, down 5% from $59 in the second quarter of 2010 and up 6% from $53 in the third quarter of 2009. We attribute the sequential quarterly decline primarily to typical seasonal weakness during the typhoon season.

Entertainment Gaming Asia continued to focus on strict cost containment and made additional progress in reducing costs following the successful implementation of its aggressive cost reduction initiatives during 2009. Cash SG&A expense for the third quarter of 2010 was $1.3 million, which was below the Company’s guidance range of $1.5 to $1.8 million for the quarter and down 10% from the second quarter of 2010 and 11% from the third quarter of 2009. The Company has effected these cost reductions while improving its operational efficiency.

Entertainment Gaming Asia’s third quarter of 2010 consolidated revenue was $6.6 million compared to $5.1 million in the second quarter of 2010 and $3.6 million for the third quarter of 2009. Revenue from gaming machines on participation was $4.1 million in the third quarter of 2010 compared to revenue of $3.5 million in the second quarter of 2010 and $1.8 million in the third quarter of 2009. The sequential and year-over-year increases in consolidated revenue were driven by growth in all of the Company’s business divisions.

Based on the Company’s solid revenue performance and the successful execution of its cost reduction initiatives, Entertainment Gaming Asia posted positive adjusted EBITDA (earnings before interest, taxes, depreciation, amortization, and non-cash charges) for the third quarter of 2010, marking the sixth consecutive quarter of achieving this important milestone since the Company enacted its new business model in September 2007. Third quarter of 2010 adjusted EBITDA was $3.0 million compared to $1.4 million for the second quarter of 2010 and $338,000 for the third quarter of 2009.

Entertainment Gaming Asia reported a net income of $725,000 for the third quarter of 2010, or $0.01 per share, on a weighted average share count of approximately 115.9 million shares compared to a net loss for the second quarter of 2010 of $1.5 million, or $0.01 per share, on a weighted average share count of approximately 115.9 million shares. This compared to a third quarter of 2009 net loss of $3.7 million, or $0.03 per share, on a weighted average share count of approximately 115.0 million shares.

The third quarter increase in net income over the net loss in the third quarter last year was primarily due to: substantial gains in gaming machine participation revenue and gross profit driven by a higher number of operating gaming machines, improving consolidated average WUD, and lower depreciation expense on gaming machines as a result of impairment charges incurred in the fourth quarter of 2009; improvement in non-gaming product revenues and gross profits due to higher sales volumes and resulting improved production efficiencies; substantially reduced operating expenses; and a one-time tax benefit of $320,000 related to the implementation of a new tax structure for its Cambodia operations compared to a tax expense for the third quarter of 2009.

In May 2010, the Company announced its intention to expand its gaming operations to include the ownership and operation of casinos under the Dreamworld brand in emerging gaming markets in Pan Asia with a focus on Indo China. Pursuant to this new growth strategy, the Company was granted a casino license by the Cambodian government and acquired title of over seven acres (30,000 square meters) of land in the Takeo Province of Cambodia strategically located near the Vietnam border upon which to build and operate a casino resort (“Takeo Project). To-date, Entertainment Gaming Asia has assembled a project management team for its casino development operations and has been working on conceptual project designs with architects for the Takeo Project.

The Company continues to actively pursue additional casino development projects in the Indo-China market and is in late stage discussions on a significant new project. While there is no guarantee the Company will successfully conclude these negotiations, given its constrained capital resources, the Company is re-evaluating its project timeline for the Takeo Project in order to divert certain capital to this potential new project, which the Company believes offers greater short- and medium-term return potential. Should an adjustment to the Takeo Project development timeline be required, it would not place the Company’s gaming license or any rights to own and operate a casino in the Takeo province at risk. We intend to provide more information on the Company’s casino development plans at such time as the plans for the new project become more definite.

Adjusted EBITDA consistent with third quarter 2010 levels from existing operations while the Company executes on its strategic casino development growth plans and actively pursues additional projects.
Cash SG&A expense at the low end of the range of $1.5 to $1.8 million.
Cash balance of $7-8 million as of December 31, 2010, after giving effect to the anticipated payment of approximately $2 million in capital expenditures associated with the Company’s casino development plans.

Entertainment Gaming Asia is hosting a conference call and simultaneous webcast at 8:30 a.m. ET today, October 27, 2010, both of which are open to the general public. The conference call number is 800/909-8315 or 212/231-2939. Questions and answers will be reserved for call-in analysts and investors. Interested parties may also access the live call on the Internet at www.EGT-Group.com. Please allow 15 minutes to register and download and install any necessary software. Following its completion, a replay of the call can be accessed for thirty days on the Internet at www.EGT-Group.com

Entertainment Gaming Asia Inc. (NYSE Amex: EGT), formerly known as Elixir Gaming Technologies, Inc., is a leading provider of electronic gaming machines on a participation basis to the Pan-Asian gaming industry. The Company secures long-term contracts to provide electronic gaming machines and related systems to premier hotels and other well-located gaming venues in Asia. The Company retains ownership of the gaming machines and systems and receives recurring daily fees based on an agreed upon percentage of the net gaming win per machine and provides on-site maintenance. Entertainment Gaming Asia Inc. also is engaged in the development of casinos in Indo China where intends to own and operate casino resorts under the “Dreamworld” brand. For more information please visit www.EGT-Group.com.

This press release contains forward-looking statements concerning Entertainment Gaming Asia, formerly known as Elixir Gaming Technologies, 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 business of Entertainment Gaming Asia, its working capital requirements, future revenue, Adjusted EBITDA, WUD and profitability, the project schedule for its Dreamworld Casino and Resort in Takeo and Entertainment Gaming Asia’s ability to fund the Dreamworld Casino project, and the Company’s ability to secure new casino projects and fund those projects as well. 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 related to the costs incurred by Entertainment Gaming Asia in defending shareholder litigation and the outcome of any judgment or settlement with respect to such litigation, Entertainment Gaming Asia’s inability to place gaming machines at significant levels, whether the gaming machines placed generate the expected amount of net win, Entertainment Gaming Asia’s ability to successfully execute its plans to build and operate Dreamworld Casino and Resort in Takeo and any new casino projects, the ability of Entertainment Gaming Asia to acquire additional capital as and when needed, the ability of Entertainment Gaming Asia to collect revenue and protect its assets and those other risks set forth in Entertainment Gaming Asia’s annual report on Form 10-K for the year ended December 31, 2009 filed with the SEC on March 30, 2010 and subsequently filed quarterly reports on Form 10-Q. Entertainment Gaming Asia cautions readers not to place undue reliance on any forward-looking statements. Entertainment Gaming Asia does not undertake, and specifically disclaims any obligation to update or revise such statements to reflect new circumstances or unanticipated events as they occur.

Contact:
Entertainment Gaming Asia Inc.
Traci Mangini
312/867-0848
tracimangini@EGT-Group.com

Entertainment Gaming Asia Reports Third Quarter 2010 Results and Provides Market Update