Nasdaq-listed Entertainment Gaming Asia Inc on Thursday reported third quarter revenue of US$690,000, down from US$4.5 million a year earlier. The firm posted a net loss of US$744,000 for the three months to September 30, compared to net income of US$1.4 million in the prior-year period.
“The decrease [in revenue] was primarily due to the expiration of the company’s electronic gaming machine (EGM) participation agreement with NagaWorld on February 29, 2016,” said Entertainment Gaming Asia in the filing.
Entertainment Gaming Asia’s business activities include leasing EGMs to the gaming industry in Asia. The firm had amended earlier this year the lease agreement with NagaWorld to a fixed fee compared to the prior revenue sharing arrangement. But in July, Entertainment Gaming Asia announced it was selling all of its EGMs placed in NagaWorld to a third-party for a total consideration of US$2.5 million.
Until recently, the company also manufactured and distributed gaming chips, gaming plaques and related products under the Dolphin brand. In May the firm sold that business to casino currency and table games equipment firm Gaming Partners International Corp.
In Thursday’s filing, Entertainment Gaming Asia said it sold in October all of its 71 EGMs in Thansur Bokor Highland Resort, in Cambodia, for cash proceeds of US$250,000. The firm still leases EGMs to two properties in the Philippines and to one venue in Cambodia.
“While our reduced base of operations will have a negative impact on our near-term earnings, these transactions provide us a total of approximately US$9.4 million in cash proceeds, excluding US$765,000 in expense reimbursements for severance costs and factory lease payments and the potential for earn outs on certain gaming chip and plaque sales related to the now discontinued gaming products business,” said Clarence Chung Yuk Man (pictured), chairman and chief executive of Entertainment Gaming Asia, in a statement accompanying the firm’s results announcement.
He added: “To date, we have received US$7.3 million of the sale proceeds and have cash resources of approximately US$35 million which, we believe, enhances our ability to pursue and execute on new projects.”
The company had previously announced it would focus on developing an online social casino platform for the Asian market. “We are testing the platform in certain markets to assess its potential as a provider to long-term earnings,” said Mr Chung in Thursday’s statement.
Entertainment Gaming Asia said it recorded higher operating expenses in the third quarter, related to the new social gaming operations. The firm said its selling, general and administrative costs, as well as research and development expenses, increased by 36.4 percent year-on-year to US$1.5 million.
Mr Chung said the company is now eyeing new projects in different business segments.
“We are actively pursuing projects that we believe will provide long-term growth potential for the company. These potential projects are in new businesses, such as the film [industry] and related businesses, for the company and would provide us a new strategic direction,” stated the firm’s chairman.
Casino investor Melco International Development Ltd – a company controlled by Lawrence Ho Yau Lung – is the controlling shareholder of Entertainment Gaming Asia.
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Summit Ascent, lead developer of Tigre de Cristal