Elixir Gaming Technologies Inc Reports Operating Results (10-Q)

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Nov 10, 2010
Elixir Gaming Technologies Inc (EGT, Financial) filed Quarterly Report for the period ended 2010-09-30.

Elixir Gaming Technologies Inc has a market cap of $44.1 million; its shares were traded at around $0.38 with a P/E ratio of 2.5 and P/S ratio of 2.8. EGT is in the portfolios of Jim Simons of Renaissance Technologies LLC.

Highlight of Business Operations:

We also have implemented dramatic cost reduction initiatives, which resulted in a 27% decline in cash-based selling, general, and administrative expenses for the first nine months of 2010 compared to the same period in 2009. We continue to exercise strict cost control measures and, as a result, cash-based selling, general and administrative expenses were $1.3 million for the three months ended September 30, 2010, below our targeted range of $1.5 to $1.8 million for the quarter. Importantly, we have effected these reductions without hindering our operational capabilities and while remaining flexible enough to act on our growth plans.

With our refined operations and streamlined cost structure, we have significantly improved our execution capabilities, operational efficiency and financial performance. Our consolidated revenue for the three months ended September 30, 2010 was approximately $6.6 million, of which revenue from our gaming machine participation, table games and non-gaming operations comprised 62%, 10% and 28%, respectively, of consolidated revenue. This compares to consolidated revenue of approximately $3.6 million for the three months ended September 30, 2009, of which revenue from our gaming machine participation, table games and non-gaming operations comprised 51%, 16% and 33%, respectively, of consolidated revenue.

Revenue from our gaming machine participation operations was approximately $4.1 million for the three months ended September 30, 2010, more than doubling from $1.8 million in the same period in the prior year. Gross margin for the gaming participation business improved to 45% in the three months ended September 30, 2010 compared to negative gross margin of 64% in the same period in the prior year. Excluding non-cash items such as machine depreciation and asset write-downs, gross margin for the gaming participation business improved to 96% from 80%, respectively.

Based on the solid revenue performance, particularly from our operations at NagaWorld, and our continued strict cost control efforts, we have achieved positive GAAP earnings for the three months ended September 30, 2010, the first profitable quarter since effecting our new business model in September 2007, and have significantly improved our ability to generate and grow positive cash flow. We achieved positive Adjusted EBITDA (as defined below) of approximately $3.0 million for the three months ended September 30, 2010 up from approximately $1.4 million for the three months ended June 30, 2010. Cash flow provided from operations amounted to approximately $7.8 million for the nine months ended September 30, 2010 compared with cash used in operations of approximately $7.9 million in the same period in the prior year.

In addition, we have improved our liquidity and financial flexibility. In May 2010, we entered into another agreement with EGT Entertainment to further amend the unsecured promissory note originally issued in April 2008. Under these new terms, which became effective July 1, 2010, we have deferred the repayment of principal on the outstanding principal balance of the note of approximately $9.2 million until July 2011 and we make interest only payments on a monthly basis at a rate of 5% per annum. In July 2011, we will resume monthly payments of principal and interest for a period of 18 months. The amended terms also required that we pay all the accrued interest for the period of July 1, 2009 to June 30, 2010, which had accrued at a rate of 5% per annum on the principal amount of approximately $9.2 million, in the total amount of approximately $458,000 on July 1, 2010 and we made such payment on that date.

The Land has a total area of approximately seven acres (30,000 square meters) and is located in the Takeo province, a border area of Cambodia and Vietnam, which is approximately 125 miles (200 kilometers) south of Cambodias capital city Phnom Penh and connects the major cities of southern Vietnam and Phnom Penh. The total consideration for the Land was $1.76 million, of which $850,000 was paid to the Seller in May 2010 as a deposit. The registration of the title for the Land under the name of Dreamworld Holding by the land office and the relevant authorities in Cambodia was completed on June 28, 2010 and, accordingly, we paid the balance of $910,000 to the Seller in mid-July 2010.

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