By Ben Blaschke
Entertainment Gaming Asia, a subsidiary of Melco International Development Ltd, has announced its 2016 financial results which saw revenue slump 26% for the year to US$2 million and fourth quarter revenue by 47% to US$357,000. Net losses from continuing operations for the year came in at US$2.4 million for the fourth quarter and US$5.3 million for the 2016 fiscal year.
Entertainment Gaming Asia engages in the leasing of electronic gaming machines to the gaming industry in the Philippines and is developing a free-to-play online social gaming platform focused on Asian markets.
In a Nasdaq filing on Monday, the company attributed its losses to, “a reduced operating base of electronic gaming machines (EGMs) as a result of the expiration of the EGM leasing agreement with Leisure World VIP Slot Club on June 30, 2016 and lower average daily net win per unit due to increased competition.”
The company also sold the principal assets related to its gaming products operations and all of its gaming assets in Cambodia in 2016.
“As a result, all revenue and expenses associated with the gaming products operations and Cambodia gaming operations have been reclassified as discontinued operations for the periods presented,” it said.
Selling, general and administrative expenses combined with research and development expenses totaled US$2.3 million for the fourth quarter compared to US$1.4 million 12 months earlier. The increase was primarily related to the ramping up of the company’s social gaming operations, which comprised US$1 million of the total combined expenses for the fourth quarter.
The company reported adjusted LBITDA from continuing operations of $2.2 million in the fourth quarter of 2016 compared to US$978,000 in the fourth quarter of 2015. Adjusted LBITDA from continuing operations was US$4.4 million in the 2016 fiscal year compared to US$2.5 million in the 2015 fiscal year.
The company also reported a net loss of US$9.7 million for the 2016 fiscal year compared to income of US $820,000 for 2015 fiscal year, due largely to the discontinued Cambodia gaming operations.
Clarence Chung, Chairman and CEO of Entertainment Gaming Asia, said, “During 2016, we disposed of all of our gaming assets in Cambodia, certain gaming assets in the Philippines and the principal assets of the gaming products business. These sales have provided cash proceeds of US$10.3 million and the potential for earn-outs on certain gaming chip and plaque sales related to the now discontinued gaming products business. To date, we have received $8.1 million of the sales proceeds and no earn-outs on gaming chip and plaque sales.
“Our reduced base of operations coupled with the expenses related to the social gaming operations, which remain in the testing phase, and corporate overhead, presently have a negative impact on our cash flow. We currently have approximately U $32 million in cash and are exploring avenues to apply these resources in ways to enhance value for our shareholders.”
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