Debt and Capital Lease Obligations

3 Months Ended

Mar. 31, 2012

Debt and Capital Lease Obligations

Debt and Capital Lease Obligations

Note 11.         Debt and Capital Lease Obligations

Debt and capital lease obligations consisted of the following:

(amounts in thousands)	March 31, 2012		December 31, 2011
	(Unaudited)
Notes payable to a related party at interest of 5%	$	4,687	$	6,211
Capital lease obligations to an Australian bank at various interest rates and collateralized by equipment	278		322
Total	$	4,965	$	6,533

On November 6, 2008, in accordance with the amended Trade Credit Facility Agreement (the “Facility Agreement”), Elixir International Limited (“Elixir International”), a then wholly-owned subsidiary of the Company’s principal shareholder EGT Entertainment Holding Limited (“EGT Entertainment Holding”), exchanged its promissory note issued under the Facility Agreement in the original principal amount advance of $15.0 million for a new promissory note issued by the Company for the then outstanding principal amount of approximately $12.1 million.  The outstanding principal and the interest accrued (revised from 8% to 5%) thereon were to be repaid in 24 equal monthly installments reset from January 1, 2009.

On July 24, 2009, the Company entered into a second amendment (the “Second Amendment”) to the Facility Agreement with Elixir International to defer the repayment of principal and interest on the outstanding principal balance of approximately $9.2 million during the period from July 1, 2009 to June 30, 2010 although interest at the rate of 5% per annum continued to accrue on the outstanding principal balance of approximately $9.2 million (the “Outstanding Principal Balance”).  Repayments in 18 equal monthly installments were to resume on July 1, 2010.

On April 20, 2010, the Company entered into a Deed of Assignment and Novation and Consent (the “Deed of Assignment”) with Elixir International and EGT Entertainment Holding. Pursuant to the Deed of Assignment, the Company agreed to the assignment and transfer by Elixir International of all its rights and obligations under the Facility Agreement and the related promissory note to EGT Entertainment Holding, our principal shareholder, with immediate effect. The said assignment and transfer was made in relation to the disposal of Elixir International by EGT Entertainment Holding and does not have any impact on the note terms or the repayment obligations of the Company save and except that when the repayment schedule resumes, the monthly repayment of principal and interest under the note will be made to or at the direction of EGT Entertainment Holding instead of Elixir International.

On May 25, 2010, the Company entered into a third amendment (“Third Amendment”) to the Facility Agreement with EGT Entertainment Holding, pursuant to which the payment schedule of the Outstanding Principal Balance and the interest accrued thereon were further restructured in the following manner: (i) the total interest accrued on the Outstanding Principal Balance during the period from July 1, 2009 to June 30, 2010 in the amount of approximately $458,000 to be paid by the Company in a lump sum payment on July 1, 2010; (ii)  on the first day of each calendar month during the period from August 1, 2010 to June 1, 2011, the Company was to pay interest in arrears on the Outstanding Principal Balance at the same rate of 5% per annum for the preceding month; and (iii)  the Company is to repay the Outstanding Principal Balance and interest accrued thereon at the rate mentioned above in 18 equal monthly installments commencing on July 1, 2011.  Pursuant to the terms of the Third Amendment, the Company paid total principal and interest of approximately $1.5 million and $64,000, respectively, for the three-month period ended March 31, 2012 to EGT Entertainment Holding.  (See Note 14)  Interest expenses capitalized during the three-month periods ended March 31, 2012 and 2011 amounted approximately $13,000 and $23,000, respectively.

In 2006, the Company entered into a capital lease agreement for four injection molding machines with auxiliary equipment. The lease has a six-year term and the machines will be fully owned on final payment at the end of the contract term. The molding machine lease was capitalized at the present value of the future minimum lease payments at lease inception. As of March 31, 2012, the capital lease balance is approximately $278,000, which will be fully settled in 2012.

The cost and accumulated depreciation of property and equipment leased under capital lease arrangements was approximately $192,000 and $47,000, respectively as of March 31, 2012.  Depreciation expense was approximately $9,000 for the three-month period ended March 31, 2012.  The cost and accumulated depreciation of property and equipment leased under capital lease arrangements was approximately $190,000 and $9,000, respectively as of March 31, 2011.