10-Q

FORM 10-Q

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the Quarterly Period Ended March 31, 2016

OR

¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from             to             .

Commission file number: 001-32161

Entertainment Gaming Asia Inc.

(Exact name of registrant as specified in its charter)

Nevada	91-1696010
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification no.)

Unit C1, Ground Floor, Koon Wah Building

No. 2 Yuen Shun Circuit

Yuen Chau Kok, Shatin

New Territories, Hong Kong SAR

(Address of principal executive offices, including zip code)

+ 852-3147-6600

(Registrant’s telephone number, including area code)

Not Applicable

(Former name, former address and former fiscal year, if changed since last report)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  Yes   x   No   ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).  Yes   x   No   ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company (as defined in Rule 12b-2 of the Act):

Large accelerated filer  ¨	Accelerated filer  ¨
Non-accelerated filer   x	Smaller reporting company  ¨
(Do not check if a smaller reporting company)

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).  Yes   ¨   No  x

As of May 1, 2016, 14,464,220 shares of common stock of Entertainment Gaming Asia Inc. were outstanding.

		Page
	PART I — FINANCIAL INFORMATION
Item 1.	Financial Statements	3
	Consolidated Balance Sheets	3
	Consolidated Statements of Comprehensive Loss/Income	4
	Consolidated Statements of Cash Flows	5
	Notes to Consolidated Financial Statements	6
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	20
	Overview	20
	Results of Operations	22
	Liquidity and Capital Resources	26
	Critical Accounting Policies and Estimates	27
Item 3.	Quantitative and Qualitative Disclosures about Market Risk	29
Item 4.	Controls and Procedures	29
	PART II — OTHER INFORMATION
Item 6.	Exhibits	30

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PART I — FINANCIAL INFORMATION

Item 1. Financial Statements

ENTERTAINMENT GAMING ASIA INC. AND SUBSIDIARIES

Consolidated Balance Sheets

(amounts in thousands, except per share data)

	March 31, 2016			December 31, 2015
	(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents	$	30,685		$	30,681
Accounts receivable, net		1,084			724
Amounts due from related parties		2			257
Other receivables		63			78
Inventories		1,856			2,378
Prepaid expenses and other current assets		468			295
Contract amendment fees		—			18
Total current assets		34,158			34,431
Gaming equipment, net		2,583			2,985
Casino contracts		95			528
Property and equipment, net		5,589			5,919
Goodwill		340			332
Intangible assets, net		650			391
Deferred tax asset		280			274
Prepaids, deposits and other assets		434			425
Total assets	$	44,129		$	45,285
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	900		$	288
Amounts due to related parties		48			239
Accrued expenses		1,843			1,755
Income tax payable		106			2
Deferred revenue		—			9
Customer deposits and other current liabilities		188			529
Total current liabilities		3,085			2,822
Other liabilities		892			880
Deferred tax liability		29			29
Total liabilities		4,006			3,731
Commitments and contingencies
Stockholders’ equity:
Common stock, $.001 par value, 38,000,000 shares authorized; 14,464,220 shares issued and outstanding		14			14
Additional paid-in-capital		47,778			47,763
Accumulated other comprehensive income		738			709
Accumulated losses		(8,408	)		(6,933	)
Total EGT stockholders’ equity		40,122			41,553
Non-controlling interest		1			1
Total stockholders’ equity		40,123			41,554
Total liabilities and stockholders’ equity	$	44,129		$	45,285

The notes to consolidated financial statements are an integral part of these consolidated statements.

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 ENTERTAINMENT GAMING ASIA INC. AND SUBSIDIARIES

Consolidated Statements of Comprehensive Loss / Income

(amounts in thousands, except per share data)

(Unaudited)

	Three-Month Periods Ended March 31,
	2016			2015
Revenues:
Gaming operations	$	3,851		$	4,010
Gaming products		1,305			4,272
Total revenues		5,156			8,282
Operating costs and expenses:
Cost of gaming operations
Gaming property and equipment depreciation		482			819
Casino contract amortization		434			611
Other gaming related intangibles amortization		63			63
Other operating costs		1,396			822
Cost of gaming products		1,761			3,662
Selling, general and administrative expenses		1,960			1,612
Gain on disposition of assets		—			(5	)
Research and development expenses		448			35
Depreciation and amortization		52			54
Total operating costs and expenses		6,596			7,673
(Loss)/income from operations		(1,440	)		609
Other income/(expenses):
Interest expense and finance fees		—			(1	)
Interest income		3			3
Foreign currency gains/(losses)		72			(30	)
Other		9			9
Total other income/(expenses)		84			(19	)
Loss/(income) before income tax		(1, 356	)		590
Income tax expenses		(119	)		(20	)
Net (loss)/income attributable to EGT stockholders	$	(1,475	)	$	570
Other comprehensive income:
Foreign currency translation		29			1
Total other comprehensive income, net of tax		29			1
Comprehensive (loss)/income attributable to EGT stockholders	$	(1,446	)	$	571
Per share data (basic and diluted):
(Loss)/earnings	$	(0.10	)	$	0.04
Weighted average common shares outstanding:
Basic		14,460			14,450
Diluted		14,460			14,467

The notes to consolidated financial statements are an integral part of these consolidated statements.

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ENTERTAINMENT GAMING ASIA INC. AND SUBSIDIARIES

Consolidated Statements of Cash Flows

(amounts in thousands)

(Unaudited)

	Three-Month Periods Ended March 31,
	2016			2015
Cash flows provided by operating activities:
Net (loss)/income	$	(1,475	)	$	570
Adjustments to reconcile net (loss)/income to net cash provided by operating activities:
Foreign currency losses		17			7
Depreciation of gaming equipment and property and equipment		796			1,130
Amortization of casino contracts		434			611
Amortization of intangible assets		75			75
Amortization of contract amendment fees		18			27
Stock-based compensation expenses		14			30
Gain on disposition of assets		—			(5	)
Changes in operating assets and liabilities:
Accounts receivable and other receivables		(335	)		156
Inventories		523			(664	)
Prepaid expenses and other current assets		(173	)		786
Prepaids, deposits and other assets		(8	)		172
Accounts payable		612			1,213
Amounts due from/to related parties		64			329
Accrued expenses and other liabilities		99			(59	)
Income tax payable		104			5
Customer deposits and other current liabilities		(341	)		(37	)
Deferred revenue		(9	)		—
Net cash provided by operating activities		415			4,346
Cash flows used in investing activities:
Purchases of property and equipment		(46	)		(864	)
Purchases of gaming machines and systems		—			(169	)
Proceeds from sale of gaming equipment		—			7
Proceeds from sale of subsidiary related to discontinued operations		—			200
Development/purchase of intangibles		(334	)		—
Net cash used in investing activities		(380	)		(826	)
Cash flows used in financing activities:
Net cash used in financing activities		—			—
Effect of exchange rate changes on cash		(31	)		(1	)
Increase in cash and cash equivalents		4			3,519
Cash and cash equivalents at beginning of period		30,681			17,301
Cash and cash equivalents at end of period	$	30,685		$	20,820

The notes to consolidated financial statements are an integral part of these consolidated statements.

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ENTERTAINMENT GAMING ASIA INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

Note 1. Description of Business and Significant Accounting Policies

The business activities of the Company entail: (i) the owning and leasing of electronic gaming machines (EGMs) placed in resorts, hotels and other venues in Cambodia and the Philippines on a fixed lease or revenue sharing basis with venue owners; (ii) the design, manufacture and distribution of gaming chips and plaques under our Dolphin brand and distribution of third-party gaming products to major casinos in Southeast Asia and Australia; and (iii) the development of a social casino gaming platform designed for the Pan-Asian market.

Basis of Presentation

These consolidated financial statements are prepared pursuant to generally accepted accounting principles in the United States for interim financial information and with the instructions to Form 10-Q and Rule 8-03 of Regulation S-X promulgated by the Securities and Exchange Commission (“SEC”) and reflect all adjustments, consisting of normal recurring adjustments and other adjustments, which management believes are necessary to fairly present the financial position, results of operations and cash flows of the Company, for the respective periods presented. The results of operations for an interim period are not necessarily indicative of the results that may be expected for any other interim period or the year as a whole. The accompanying unaudited consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto in the Company’s Annual Report on Form 10-K for the year ended December 31, 2015, filed with the SEC on March 30, 2016.

The Company effected a 1-for-4 reverse stock split of its common shares as of February 26, 2015. All historical share amounts and share price information presented in the financial statements and notes have been proportionally adjusted to reflect the impact of this reverse stock split, including but not limited to basic and diluted weighted-average shares issued and outstanding.

Principles of Consolidation

These consolidated financial statements include the accounts of Entertainment Gaming Asia Inc. and all its subsidiaries. All intercompany balances and transactions have been eliminated in consolidation.

Use of Estimates

The Company is required to make estimates, judgments and assumptions that it believes are reasonable based on its historical experience, contract terms, observance of known trends in the Company and the industry as a whole, and information available from other outside sources. These estimates affect the reported amounts of assets, liabilities, revenues and expenses and related disclosures of contingent assets and liabilities. On a regular basis, the Company evaluates its estimates, including those related to revenue recognition, product returns, long-lived assets, inventory obsolescence, stock-based compensation, income taxes, bad debts, warranty obligations, long-term contracts, contingencies and litigation. Actual results may differ from those estimates.

Cash and Cash Equivalents

All highly-liquid instruments with original maturities of three months or less are considered cash equivalents. The Company places its cash and temporary investments with financial institutions. As of March 31, 2016, the Company had deposits with financial institutions in excess of Federal Deposit Insurance Corporation (FDIC) insured limits by approximately $30.4 million.

Accounts Receivable and Allowance for Doubtful Accounts

Accounts receivable are stated at face value less any allowances for doubtful accounts. Allowances for doubtful accounts are maintained at levels determined by Company management to adequately provide for uncollectible amounts. In determining the estimated uncollectable amounts, the Company evaluates a combination of factors, including, but not limited to, activity in the related market, financial condition of customers, specific customer collection experience and history of write-offs and collections. Interest income is imposed on overdue accounts receivable after the Company evaluates a combination of factors, including but not limited to, customer collection experiences, customer relationship and contract terms. Accounts receivable balances are written off after all collection efforts have been exhausted.

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Inventories

Inventories are stated at the lower of cost, determined using the first-in, first-out method, or market. Cost elements included in work-in-process and finished goods include raw materials, direct labor and manufacturing overheads. Inventories included a lower of cost or market (LCM) write-down of approximately $89,000 and $14,000 for the three-month periods ended March 31, 2016 and 2015, respectively.

Long-Lived Assets

The Company accounts for impairment of long-lived assets in accordance with Financial Accounting Standards Board (FASB) Accounting Standards Codification (ASC) 360, Property, Plant and Equipment. Long-lived assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. In such instances, the Company estimates the undiscounted future cash flows that result from the use of the asset and its ultimate disposition. If the sum of the undiscounted cash flows is less than the carrying value, the Company recognizes an impairment loss, measured as the amount by which the carrying value exceeds the fair value of the asset, determined principally using discounted cash flows. There were no impairment charges for long-lived assets for the three-month periods ended March 31, 2016 and 2015.

Prepaids, Deposits and Other Assets

Prepaids, deposits and other assets consist primarily of prepaid lease, prepaid value-added taxes in foreign countries, prepayments to suppliers, rental and utilities and other deposits.

Gaming Equipment

Gaming equipment consists primarily of EGMs and systems. Gaming equipment is stated at cost. The Company depreciates new EGMs and systems over a five-year useful life and depreciates refurbished EGMs and systems over a three-year useful life once placed in service. Depreciation of gaming equipment of approximately $425,000 and $660,000 was included in cost of gaming operations in the consolidated statements of comprehensive income for the three-month periods ended March 31, 2016 and 2015, respectively.

Property and Equipment

Property and equipment are stated at cost. Depreciation is computed using the straight-line method over the useful lives of the assets currently estimated to be three to twenty years, which in the case of leasehold improvements, is limited to the life of the lease and throughout the renewal period as long as renewal is reasonably assured.

The Company capitalizes certain direct and incremental costs related to the design and construction, project payroll, and applicable portions of interest incurred for potential projects in property and equipment.

Depreciation of property and equipment of approximately $57,000 and $159,000 was included in the cost of gaming operations in the consolidated statements of comprehensive income for the three-month periods ended March 31, 2016 and 2015, respectively.

Depreciation of property and equipment of approximately $268,000 and $256,000 was included in cost of gaming products in the consolidated statements of comprehensive income for the three-month periods ended March 31, 2016 and 2015, respectively.

Goodwill and Intangible Assets, Including Casino Contracts

Intangible assets consist of patents, trademarks, technical know-how, gaming operation agreement, casino contracts and goodwill. Intangible assets other than goodwill are amortized on the straight-line basis over the period of time the asset is expected to contribute directly or indirectly to future cash flows, which ranges from four to ten years. The straight-line amortization method is utilized because the Company believes there is no more reliably determinable method of reflecting the pattern for which the economic benefits of the intangible assets are consumed or otherwise used.

The Company capitalizes certain costs relating to software developed to solely meet the Company’s internal requirements and for which there are no substantive plans to market the software. These costs mainly include payroll and payroll-related costs for employees who are directly associated with and who devote time to the internal-use software projects during the application development stage until the software is substantially complete and ready for its intended use. The Company also capitalizes certain costs related to the development of the social gaming application for marketing purposes. These costs are capitalized once technological feasibility has been established. Costs incurred prior to the criteria met for capitalization are expensed to research and development expenses as incurred. Management has committed the resources of developing social gaming application, and it is probable that the social gaming application will be completed and the software will be used as intended. Such capitalized costs are amortized on a straight-line basis over the estimated useful life of the related assets.

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Amortization expenses related to casino contracts were approximately $434,000 and $611,000 for the three-month periods ended March 31, 2016 and 2015, respectively. Amortization expenses related to other gaming related intangibles were approximately $63,000 for the three-month periods ended March 31, 2016 and 2015. The amounts were accounted for as cost of gaming operations in the consolidated statements of comprehensive income. Amortization expenses related to technical know-how were approximately $6,000 for the three-month periods ended March 31, 2016 and 2015. The amounts were accounted for as cost of gaming products in the consolidated statements of comprehensive income. Amortization expenses related to patents and trademarks were approximately $6,000 for the three-month periods ended March 31, 2016 and 2015. The amounts were accounted for as selling, general and administrative expenses in the consolidated statements of comprehensive income.

The Company measures and tests finite-lived intangibles for impairment when there are indicators of impairment in accordance with ASC 360-10-05, Property, Plant and Equipment.

The Company measures and tests goodwill for impairment, at least annually in accordance with ASC 350-10-05, Intangibles — Goodwill and Other.

Impairment testing for goodwill and other intangibles requires judgment, including the identification of reporting units, allocation of related goodwill, assignment of corporate shared assets and liabilities to reporting units, estimated future cash flows and determinations of fair values. While the Company believes its estimates of future revenues and future cash flows are reasonable, different assumptions could materially affect the assessment of useful lives, recoverability and fair values. No impairment charges relating to intangible assets were recorded for the three-month periods ended March 31, 2016 and 2015, respectively.

Litigation and Other Contingencies

In the performance of its ordinary course of business operations, the Company is subject to risks of various legal matters, litigation and claims of various types. The Company has regular litigation reviews, including updates from corporate and outside counsel, to assess the need for accounting recognition or disclosure of these contingencies. See Note 15.

ASC 450, Contingencies, requires that liabilities for contingencies be recorded when it is probable that a liability has been incurred and that the amount can be reasonably estimated. Significant management judgment is required related to contingent liabilities and the outcome of litigation because both are difficult to predict. For a contingency for which an unfavorable outcome is reasonably possible and which is significant, the Company discloses the nature of the contingency and, when feasible, an estimate of the possible loss.

Revenue Recognition

The Company recognizes revenue when all of the following have been satisfied:

· Persuasive evidence of an arrangement exists;

· The price to the customer is fixed and determinable;

· Delivery has occurred and any acceptance terms have been fulfilled;

· No significant contractual obligations remain; and

· Collection is reasonably assured.

Gaming Revenue and Promotional Allowances

The Company earns recurring gaming revenue from its gaming operations.

For gaming operations, the Company earns recurring revenue by providing customers with EGMs and casino management systems which track game performance and provide statistics on installed EGMs owned by the Company and leased to venue owners. Revenues are recognized on the contractual terms of the EGM agreements between the Company and the venue owners and are based on either a fixed lease fee or the Company’s share of net winnings and reimbursement of expenses, net of customer incentives and commitment fees.

Revenues are recognized as earned unless collection is not reasonably assured, in which case revenues are recognized when the payment is received. All slot operations revenues were recognized as earned during the three-month periods ended March 31, 2016 and 2015, respectively.

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Commitment fees paid to the venue operators relating to contract amendments which are not recoverable from daily net win are capitalized as assets and amortized as a reduction of revenue over the term of the amended contracts. The Company had commitment fee balances related to contract amendments of $NIL and approximately $18,000 as of March 31, 2016 and December 31, 2015, respectively.

Gaming Products Sales

The Company recognizes revenue from the sale of its gaming products and accessories to end users upon shipment against customer contracts or purchase orders. In accordance with the criteria of ASC 605-45, Reporting Revenue Gross as a Principal versus Net as an Agent, the Company recognizes gross revenue when it acts as a principal, has discretion to choose suppliers and establish selling price, bears credit risk and provides the products or services required in the transaction. If the above criteria are not met, in which the supplier is the primary obligor in the arrangement and bears the general inventory risk, the Company recognizes revenue net of related costs. The Company also recognizes revenue for the maintenance services of gaming products on the straight line basis over the contract term in accordance with ASC 605, Revenue Recognition.

Stock-Based Compensation

Under the fair value recognition provisions of ASC 718, Compensation-Stock Compensation, the Company recognizes stock-based compensation expenses for all service-based awards to employees and non-employee directors with graded vesting schedules on the straight-line basis over the requisite service period for the entire award. Estimates are revised if subsequent information indicates that forfeitures will differ from previous estimates, and the cumulative effect on compensation cost of a change in the estimated forfeitures is recognized in the period of the change. For non-employee awards, the Company remeasures compensation cost each period until the service condition is complete and recognizes compensation cost on the straight-line basis over the requisite service period. Option valuation models require the input of highly subjective assumptions, and changes in the assumptions used can materially affect the fair value estimates. Judgment is required in estimating stock price volatility, forfeiture rates, expected dividends, and expected terms that options remain outstanding. For restricted stock awards with performance conditions, the Company evaluates if performance conditions are probable in each reporting period. The compensation expense of restricted awards is recognized ratably over the implicit service period if achieving performance conditions is probable. Cumulative catch-up adjustments are required in the event of changes in assessment of probability. See Note 12 for additional information relating to stock-based compensation assumptions. Stock-based compensation expenses totaled approximately $14,000 and $30,000 for the three-month periods ended March 31, 2016 and 2015, respectively.

Research and Development

Research and development expenses are expensed as incurred. Employee-related costs associated with research and development and certain costs associated with the development of the social casino platform are included in research and development expenses.  Research and development expenses were approximately $448,000 and $35,000 for the three-month periods ended March 31, 2016 and 2015, respectively.

Leases

Leases are classified at the inception date as either a capital lease or an operating lease. A lease is a capital lease if any of the following conditions exists:

· Ownership is transferred to the lessee by the end of the lease term;

· There is a bargain purchase option;

· The lease term is at least 75% of the property’s estimated remaining economic life; or

· The present value of the minimum lease payments at the beginning of the lease term is 90% or more of the fair value of the leased property to the lessor at the inception date.

A capital lease is accounted for as if there was an acquisition of an asset and an incurrence of an obligation at the inception of the lease. All other leases are accounted for as operating leases wherein rental payments are expensed as incurred. The Company had no capital leases as of March 31, 2016 and December 31, 2015.

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Income Taxes

The Company is subject to income taxes in the United States (including federal and state) and several foreign jurisdictions in which it operates. Deferred income tax balances reflect the effects of temporary differences between the carrying amounts of assets and liabilities and their tax basis and are stated at enacted tax rates expected to be in effect when taxes are actually paid or recovered. ASC 740, Income Taxes, requires that deferred tax assets be evaluated for future realization and reduced by a valuation allowance to the extent the Company believes a portion will not be realized. The Company considers many factors when assessing the likelihood of future realization of its deferred tax assets, including its recent cumulative earnings experience and expectations of future taxable income by taxing jurisdiction, the carry-forward periods available to the Company for tax reporting purposes, and other relevant factors.

The Company accounts for uncertain tax positions in accordance with ASC 740, which contains a two-step approach to recognizing and measuring uncertain tax positions. The first step is to evaluate the tax position for recognition by determining if the weight of available evidence indicates it is more likely than not that the position will be sustained on audit, including resolution of related appeals or litigation processes, if any. The second step is to measure the tax benefit as the largest amount which is more than 50% likely to be realized upon ultimate settlement. The Company considers many factors when evaluating and estimating its tax positions and tax benefits, which may require periodic adjustments and which may not accurately anticipate actual outcomes. The Company recognizes interest and penalties, if any, related to unrecognized tax benefits in the provision for income taxes in the statements of comprehensive income.

As of that date, the Company’s deferred taxes were reported in conformity with applicable income tax accounting standards described above, net of applicable valuation allowances. Deferred tax assets and liabilities were recognized for differences between the assigned values and the tax basis of the recognized assets and liabilities with corresponding valuation allowances as appropriate.

(Loss)/Earnings per Share

Basic (loss)/earnings per share are computed by dividing the reported net (loss)/earnings by the weighted average number of shares of common stock outstanding during the period. Diluted earnings per share is computed by dividing the net income by the weighted average number of shares of common stock and shares issuable from stock options and restricted shares during the period. The computation of diluted earnings per share excludes the impact of stock options and restricted shares that are anti-dilutive. There was no difference in diluted loss per share from basic loss per share for three-month period ended March 31, 2016 as the assumed exercise of common stock equivalents would have an anti-dilutive effect due to losses.

Foreign Currency Translations and Transactions

The functional currency of the Company’s international subsidiaries, except for its operations in Cambodia whose functional currency is also U.S. dollars, is generally the local currency. For these subsidiaries, the Company translates the assets and liabilities at exchange rates in effect at the balance sheet date and income and expense accounts at average exchange rates during the year. Resulting currency translation adjustments are recorded directly to accumulated other comprehensive income within stockholders’ equity. Gains and losses resulting from transactions in non-functional currencies are recorded in the consolidated statements of comprehensive income.

Below is a summary of closing exchange rates as of March 31, 2016 and December 31, 2015 and average exchange rates for the three-month periods ended March 31, 2016 and 2015.

(US$1 to foreign currency)	March 31, 2016		December 31, 2015
Australian dollar		1.30		1.37
Hong Kong dollar		7.75		7.75
Philippine peso		46.11		47.17
Thai baht		35.18		36.07

	Three-Month Periods Ended March 31,
(US$1 to foreign currency)	2016		2015
Australian dollar		1.33		1.27
Hong Kong dollar		7.76		7.76
Philippine peso		46.72		44.37
Thai baht		35.20		32.53

Fair Value Measurement

Fair value is defined under ASC 820, Fair Value Measurements and Disclosures, as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. Valuation techniques used to measure fair value under ASC 820 must maximize the use of observable inputs and minimize the use of unobservable inputs. The standard establishes a fair value hierarchy based on three levels of input, of which the first two are considered observable and the last unobservable.

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· Level 1 — Quoted prices in active markets for identical assets or liabilities. These are typically obtained from real-time quotes for transactions in active exchange markets involving identical assets.

· Level 2 — Input, other than quoted prices included within Level 1, which are observable for the asset or liability, either directly or indirectly. These are typically obtained from readily-available pricing sources for comparable instruments.

· Level 3 — Unobservable input, where there is little or no market activity for the asset or liability. This input reflects the reporting entity’s own assumptions of the data that participants would use in pricing the asset or liability, based on the best information available under the circumstances.

As of March 31, 2016, the fair values of financial assets and liabilities approximate carrying values due to the short maturity of these items.

Defined Benefit Pension Plan

The Company provides pension benefits to all regular full-time employees in the Philippines through a defined benefit plan. A defined benefit plan is a pension plan that defines an amount of pension benefit that an employee will receive on retirement, usually dependent on one or more factors such as age, years of service and salary.

The defined benefit obligation is calculated annually by independent actuaries using the projected unit credit method. The present value of the defined benefit obligation is determined by discounting the estimated future cash outflows using interest rates of high quality corporate bonds that are denominated in the currency in which the benefits will be paid and that have terms to maturity approximating to the terms of the related pension liability.

The accounting guidance related to employers’ accounting for defined benefit pension plan requires recognition in the balance sheet of the present value of the defined benefit obligation at the reporting date, together with adjustments for unrecognized actuarial gains or losses and past service costs or credits in other comprehensive income.

There were no adjustments for unrecognized actuarial gains or losses and past service costs or credits to equity through other comprehensive income for the three-month periods ended March 31, 2016 and 2015.

Asset Retirement Obligations  

Asset retirement obligations are legal obligations associated with the retirement of long-lived assets resulting from the acquisition, construction, development and/or normal use of the underlying assets. Recognition of a liability for an asset retirement obligation is required in the period in which it is incurred at its estimated fair value. The associated asset retirement costs are capitalized as part of the carrying amount of the underlying asset and depreciated over the estimated useful life of the asset. The liability is accreted through charges to operating expenses. If the asset retirement obligation is settled for other than the carrying amount of the liability, the Company recognizes a gain or loss on settlement.

The Company records all asset retirement obligations for which we have legal obligations to remove all installation works and reinstate the manufacturing facilities to its original state at estimated fair value. For the three-month period ended March 31, 2016 and 2015, the Company recognized approximately $4,000 as asset retirement obligation operating costs related to accretion of the liabilities and depreciation of the assets.

Note 2. Segments

During the reported periods, the Company conducted business under three operating segments: (i) gaming operations, which include leasing of its owned EGMs on a fixed or revenue-sharing basis; (ii) gaming products, which consist of the design, manufacture and distribution of gaming chips and plaques as well as the distribution of third-party gaming products; and (iii) the development of a social casino gaming platform. On May 11, 2016, the Company sold substantially all of the assets of the gaming products operations (Note 20).

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The following table presents the financial information for each of the Company’s operating segments.

	Three-Month Periods Ended March 31,
(amounts in thousands)	2016			2015
	(Unaudited)			(Unaudited)
Revenues:
Gaming operations	$	3,851		$	4,010
Gaming products		1,305			4,272
Total revenues	$	5,156		$	8,282
Operating (loss)/income:
Gaming operations	$	1,476		$	1,700
Gaming products		(506	)		575
Social casino gaming platform		(398	)		—
Corporate and other operating costs and expenses		(2,012	)		(1,666	)
Total operating (loss)/income	$	(1,440	)	$	609
Depreciation and amortization:
Gaming operations	$	987		$	1,504
Gaming products		295			282
Social casino gaming platform		4			—
Corporate		20			24
Total depreciation and amortization	$	1,306		$	1,810

Geographic segment revenues for the three-month periods ended March 31, 2016 and 2015 consisted of the following:

	Three-Month Periods Ended March 31,
(amounts in thousands)	2016		2015
	(Unaudited)		(Unaudited)
Cambodia	$	3,246	$	3,324
Macau		52		561
Philippines		1,738		3,644
Australia		92		753
Other		28		—
Total	$	5,156	$	8,282

For the three-month periods ended March 31, 2016 and 2015, in the gaming operations segment, the largest customer represented 62% and 73%, respectively, of total gaming operations revenue. For the three-month periods ended March 31, 2016 and 2015, in the gaming products segment, the largest customer represented 37% and 68%, respectively, of total gaming products sales.

Note 3. Inventories

Inventories consisted of the following:

(amounts in thousands)	March 31, 2016		December 31, 2015
	(Unaudited)
Raw materials	$	1,567	$	1,742
Work-in-process		157		80
Finished goods (1)		—		443
Spare parts		132		113
Total	$	1,856	$	2,378

(1) Finished goods decreased from December 31, 2015 to March 31, 2016 due to an order for the gaming products division delivered in the three-month period ended March 31, 2016.

Note 4. Prepaid Expenses and Other Current Assets

Prepaid expenses and other current assets consisted of the following:

(amounts in thousands)	March 31, 2016		December 31, 2015
	(Unaudited)
Prepayments to suppliers	$	465	$	292
Prepaid leases		3		3
Total	$	468	$	295

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Note 5. Receivables

Accounts and other receivables consisted of the following:

(amounts in thousands)	March 31, 2016		December 31, 2015
	(Unaudited)
Trade receivables	$	1,084	$	724
Other receivables		63		78
		1,147		802
Less: allowance for doubtful accounts		—		—
Net	$	1,147	$	802

Note 6. Gaming Equipment

Gaming equipment is stated at cost. The major categories of gaming equipment and accumulated depreciation consisted of the following:

(amounts in thousands)	Useful Life (years)	March 31, 2016			December 31, 2015
		(Unaudited)
EGMs	3-5	$	16,312		$	16,215
Systems	5		1,296			1,335
			17,608			17,550
Less: accumulated depreciation			(15,025	)		(14,565	)
Net		$	2,583		$	2,985

Depreciation expense of approximately $425,000 and $660,000 was included in cost of gaming operations in the consolidated statements of comprehensive income for the three-month periods ended March 31, 2016 and 2015, respectively.

Note 7. Property and Equipment

Property and equipment are stated at cost. The major categories of property and equipment and accumulated depreciation consisted of the following:

(amounts in thousands)	Useful Life (years)	March 31, 2016			December 31, 2015
		(Unaudited)
Equipment, vehicles, furniture and fixtures	3-10	$	6,338		$	6,290
Land and building	5		1,506			1,506
Leasehold improvements	1-6		1,400			1,400
			9,244			9,196
Less: accumulated depreciation			(3,655	)		(3,277	)
Net		$	5,589		$	5,919

Depreciation expense of property and equipment of approximately $57,000 and $159,000 was included in cost of gaming operations in the consolidated statements of comprehensive income for the three-month periods ended March 31, 2016 and 2015, respectively.

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Depreciation expense of property and equipment of approximately $268,000 and $256,000 was included in cost of gaming products in the consolidated statement of comprehensive income for the three-month periods ended March 31, 2016 and 2015, respectively.

Note 8. Goodwill and Intangible Assets, including Casino Contracts

Goodwill and intangible assets are stated at cost. The major categories of goodwill and intangible assets and accumulated amortization consisted of the following:

(amounts in thousands)	Useful Life (years)	March 31, 2016			December 31, 2015
		(Unaudited)
Gaming operation agreement	4-5	$	1,166		$	1,166
Less: accumulated amortization			(1,133	)		(1,070	)
			33			96
Goodwill	N/A		340			332
Patents	5-6		114			114
Less: accumulated amortization			(109	)		(104	)
			5			10
Trademarks	5-9		26			26
Less: accumulated amortization			(16	)		(15	)
			10			11
Technical know-how	10		261			261
Less: accumulated amortization			(100	)		(94	)
			161			167
Casino contracts	5-6		12,684			12,637
Less: accumulated amortization			(12,589	)		(12,109	)
			95			528
Internal-use software			441			107
Net carrying value		$	1,085		$	1,251

Amortization expenses for finite-lived intangible assets were approximately $509,000 and $686,000 for the three-month periods ended March 31, 2016 and 2015, respectively.

Goodwill movements during the periods consisted of the following:

(amounts in thousands)	2016		2015
	(Unaudited)
Balance as of January 1	$	332	$	351
Foreign currency translation adjustment		8		(19	)
Balance as of March 31/December 31	$	340	$	332

Note 9. Prepaids, Deposits and Other Assets

Prepaids, deposits and other assets consisted of the following:

(amounts in thousands)	March 31, 2016		December 31, 2015
	(Unaudited)
Prepaid taxes	$	17	$	—
Prepayments to suppliers		27		34
Rentals, utilities and other deposits		390		391
Total	$	434	$	425

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Note 10. Accrued Expenses

Accrued expenses consisted of the following:

(amounts in thousands)	March 31, 2016		December 31, 2015
	(Unaudited)
Payroll and related costs	$	629	$	626
Professional fees		219		339
Withholding tax expenses		630		549
Other tax expenses		44		44
Other expenses		321		197
Total	$	1,843	$	1,755

Note 11. Other Liabilities

Other liabilities consisted of the following:

(amounts in thousands)	March 31, 2016		December 31, 2015
	(Unaudited)
Other tax liabilities	$	769	$	754
Other		123		126
Total	$	892	$	880

Note 12. Stock-Based Compensation

The Company effected a 1-for-4 reverse stock split of its common shares as of February 26, 2015. All historical share amounts and share price information presented below have been proportionally adjusted to reflect the impact of this reverse split.

At the annual shareholders meeting held on September 8, 2008, a new stock option plan, the 2008 Stock Incentive Plan, was voted on and became effective on January 1, 2009, which replaced two previous plans, the Amended and Restated 1999 Stock Option Plan and the Amended and Restated 1999 Directors’ Stock Option Plan, thereby terminating both of the previous plans on December 31, 2008.

The 2008 Plan allows for incentive awards to eligible recipients consisting of:

· Options to purchase shares of common stock that qualify as incentive stock options within the meaning of the Internal Revenue Code;

· Non-statutory stock options that do not qualify as incentive options;

· Restricted stock awards; and

· Performance stock awards which are subject to future achievement of performance criteria or free of any performance or vesting.

The maximum number of shares reserved for issuance under the 2008 Plan is 1,250,000 shares. The exercise price of options granted under the 2008 Plan shall not be less than 100% of the fair market value of one share of common stock on the date of grant, unless the participant owns more than 10% of the total combined voting power of all classes of stock of the Company or any parent or subsidiary corporation of the Company, in which case the exercise price shall then be 110% of the fair market value. The outstanding stock options generally vest over three years and have ten-year contractual terms.

In the three-month period ended March 31, 2016, there were no grants of stock options or restricted stock awards and there were no exercises of outstanding stock options.

Prior to January 1, 2009, the Company had two stock options plans, the Amended and Restated 1999 Stock Option Plan and the Amended and Restated 1999 Directors’ Stock Option Plan, through which 937,500 shares and 18,750 shares were authorized, respectively. Both of these previous plans expired on December 31, 2008. However, options granted under these previous plans that were outstanding as of the date of termination remain outstanding and subject to termination according to their terms.

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As of March 31, 2016, stock options for the purchase of 226,252 shares and 3,751 shares of common stock, respectively, were outstanding in relation to the Amended and Restated 1999 Stock Option Plan and the Amended and Restated 1999 Director’s Stock Option Plan.

As of March 31, 2016, stock options for the purchase of 536,848 shares of common stock were outstanding under the 2008 Plan.

As of March 31, 2016, stock options for the purchase of 755,601 shares of common stock were exercisable with a weighted average exercise price of $7.91, a weighted average fair value of $3.35 and an aggregate intrinsic value of approximately $38,000. The total fair value of shares vested during the three-month period ended March 31, 2016 was approximately $62,000. As of March 31, 2016, an aggregate of 11,250 options granted under all plans was subject to vesting with a total compensation cost of approximately $6,000. The amount is expected to be recognized over 0.76 years.

A summary of all current and expired plans as of March 31, 2016 and changes during the period then ended are presented in the following table:

Options

	Number of Options			Weighted Average Exercise Price		Weighted Average Remaining Contractual Life (in years)		Aggregate Intrinsic Value (in thousands)
Outstanding as of December 31, 2015		767,476		$	7.90		4.28	$	34
Granted		—			—		—		—
Exercised		—			—		—		—
Forfeited or expired		(625	)		48.48		—		—
Outstanding as of March 31, 2016		766,851			7.86		4.03		38
Exercisable as of March 31, 2016		755,601		$	7.91		3.98	$	38

Restricted Stock

	Number of shares		Weighted Average Fair Value at Grant Date		Weighted Average Remaining Contractual Life (in years)
Unvested balance as of December 31, 2015		3,750	$	4.84		0.41
Granted		—		—		—
Vested		—		—		—
Unvested balance as of March 31, 2016		3,750	$	4.84		0.16

Recognition and Measurement

The fair value of each stock-based award to employees and non-employee directors is estimated on the measurement date which generally is the grant date while awards to non-employees and restricted common stock with performance criteria are measured at the earlier of the performance commitment date or the service completion date using the Black-Scholes-Merton option-pricing model. Option valuation models require the input of highly subjective assumptions, and changes in assumptions used can materially affect the fair value estimates. The Company estimates the expected life of the award by taking into consideration the vesting period, contractual term, historical exercise data, expected volatility, blackout periods and other relevant factors. Volatility is estimated by evaluating the Company’s historical volatility data. The risk-free interest rate on the measurement date is based on U.S. Treasury constant maturity rates for a period approximating the expected life of the award. The Company historically has not paid dividends, nor does it expect to pay dividends in the foreseeable future and, therefore, the expected dividend rate is zero.

The following table summarizes the range of assumptions utilized in the Black-Scholes-Merton option-pricing model for the valuation of stock options granted during the three-month periods ended March 31, 2016 and 2015.

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	Three-Month Periods Ended March 31,
	2016						2015
Range of values:	Low			High			Low			High
Expected volatility		81.78	%		87.26	%		78.74	%		80.91	%
Expected dividends		—			—			—			—
Expected term (in years)		4.78			7.11			4.78			8.11
Risk free rate		1.17	%		1.69	%		1.13	%		1.80	%

For stock-based compensation accrued to employees and non-employee directors, the Company recognizes stock-based compensation expenses for all service-based awards with graded vesting schedules on the straight-line basis over the requisite service period for the entire award. Initial accruals of compensation expense are based on the estimated number of shares for which requisite service is expected to be rendered. Estimates are revised if subsequent information indicates that forfeitures will differ from previous estimates, and the cumulative effect on compensation cost of a change in the estimated forfeitures is recognized in the period of the change.

For non-employee awards, the Company remeasures compensation cost each period until the service condition is complete and recognizes compensation cost on the straight-line basis over the requisite service period.

The Company estimates forfeitures and recognizes compensation cost only for those awards expected to vest assuming all awards would vest and reverse recognized compensation cost for forfeited awards when the awards are actually forfeited.

For awards with service conditions and graded vesting that were granted prior to the adoption of ASC 718, the Company estimates the requisite service period and the number of shares expected to vest, and recognizes compensation expense for each tranche on the straight-line basis over the estimated requisite service period.

Note 13. Related Party Transactions

Significant revenues, purchases and expenses arising from transactions with related parties consisted of the following:

	Three-Month Periods Ended March 31,
(amounts in thousands)	2016		2015
	(Unaudited)		(Unaudited)
Related party transactions provided to:
Melco Crown (Macau) Limited
Sales of gaming products	$	—	$	349
MCE Leisure (Philippines) Corporation
Sales of gaming products	$	159	$	2,892
Melco Crown Entertainment Limited
Sales of gaming products	$	—	$	212
Related party transactions provided by:
Melco Services Limited
Technical services	$	1	$	1
Services agreement	$	63	$	4
Golden Future (Management Services) Limited
Management services	$	63	$	61

Melco Services Limited is a wholly-owned subsidiary of Melco International Development Limited, which owns 64.8% of Entertainment Gaming Asia Inc.

Melco International Development Limited owns 34.3% of Melco Crown Entertainment Limited, which owns 90% of Melco Crown (Macau) Limited and 72.6% of MCE Leisure (Philippines) Corporation.

Golden Future (Management Services) Limited is a wholly-owned subsidiary of Melco Crown (Macau) Limited.

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Note 14. Income Taxes

The Company recorded income tax expenses of $119,000 and $20,000 for the three-month periods ended March 31, 2016 and 2015, respectively. The Company’s effective income tax rates were (8.8%) and 3.4% for the three-month periods ended March 31, 2016 and 2015, respectively. The EGT Cambodia entity is income tax exempt and only pays a fixed monthly tax rather than a tax on income. The change in effective tax rate was mainly due to an increase in the consolidated pre-tax loss.

The fixed obligation tax arrangement is subject to annual renewal and negotiation. The Company is working to renew the fixed obligation tax arrangement for EGT Cambodia for 2016.

The Company is subject to income tax examinations by tax authorities in jurisdictions in which it operates. The Company’s 2010 to 2015 United Status income tax returns remain open to examination by the Internal Revenue Service. The Company’s 2009 to 2013 Australian income tax returns remain open to examination by the Australian Taxation Office. The Company’s 2015 Cambodian income tax returns remain open to examination by the General Department of Taxation. The Company’s 2013 to 2015 Philippines income tax returns remain open to examination by the Philippines Bureau of Internal Revenue. The Company’s 2009 to 2015 Hong Kong income tax returns remain open to examination by the Hong Kong Inland Revenue Department.

Note 15. Commitments and Contingencies

Legal Matters

Gaming Partners International Corporation Litigation

On December 21, 2015, Gaming Partners International Corporation, or GPIC, commenced a legal action in the High Court of the Hong Kong Special Administrative Region against Dolphin Products Limited, or Dolphin, our wholly-owned subsidiary.

On January 6, 2016, GPIC filed its Statement of Claim and set out its causes of action, which included inducing a breach of contract, breach of confidence, unlawful interference with trade or business and conspiracy to injure by unlawful means. GPIC claimed, amongst others, (1) an injunction restraining Dolphin from using, accessing, disclosing and/or publishing all confidential information of GPIC for any purpose without GPIC’s consent, (2) an order that Dolphin discloses to GPIC’s solicitors all information, documents and/or items belonging to GPIC in Dolphin’s possession, custody or power and (3) damages to be assessed, interest and costs. On February 17, 2016, Dolphin filed its Defense denying any breach or wrongdoing on its part.

On May 11, 2016, GPIC agreed to irrevocably withdraw, terminate and discontinue the legal action mentioned above. On the same date, the Company agreed to sell substantially all the assets of Dolphin to GPIC and to discontinue Dolphin’s business of designing, manufacturing and distributing gaming chips and plaques and distributing third-party table gaming products.

Given the action was at a preliminary stage, it was not possible to accurately predict the likely outcome of the case. Therefore, no accrual had been made for any possible losses in connection with this matter.

Note 16. (Loss)/Earnings Per Share

Computation of the basic and diluted (loss)/earnings per share from continuing operations consisted of the following:

	Three-Month Periods Ended March 31,
	2016								2015
	(Unaudited)								(Unaudited)
(amounts in thousands, except per share data)	Loss			Number of Shares		Per Share Amount			Income		Number of Shares		Per Share Amount
Basic
Net (loss)/income attributable to equity shareholders	$	(1,475	)		14,460		(0.10	)	$	570		14,450	$	0.04
Effect of dilutive securities
Dilutive stock options/restricted shares (1)					—							17
Diluted
Net (loss)/income attributable to equity shareholders plus assumed conversion	$	(1,475	)		14,460		(0.10	)	$	570		14,467	$	0.04

(1) There was no difference in diluted loss per share from basic loss per share as the assumed exercise of common stock equivalents would have an anti-dilutive effect due to losses for the three-month period ended March 31, 2016.

18

For the three-month periods ended March 31, 2016 and 2015, outstanding stock options of 743,630 and 753,988, respectively, shares of common stock were excluded from the calculation of diluted earnings per share as their effect would be anti-dilutive.

Note 17. Retirement Plan

The components of accrued retirement benefits consisted of the following: 

(amounts in thousands)	2016		2015
	(Unaudited)
Balance as of January 1	$	23	$	29
Service cost		—		8
Interest cost		—		1
Actuarial gain and others		—		(15	)
Balance as of March 31/December 31	$	23	$	23

Note 18. Asset Retirement Obligations

Reconciliations of the carrying amounts of the Company’s asset retirement obligations are as follows:

(amounts in thousands)	2016		2015
	(Unaudited)
Balance as of January 1	$	99	$	92
Accretion expense		—		7
Balance as of March 31/December 31	$	99	$	99

Note 19. Accumulated Other Comprehensive Income

The accumulated balances in respect of other comprehensive income consisted of the following:

(amounts in thousands)	Defined Benefit Pension Plan		Foreign Currency Translation			Accumulated Other Comprehensive Income
Balances as of January 1, 2015	$	87	$	666		$	753
Current period other comprehensive income/(loss)		3		(47	)		(44	)
Balances as of December 31, 2015		90		619			709
Current period other comprehensive income		—		29			29
Balances as of March 31, 2016 (Unaudited)	$	90	$	648		$	738

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Note 20. Subsequent Events

On April 21, 2016, the Company’s wholly-owned Hong Kong subsidiary, Dolphin Products Limited, or Dolphin, entered into a binding letter of intent, or LOI, to sell its assets to Gaming Partners International Corporation, or GPIC. Under the terms of the LOI, GPIC will acquire the assets of Dolphin including fixed assets, raw materials and inventory and intellectual property for an estimated cash consideration of approximately $5.9 million, subject to physical inventory counts at closing. The purchase price will be paid out in installments over a 24-month period after closing. In addition, GPIC will make earn out payments to the Company over the next five years, or longer in the case of sales to the Company’s related parties, based on varying percentages of net revenues on certain select sales to specific Asian-based casinos. The asset sale represents Dolphin’s and the Company’s exit from the table game equipment business and, as part of the transaction, Dolphin and the Company will each agree not to engage in the manufacture of table game equipment in competition with GPIC.

On May 11, 2016, the Company entered into a definitive asset purchase agreement and closed the transaction. The final consideration was $5.9 million, excluding the future earn-out payments to be paid by GPIC to the Company. Also that day, GPIC agreed to irrevocably withdraw, terminate and discontinue the above-mentioned legal action between the parties (Note 15).

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

CAUTIONARY STATEMENT

The following discussion and analysis should be read in conjunction with our unaudited consolidated financial statements and the related notes thereto contained elsewhere in this report. The information contained in this quarterly report on Form 10-Q is not a complete description of our business or the risks associated with an investment in our common stock. We urge you to carefully review and consider the various disclosures made by us in this report and in our other reports filed with the Securities and Exchange Commission, or SEC, including our annual report on Form 10-K for the year ended December 31, 2015, filed with the SEC on March 30, 2016 and subsequent reports on Form 8-K, which discuss our business in greater detail.

In this report we make, and from time to time we otherwise make, written and oral statements regarding our business and prospects, such as projections of future performance, statements of management’s plans and objectives, forecasts of market trends, and other matters that are forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Statements containing the words or phrases “will likely result,” “are expected to,” “will continue,” “is anticipated,” “estimates,” “projects,” “believes,” “expects,” “anticipates,” “intends,” “target,” “goal,” “plans,” “objective,” “should” or similar expressions identify forward-looking statements, which may appear in documents, reports, filings with the Securities and Exchange Commission, news releases, written or oral presentations made by officers or other representatives made by us to analysts, stockholders, investors, news organizations and others, and discussions with management and other of our representatives. For such statements, we claim the protection of the safe harbor for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995.

Our future results, including results related to forward-looking statements, involve a number of risks and uncertainties. No assurance can be given that the results reflected in any forward-looking statements will be achieved. Any forward-looking statement speaks only as of the date on which such statement is made. Our forward-looking statements are based upon assumptions that are sometimes based upon estimates, data, communications and other information from suppliers, government agencies and other sources that may be subject to revision. Except as required by law, we do not undertake any obligation to update or keep current either (i) any forward-looking statement to reflect events or circumstances arising after the date of such statement, or (ii) the important factors that could cause our future results to differ materially from historical results or trends, results anticipated or planned by us, or which are reflected from time to time in any forward-looking statement.

There are several important factors that could cause our future results to differ materially from historical results or trends, results anticipated or planned by us, or results that are reflected from time to time in any forward-looking statement. Some of these important factors, but not necessarily all important factors, are included in this Management’s Discussion and Analysis of Financial Condition and Results of Operations and in the section “Risk Factors” in our annual report on Form 10-K for the year ended December 31, 2015 filed with the SEC on March 30, 2016.

We own or have rights to certain trademarks that we used in connection with our business or products, including, but not limited to, Dolphin™. Other than this trademark, this report also makes reference to trademarks and trade names of other companies.

On February 26, 2015, we effected a 1-for-4 reverse stock split of our common stock and corresponding decrease in the number of authorized shares of common stock. All historical share amounts and share information presented in the financial statements and notes have been proportionally adjusted to reflect the impact of this reverse stock split, including but not limited to basic and diluted weighted-average shares issued and outstanding.

Overview

This discussion is intended to provide the reader with information that will assist in understanding our financial statements, the changes in certain key items in those financial statements from year to year, and the primary factors that accounted for those changes, as well as how certain accounting principles affect our financial statements. The discussion also provides information about the financial results of the various segments of our business to provide a better understanding of how those segments and their results affect our financial condition and results of operations as a whole. This discussion should be read in conjunction with our consolidated financial statements and accompanying notes as of and for the three-month periods ended March 31, 2016 and 2015 included elsewhere in this report.

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General

We are a gaming company focused on capitalizing on the growth opportunities in growing gaming markets of Asia. Historically, we have generated revenue in two principal ways: gaming operations and gaming product sales. Our gaming operations comprise EGM operations in Cambodia and the Philippines, when permitted, operating under our Dreamworld brand. Our gaming products comprise the manufacture and sale of gaming chips and plaques under our Dolphin brand and the distribution of third-party gaming products in Asia and Australia. However, on May 11, 2016, we sold substantially all of the assets of the gaming products operations and we have exited this business. In addition, in 2015, we commenced operations to develop and publish an online social casino gaming platform specifically designed for the Pan-Asian market.

Our consolidated revenue for the three-month period ended March 31, 2016 was approximately $5.2 million, of which revenue from the gaming operations and gaming products segments comprised 75% and 25%, respectively, of consolidated revenue. This compares to consolidated revenue for the three-month period ended March 31, 2015 of approximately $8.3 million, of which revenue from the gaming operations and gaming products segments comprised 48% and 52%, respectively, of consolidated revenue.

Gaming Operations

As of March 31, 2016, our gaming operations, which comprised the leasing of our EGMs on both a fixed and revenue sharing basis, were located in two countries, Cambodia and the Philippines, and totaled 1,546 EGM seats in operation in six venues. In Cambodia, we had a total of 999 EGM seats in operation in three venues. In the Philippines, we had a total of 547 EGM seats in operation in three venues.

In Cambodia, our gaming operations have largely been focused on our operations in NagaWorld, a luxury destination gaming resort and the only licensed full service casino in and around the capital city of Phnom Penh. Pursuant to a machine operation and participation contract in operation between 2010 and February 2016, we jointly operated with NagaWorld a substantial portion of the gaming machine area in prime casino floor locations and we and NagaWorld split the net win from our 670 EGMs placed in their property and certain operating costs related to marketing and floor staff on a respective basis of 25%/75%. The net win, which represented the monies wagered less payouts to customers, from the 670 EGM seats was settled and our share was distributed to us on a daily basis. This contract with NagaWorld commenced on March 1, 2010 and expired on February 29, 2016. These operations have been a primary contributor to our gaming operations revenue and cash flow over the period.

On February 29, 2016, we entered into a machine lease agreement with NagaWorld Limited pursuant to which NagaWorld leases all of our 670 EGM seats and related equipment in their present locations on the NagaWorld casino floor commencing March 1, 2016. We are responsible to pay the withholding tax and provide onsite machine and system maintenance but do not provide any other operational support staff. NagaWorld pays us, on a monthly basis, a fixed fee per machine seat per day. The lease payments will be graduated for the first six months of the agreement. From March 1 through May 31, 2016, the lease payments per machine seat per day will be $22. From June 1 through August 31, 2016, the lease payments will be $20 per machine seat per day. Beginning from September 1, 2016 and thereafter until the contract terminates, the lease payments will be $18 per machine seat per day. The agreement is ongoing in nature and NagaWorld may terminate the agreement upon not less than 30 days’ prior written notice.

Our gaming operations in Cambodia also include Thansur Bokor Highland Resort and Dreamworld Club (Poipet). Thansur Bokor is a casino resort developed by leading Cambodian hotelier, Sokha Hotels and Resorts, in a tourist area of the Kampot Province. Under the original agreement, we and Sokha split the net win and certain operating expenses for the placed EGMs on a respective basis of 27%/73%. In August 2015, we and Sokha amended our agreement and adjusted the number of our EGMs placed in this venue to 71 and the split of net win and certain operating costs to 29%/71%, respectively.

Dreamworld Club (Poipet) is a slot hall located in the established gaming market of Poipet in the Banteay Meanchey Province of Northwestern Cambodia near the Thailand border. During the reported periods, we had approximately 300 EGM seats placed in this venue. Dreamworld Club (Poipet) operates under a machine operation and participation agreement with a local partner that owns and operates an existing casino in Poipet. Under the terms of the agreement, the local partner allocated, at no expense to us, part of its land with an area of approximately 16,000 square feet to us to develop and construct, at our own design, budget and cost, the slot venue. We are responsible for all capital expenditures for Dreamworld Club (Poipet) and the placement of EGMs and are the sole operators of this venue. We and the local partner split the net win from all the EGMs placed by us at Dreamworld Club (Poipet) and certain operating costs related to marketing and floor staff on a respective basis of 40%/60%.  

In the Philippines, our gaming operations comprise three venues in the greater Manila area. For these three venues, our share of the net win per unit per day ranges from 15% to 35%. Contracts for our three venues in the Philippines expire on June 30, 2016. We intend to seek renewal of two of these venues and have commenced discussions with the relevant parties.

21

Gaming Products

During the reported periods, we were engaged in the design, manufacture and distribution of gaming chips and plaques under our Dolphin brand from our manufacturing facilities in Hong Kong. 

Our customer base for Dolphin gaming chips and plaques included major casino resorts in Macau, the Philippines and Australia.

In addition, we had four agreements with third-party gaming suppliers to distribute their products, including gaming table layouts, UV lights and kiosks. Typically, we sold these products to our existing gaming chip and plaque customers in various markets in Asia and sales of these products represented a small amount of total gaming products revenue.  

On May 11, 2016, we reached a definitive agreement to sell substantially all of the assets of the gaming products operations (Noted 20). We closed the transaction that same day and we have exited this business.

Social Casino Gaming Platform

In 2015, we commenced operations to develop and publish an online social casino gaming platform. We intend to create free-to-play, mobile, social casino games designed specifically for the Pan-Asian market. We have hired experienced social gaming professionals to lead the development efforts. The development of the social casino gaming application is intended to be fully internally funded. We expect total costs, both expensed and capitalized, of approximately $5 million to $6 million for the development and distribution of the platform in the year ended December 31, 2016.

Results of Operations for the Three-Month Periods Ended March 31, 2016 and 2015

The following table summarizes our operating results on a consolidated basis and separately by each of the two operating segments, gaming operations and gaming products, for the three-month periods ended March 31, 2016 and 2015.

	Three-Month Periods Ended March 31,
(amounts in thousands, except per share data)	2016			2015
Total:
Revenue	$	5,156		$	8,282
Gross profit	$	1,020		$	2,305
Gross margin percentage		20	%		28	%
Adjusted (LBITDA)/EBITDA (1)	$	(38	)	$	2,423
Operating (loss)/income	$	(1,440	)	$	609
Net (loss)/income	$	(1,475	)	$	570
Basic and diluted (loss)/earnings per share	$	(0.10	)	$	0.04
Weighted average common shares outstanding
Basic		14,460			14,450
Diluted		14,460			14,467
Gaming operations:
Revenue	$	3,851		$	4,010
Gross profit	$	1,476		$	1,695
Gross margin percentage		38	%		42	%
Gaming products:
Revenue	$	1,305		$	4,272
Gross margin (loss)/profit	$	(456	)	$	610
Gross margin percentage		(35	)%		14	%

(1) We define “Adjusted (LBITDA)/EBITDA” as (loss)/earnings before interest, taxes, depreciation, amortization, stock-based compensation, and other non-cash operating income and expenses. Adjusted (LBITDA)/EBITDA is presented exclusively as a supplemental disclosure because our management believes that it is widely used to measure the performance, and as a basis for valuation, of gaming companies. Our management uses Adjusted (LBITDA)/EBITDA as a measure of the operating performance of its segments and to compare the operating performance of its operations with those of its competitors. We also present Adjusted (LBITDA)/EBITDA because it is used by some investors as a way to measure a company’s ability to incur and service debt, make capital expenditures and meet working capital requirements. Gaming companies have historically reported (LBITDA)/EBITDA as a supplement to financial measures in accordance with generally accepted accounting principles in the United States (“GAAP”). Adjusted (LBITDA)/EBITDA should not be considered as an alternative to operating income as an indicator of our performance, as an alternative to cash flows from operating activities as a measure of liquidity, or as an alternative to any other measure determined in accordance with GAAP. Unlike net income, Adjusted (LBITDA)/EBITDA does not include depreciation or interest expense and, therefore, does not reflect current or future capital expenditures or the cost of capital. We compensate for these limitations by using Adjusted (LBITDA)/EBITDA as only one of several comparative tools, together with GAAP measurements, to assist in the evaluation of operating performance. Such GAAP measurements include operating income, net income, cash flows from operations and cash flow data. We have significant uses of cash flows, including capital expenditures, taxes and other non-recurring charges, which are not reflected in Adjusted (LBITDA)/EBITDA. Our calculation of Adjusted (LBITDA)/EBITDA may be different from the calculation methods used by other companies and, therefore, comparability may be limited.

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A reconciliation of (LBITDA)/EBITDA, as adjusted, to the net (loss)/income is provided below.

	Three-Month Periods Ended March 31,
(amounts in thousands)	2016			2015
Net (loss)/income — GAAP basis	$	(1,475	)	$	570
Interest expense and finance fees		—			1
Interest income		(3	)		(3	)
Income tax expenses		119			20
Depreciation and amortization		1,307			1,810
Stock-based compensation expenses		14			30
Gain on disposition of assets		—			(5	)
Adjusted (LBITDA)/EBITDA	$	(38	)	$	2,423

Total revenue decreased approximately $3.1 million to $5.2 million for the three-month period ended March 31, 2016 compared to approximately $8.3 million in the same period of the prior year due to decreases in both business divisions. Revenue from gaming operations decreased primarily as a result of lower revenue from NagaWorld, as discussed in greater detail below, and the Philippines partially offset by higher revenue from Thansur Bokor. Revenue from the gaming products division decreased as a result of lower sales of gaming chips and plaques to existing customers compared to the prior year period.

Gross profit decreased approximately $1.3 million to $1.0 million for the three-month period ended March 31, 2016 compared to approximately $2.3 million in the prior year period. The decrease was primarily a result of a decrease in sales and an increase in gross margin loss for the gaming products division, as described in greater detail below, and lower gaming operations revenue compared to the prior year period.

Operating loss increased approximately $2.0 million to $1.4 million for the three-month period ended March 31, 2016 compared to income of approximately $609,000 in the prior year period. The increase in operating loss was primarily a result of the lower gross profit and higher operating expenses mainly related to the development of the social casino gaming platform and legal fees related to the Dolphin litigation.

Net loss increased approximately $2.0 million to $1.5 million for the three-month period ended March 31, 2016 compared to an income of approximately $570,000 in the prior year period. The increase in net loss was primarily a result of the lower operating income, as explained above.

Gaming Operations

Revenues from gaming operations consisted of the EGM operations, which include leasing machines on both a revenue sharing (participation) and fixed fee basis.

	Three-Month Periods Ended March 31,
(amounts in thousands, except per unit data)	2016		2015
Net revenue to the Company
Participation operations
Cambodia	$	2,575	$	3,118
Philippines		595		670
Service revenue (1)		224		222
Consolidated participation total	$	3,394	$	4,010
Fixed fee operations		457		—
Consolidated total	$	3,851	$	4,010
Average revenue per unit per day
Participation operations
Cambodia	$	142	$	128
Philippines		60		68
Consolidated participation average	$	108	$	108
Fixed fee operations	$	22	$	—

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	March 31,
	2016		2015
Total EGM seats in operation
Participation operations
Cambodia		329		1,045
Philippines		547		546
Consolidated participation total		876		1,591
Fixed fee operations		670		—
Consolidated total		1,546		1,591

(1) Service revenue represents reimbursements of certain expenses for EGM participation operations, which for accounting purposes, are included in the revenue and grossed up in the cost of gaming operations.

Revenue from gaming operations decreased approximately $159,000 to $3.9 million during the three-month period ended March 31, 2016 compared to approximately $4.0 million in the prior year period. The decrease was primarily due to lower revenue from NagaWorld and the Philippines partially offset by higher revenue from Thansur Bokor.

Gaming operations revenue for the three-month periods ended March 31, 2016 and 2015 included approximately $224,000 and $222,000, respectively, in service revenue related to the reimbursement of net shared costs from casino operators for the participation agreements.

Revenue from the Cambodia decreased approximately $543,000 to $2.6 million for the three-month period ended March 31, 2016 compared to approximately $3.1 million in the prior year period. The decline was primarily due to lower revenue from NagaWorld partially offset by higher revenue from Thansur Bokor. As described in more detail above, for the three-month period ended March 31, 2016, our operations at NagaWorld operated under the machine operation and participation agreement until its expiration on February 29, 2016 and under the machine lease agreement beginning March 1, 2016. The machine operation and participation agreement provided us with a 25% share of the average daily net win per unit and the machine lease agreement provided us with a fixed fee of $22 per day per unit.

Revenue from the Philippines decreased approximately $75,000 to $595,000 for the three-month period ended March 31, 2016 compared to approximately $670,000 in the prior year period. The decrease was due to lower average net win per day per unit primarily as a result of increased competition from major casino resorts in the Manila area. Due to the competitive environment in the Philippines, we are focused on enhancing returns on assets in this market through targeted marketing programs and strategic management of and investment in our machine mix.

Gross profit from gaming operations decreased approximately $219,000 to $1.5 million for the three-month period ended March 31, 2016 compared to approximately $1.7 million in the prior year period primarily due to the lower revenue. Cost of gaming operations for the three-month period ended March 31, 2016 included approximately $482,000 in depreciation of gaming property and equipment, $434,000 of amortization of casino contracts, $63,000 of amortization of other gaming related intangibles and $1.4 million of other operating costs which in included severance costs associated with the termination of the NagaWorld staff upon expiration of the machine operation and participation agreement. Of the total $626,000 in total severance costs, $555,000 was recorded in cost of gaming operations. Cost of gaming operations for the three-month period ended March 31, 2015 included approximately $819,000 in depreciation of gaming property and equipment, $611,000 of amortization of casino contracts, $63,000 of amortization of other gaming related intangibles and $822,000 of other operating costs.

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As of March 31, 2016, we had a total of 1,851 EGM seats of which 305 were held in inventory and 1,546 were in operation. Of the 1,546 EGM seats in operation, 999 were in operation in three venues in Cambodia and 547 were in operation in three venues in the Philippines.

	March 31, 2016				December 31, 2015
(amounts in thousands, except per unit data)	Units		Carrying Value		Units		Carrying Value
EGMs and systems used in operations (1)		1,546	$	2,519		1,543	$	2,871
EGMs and systems held for future use		305		64		308		114
Total EGMs and systems		1,851	$	2,583		1,851	$	2,985

(1) EGMs and systems used in operations as of March 31, 2016 and December 31, 2015 included 31 leased EGM seats and, therefore, their carrying values were not included.

As part of our ongoing efforts to maximize returns and minimize capital expenditures for the gaming operations, we seek to strategically manage our existing EGM base through the redeployment of gaming assets between venues, when appropriate.

Gaming Products

Gaming products revenue decreased approximately $3.0 million to $1.3 million for the three-month period ended March 31, 2016 compared to approximately $4.3 million in the prior year period. The decrease was mainly a result of lower sales of gaming chips and plaques to existing customers for the three-month period ended March 31, 2016.

Gross margin loss on gaming products increased approximately $1.1 million to $456,000 for the three-month period ended March 31, 2016 compared to a gross profit of approximately $610,000 in the prior year period. The increase in gross margin loss was primarily due to lower sales volumes, reduced production efficiencies and under-absorption of overhead expenses compared to the prior year period.

Social Casino Gaming Platform

In the year ended December 31, 2015, we began development of an online social casino gaming platform. We capitalize costs for the development of the platform and the internal-use software when the planning stage efforts are successfully completed, management has committed project resourcing and it is probable that the project will be completed and the software will be used as intended. Such costs are amortized on the straight-line basis over the estimated useful lives of the related assets. Costs incurred prior to meeting these criteria are expensed to research and development expenses as incurred. For the three-month period ended March 31, 2016, we incurred approximately $398,000 in expenses for research and development activities and approximately $334,000 in capitalized costs related to the development of the social casino gaming platform.

Operating Expenses

The schedule of expenses on a consolidated basis consisted of the following:

	Three-Month Periods Ended March 31,
(amounts in thousands)	2016		2015
Selling, general and administrative expenses	$	1,946	$	1,582
Stock-based compensation expenses		14		30
Gain on disposition of assets		—		(5	)
Research and development expenses		448		35
Depreciation and amortization		52		54
	$	2,460	$	1,696

Selling, General and Administrative Expenses

Selling, general and administrative expenses increased approximately $364,000 to $1.9 million for the three-month period ended March 31, 2016 compared to approximately $1.6 million in the prior year period. Consulting and legal expenses increased approximately $304,000 primarily due to legal fees related to the Dolphin Products Limited litigation and professional advisors’ fees. Office expenses increased approximately $57,000 due to management and administrative service fees paid to Melco Services Limited. In addition, other tax expenses increased approximately $45,000 mainly as result of a 10% withholding tax for the fixed machine lease income. The increases were partially offset by decreases in salaries and wages of approximately $35,000 due to lower corporate and gaming operations headcount. In addition, advertising, utilizes, printing expenses and other expenses decreased approximately $7,000 primarily due to various cost reduction initiatives.

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Stock-Based Compensation Expenses

Stock-based compensation expenses decreased approximately $16,000 to $14,000 for the three-month period ended March 31, 2016 compared to approximately $30,000 in the prior year period primarily due to no new option grants issued and a decrease in average stock prices during the three-month period ended March 31, 2016 as compared to the prior year period.

Research and Development Expenses

Research and development expenses increased approximately $413,000 to $448,000 for the three-month period ended March 31, 2016 compared to approximately $35,000 in the prior year period mainly as a result of approximately $398,000 in expenses related to the development of the new social casino gaming platform in the three-month period ended March 31, 2016.

Depreciation and Amortization Expenses

Depreciation and amortization expenses were approximately $52,000 for the three-month period ended March 31, 2016, which were essentially unchanged from approximately $54,000 in the prior year period.

Other Income/(Expenses)

Other income increased approximately $103,000 to $84,000 for the three-month period ended March 31, 2016 compared to expenses of approximately $19,000 in the prior year period. The increase in other income was primarily due to foreign currency gains compared to losses in the prior year period mainly as a result of the settlement of U.S. dollar denominated payables for the Philippines operations with a depreciated U.S. dollar compared to the prior year period.

Income Tax Provisions

Effective tax rates for the three-month periods ended March 31, 2016 and 2015 were approximately (8.8%) and 3.4%, respectively. We continue to review the treatment of tax losses and future income generated by our foreign subsidiaries to minimize taxation costs.

FINANCIAL CONDITION

Liquidity and Capital Resources

As of March 31, 2016, we had total cash and cash equivalents of approximately $30.7 million and working capital of approximately $31.1 million. Our cash and working capital during the three-month period ended March 31, 2016 was positively impacted by cash flow from operating activities of approximately $415,000 but was negatively impacted by investments in the development of the social casino gaming platform.

Since March 31, 2016, our cash flow from operations has been positively impacted by gaming operations revenue partially offset by increased operating expenses primarily related to the development of the social casino gaming platform and legal fees.

Our machine operation and participation contract with NagaWorld expired on February 29, 2016 and, on March 1, 2016, we entered a new machine lease agreement, as described above, which provides significantly lower cash flow from these operations. The reduced cash flow from the NagaWorld operations, estimated annual operating costs and expenses of $4 million to $4.5 million related to the development of the social casino gaming operations and the sale of the gaming products division’s assets in May 2016, are together expected to negatively impact our cash flow from operations for the year ended December 31, 2016. However, our cash position will benefit from the receipt of approximately $5.9 million in cash proceeds from the sale of the Dolphin assets, of which approximately $3.5 million will be paid in May 2016.

We continue to pursue new projects in both existing and new businesses to replace the reduced cash flow from the NagaWorld operations. However, there is no guarantee we will be successful in these efforts.

We presently expect that our capital expenditures for the remainder of 2016 will be approximately $1.5 million to $2.0 million, excluding the costs and expenses of any new projects. This primarily includes: approximately $500,000 for EGMs and system purchases and upgrades for gaming operations and approximately $1 million to $1.5 million for the development of the social casino gaming platform.

We anticipate our available working capital, along with cash expected to be generated from operating activities, will allow us to meet our capital expenditure needs through the remainder of 2016, excluding the costs and expenses of any new projects.

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However, as noted above, we continue to pursue new projects. While there is no guarantee we will be successful in securing new projects, if we were to secure new projects our capital expenditures through the remainder of 2016 would increase beyond the amounts discussed above. Where possible, we intend to fund our new projects from our cash flow from operating activities and cash on hand. Further, we will seek to structure the development of these projects in phases to better control and pace the related capital expenditures. Nonetheless, we may endeavor to obtain additional required capital from various financing sources including commercial debt financing and the sale of our debt or equity securities should the need arise. However, there are no commitments or arrangements in place as of the date of this report for receipt of additional capital and there are no assurances we will be able to acquire additional capital if, and when, needed on commercially reasonable terms or at all.

Cash Flow Summary

	Three-Month Periods Ended March 31,
(amount in thousands)	2016			2015
Cash provided by/(used in):
Operations	$	415		$	4,346
Investing		(380	)		(826	)
Financing		—			—
Effect of exchange rate change in cash		(31	)		(1	)
	$	4		$	3,519

Operations

Cash provided by operating activities was approximately $415,000 for the three-month period ended March 31, 2016 compared to approximately $4.3 million in the prior year period. For the three-month period ended March 31, 2016, cash provided by operating activities primarily resulted from operating income from the gaming operations division partially offset by an operating loss from the gaming products division, an increase in the use of funds for working capital and expenses related to the development of the social casino gaming platform . For the three-month period ended March 31, 2015, cash provided by operating activities primarily resulted from operating income from both the gaming operations and gaming products divisions and a decrease in the use of funds for working capital. 

Investing

Cash used in investing activities was approximately $380,000 for the three-month period ended March 31, 2016 compared to approximately $826,000 in the same period of the prior year. The net decrease in cash used in investing activities was mainly a result of fewer purchases of equipment for the gaming products division and EGMs for the gaming operations division.

Financing

Cash used in financing activities was $NIL for the three-month periods ended March 31, 2016 and 2015.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

Our consolidated financial statements were prepared in conformity with accounting principles generally accepted in the United States. Accordingly, we are required to make estimates incorporating judgments and assumptions we believe are reasonable based on our historical experience, contract terms, observance of known trends in our Company and the industry as a whole, as well as information available from other outside sources. Our estimates affect amounts recorded in the financial statements and actual results may differ from initial estimates.

We consider the following accounting estimates to be the most critical to fully understanding and evaluating our reported financial results. They require us to make subjective or complex judgments about matters that are inherently uncertain or variable. Senior management has discussed the development, selection and disclosure of the following accounting estimates, particularly those considered most sensitive to changes from external factors, with the audit committee of our board of directors.

Allowance for Doubtful Accounts Receivable

As of March 31, 2016, we had net accounts receivable of approximately $1.1 million, representing 2.5% of total assets. We specifically analyze the collectability of each account based upon the age of the account, the customer’s financial condition, collection history and any other known information, and we provide specific allowances for aged account balances. Revenue is recognized on an accrual basis for customers with doubtful accounts receivable. Our allowance for doubtful accounts receivable was $NIL as of March 31, 2016 and December 31, 2015.

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Inventory

The determination of obsolete or excess inventory requires us to estimate the future demand for our products within specific time horizons, generally one year or less. If we experience a significant unexpected decrease in demand for our products or a higher occurrence of inventory obsolescence because of changes in technology or customer requirements, we could be required to increase our inventory provisions. Our inventory provision was approximately $89,000 and $14,000 for the three-month periods ended March 31, 2016 and 2015, respectively.

Gaming Equipment and Property and Equipment

As of March 31, 2016, we had gaming equipment and property and equipment of approximately $8.2 million, representing 18.5% of our total assets. We depreciate gaming equipment and property and equipment on the straight-line basis over their estimated useful lives. The estimated useful lives are based on the nature of the assets as well as current operating strategies and legal considerations such as contractual life. Future events, such as property expansions, property developments, trends in market demand, new competition, or technology obsolescence, could result in a change in the manner in which we use certain assets and require changes in the estimated useful lives of such assets.

For assets to be held and used, they are reviewed for impairment whenever indicators of impairment exist. If an indicator of impairment exists, we first group assets at the lowest level for which identifiable cash flows are largely independent of the cash flows of other assets and liabilities (the “asset group”). Secondly, we estimate the undiscounted future cash flows that are directly associated with and expected to arise from the use and eventual disposition of such asset group. If the undiscounted cash flows exceed the carrying value, no impairment is indicated. If the undiscounted cash flows do not exceed the carrying value, then an impairment is measured based on fair value compared to carrying value, with fair value typically based on a discounted cash flow model.

To estimate the undiscounted cash flows of an asset group, we consider potential cash flow scenarios based on management estimates given current conditions. Determining the recoverability of our asset groups is judgmental in nature and requires the use of significant estimates and assumptions, including estimated cash flows, growth rates and future market conditions, among others. Future changes to our estimates and assumptions based upon changes in macro-economic factors, regulatory environments, operating results or management’s intentions may result in future changes to the recoverability of our asset group.

Goodwill and Intangible Assets, including Casino Contracts

As of March 31, 2016, we had intangible assets, including goodwill and casino contracts of approximately $1.1 million, representing 2.4% of our total assets. Goodwill is not subject to amortization and is tested for impairment and recoverability annually or more frequently if events or circumstances indicate that the assets might be impaired. The impairment test consists of a comparison of its fair value with its carrying amount. If the carrying amount is not recoverable and exceeds its fair value, an impairment provision will be recognized in an amount equal to that excess. If its carrying amount does not exceed the fair value, no impairment is recognized.

Finite-lived intangible assets, including casino contracts are amortized on a straight-line basis over their estimated useful lives. The estimated useful lives are based on the nature of the assets as well as legal considerations such as contractual life. Future events, such as technology obsolescence could result in a change in the manner in which we use the assets and require a change in the estimated useful lives of such assets. Finite-lived intangible assets, including casino contracts are tested for impairment and recoverability when there are indicators of impairment. The impairment test consists of a comparison of its fair value with its carrying amount. If the carrying amount is not recoverable and exceeds its fair value, an impairment provision will be recognized in an amount equal to that excess. If its carrying amount does not exceed the fair value, no impairment is recognized.

As of March 31, 2016, we had casino contracts and a gaming operation agreement aggregating approximately $128,000, representing 12% of total intangible assets.

Stock-Based Compensation

We apply ASC 718, Compensation-Stock Compensation, to account for stock-based compensation. Under the fair value recognition provisions of ASC 718, we recognize stock-based compensation expenses for all service-based awards to employees and non-employee directors with graded vesting schedules on the straight-line basis over the requisite service period for the entire award. Estimates are revised if subsequent information indicates that forfeitures will differ from previous estimates, and the cumulative effect on compensation costs of a change in the estimated forfeitures is recognized in the period of the change.  For non-employee awards, we remeasure compensation costs each period until the service condition is complete and recognize compensation costs on the straight-line basis over the requisite service period.  Option valuation models require the input of highly subjective assumptions, and changes in the assumptions used can materially affect the fair value estimate. Judgment is required in estimating stock price volatility, forfeiture rates, expected dividends, and expected terms that options remain outstanding. For restricted stock awards with performance conditions, we evaluate if performance conditions are probable in each reporting period. The compensation expense of restricted awards is recognized ratably over the implicit service period if achieving performance conditions is probable. Initial accruals of compensation expense are based on the estimated number of shares for which requisite service is expected to be rendered.

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Stock-based compensation expenses totaled approximately $14,000 and $30,000 for the three-month periods ended March 31, 2016 and 2015, respectively, in the accompanying consolidated statements of comprehensive income.

Income Taxes

We are subject to income taxes in the U.S. (including federal and state) and several foreign jurisdictions in which we operate. We record income taxes under the asset and liability method, whereby deferred tax assets and liabilities are recognized based on the future tax consequences attributable to temporary differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases, and attributable to operating loss and tax credit carryforwards. Accounting standards regarding income taxes requires a reduction of the carrying amounts of deferred tax assets by a valuation allowance, if based on the available evidence, it is “more-likely-than-not” that such assets will not be realized. Accordingly, the need to establish valuation allowances for deferred tax assets is assessed at each reporting period based on a “more-likely-than-not” realization threshold. This assessment considers, among other matters, the nature, frequency and severity of current and cumulative losses, forecasts of future profitability, the duration of statutory carryforward periods, our experience with operating loss and tax credit carryforwards not expiring, and implementation of tax planning strategies.

We recorded a valuation allowance to reduce deferred tax assets to the amount that is believed more likely than not to be realized. Management will reassess the realization of deferred tax assets based on the applicable accounting standards for income taxes each reporting period and consider the scheduled reversal of deferred tax liabilities, sources of taxable income and tax planning strategies. To the extent that the financial results of these operations improve and it becomes “more-likely-than-not” that the deferred tax assets are realizable, we will be able to reduce the valuation allowance. For valuation allowance related to deferred tax assets generated prior to Quasi-Reorganization, which was effected on December 31, 2010, reductions in the valuation allowance will be recorded directly in equity.

Significant judgment is required in evaluating our tax positions and determining our provision for income taxes. During the ordinary course of business, there are many transactions for which the tax treatment is uncertain. Accounting standards regarding uncertainty in income taxes provides a two-step approach to recognizing and measuring uncertain tax positions. The first step is to evaluate the tax position for recognition by determining if the weight of available evidence indicates it is “more-likely-than-not” that the position will be sustained on audit, including resolution of related appeals or litigation processes, if any. The second step is to measure the tax benefit as the largest amount which is more than 50% likely, based solely on the technical merits, of being sustained on examinations. We consider many factors when evaluating and estimating our tax positions and tax benefits, which may require periodic adjustments and which may not accurately anticipate actual outcomes. We recognize interest and penalties, if any, related to unrecognized tax benefits in the provision of income taxes in the statements of comprehensive income.

Off-Balance Sheet Arrangements

We do not have any off-balance sheet financing arrangements.

Item 3. Quantitative and Qualitative Disclosures about Market Risk

Not applicable.

Item 4. Controls and Procedures

(a)   Evaluation of Disclosure Controls and Procedures.

Our management, with the participation of our chief executive officer and chief accounting officer, has evaluated the effectiveness of the design and operation of the Company’s disclosure controls and procedures pursuant to Rule 13a-15 of the Securities Exchange Act of 1934.  Based on this evaluation, management concluded that our disclosure controls and procedures were effective as of March 31, 2016.

(b)   Changes in Internal Control Over Financial Reporting.

There were no changes in our internal control over financial reporting that occurred during the three-month period ended March 31, 2016 that have materially affected, or are reasonably likely to materially affect, our internal controls over financial reporting.

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PART II — OTHER INFORMATION

Item 6. Exhibits

Exhibit No.	Description	Method of Filing
3.1	Certificate of Change filed with the Secretary of State of Nevada on November 24, 2015.	Filed electronically herewith
10.1	Management Services Agreement dated January 27, 2016 entered into between the Registrant and Melco Services Limited.	Incorporated by reference from the Registrant’s current report on Form 8-K filed on January 27, 2016
10.2	Lease of Machines Agreement dated February 29, 2016 between Elixir Gaming Technologies (Cambodia) Limited and NagaWorld Limited.	Incorporated by reference from the Registrant’s current report on Form 8-K filed on February 29, 2016
31.1	Certifications Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.	Filed electronically herewith
31.2	Certifications Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.	Filed electronically herewith
32.1	Certification of Principal Executive Officer and Principal Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. Section 1350).	Filed electronically herewith
101.INS	XBRL Instance Document	Filed electronically herewith
101.SCH	XBRL Taxonomy Extension Schema Document	Filed electronically herewith
101.CAL	XBRL Taxonomy Extension Calculation Linkbase Document	Filed electronically herewith
101.LAB	XBRL Taxonomy Extension Label Linkbase Document	Filed electronically herewith
101.PRE	XBRL Taxonomy Extension Presentation Linkbase Document	Filed electronically herewith
101.DEF	XBRL Taxonomy Extension Definition Linkbase Document	Filed electronically herewith

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SIGNATURES

In accordance with the requirements of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

		ENTERTAINMENT GAMING ASIA INC.
		(Registrant)
Date:	May 16, 2016	By:	/s/ Clarence Chung
			Clarence Chung
		Its:	President and Chief Executive Officer
Date:	May 16, 2016	By:	/s/ Traci L. Mangini
			Traci L. Mangini
		Its:	Interim Chief Financial Officer

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EX-3.1

Exhibit 3.1

 

 

EX-31.1

EXHIBIT 31.1

CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER

Section 302 Certification

I, Clarence Chung, certify that:

1) I have reviewed this quarterly report on Form 10-Q of Entertainment Gaming Asia Inc.;

2) Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3) Based on my knowledge, the financial statements and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4) The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures as of the end of the period covered by this report based on such evaluation; and

d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s fiscal quarter presented in this report that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5) The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial data information; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: May 16, 2016	By:	/s/ Clarence Chung
		Clarence Chung, President and Chief Executive Officer

EX-31.2

EXHIBIT 31.2

CERTIFICATION OF PRINCIPAL FINANCIAL AND ACCOUNTING OFFICER

Section 302 Certification

I, Traci L. Mangini, certify that:

1) I have reviewed this quarterly report on Form 10-Q of Entertainment Gaming Asia Inc.;

2) Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3) Based on my knowledge, the financial statements and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4) The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles

c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures as of the end of the period covered by this report based on such evaluation; and

d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s fiscal quarter presented in this report that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5) The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial data information; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: May 16, 2016	By:	/s/ Traci L. Mangini
		Traci L. Mangini, Interim Chief Financial Officer

EX-32.1

EXHIBIT 32.1

CERTIFICATION PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of Entertainment Gaming Asia Inc. (the “Company”) on Form 10-Q for the quarterly period ended March 31, 2016, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), we, Clarence Chung, President and Chief Executive Officer of the Company, and Traci L. Mangini, Interim Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

1. The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

2. The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company.

By:	/s/ Clarence Chung	Dated:	May 16, 2016
	Clarence Chung
Title:	President and Chief Executive Officer
By:	/s/ Traci L. Mangini	Dated:	May 16, 2016
	Traci L. Mangini
Title:	Interim Chief Financial Officer

This certification is made solely for the purposes of 18 U.S.C. Section 1350, subject to the knowledge standard contained therein, and not for any other purpose.

XML

Document And Entity Information - shares	3 Months Ended
	Mar. 31, 2016	May. 01, 2016
Document Information [Line Items]
Document Type	10-Q
Amendment Flag	false
Document Period End Date	Mar. 31, 2016
Document Fiscal Year Focus	2016
Document Fiscal Period Focus	Q1
Entity Registrant Name	Entertainment Gaming Asia Inc.
Entity Central Index Key	0001004673
Current Fiscal Year End Date	--12-31
Entity Filer Category	Non-accelerated Filer
Trading Symbol	EGT
Entity Common Stock, Shares Outstanding		14,464,220

XML

Consolidated Balance Sheets - USD ($) $ in Thousands	Mar. 31, 2016	Dec. 31, 2015
Current assets:
Cash and cash equivalents	$ 30,685	$ 30,681
Accounts receivable, net	1,084	724
Amounts due from related parties	2	257
Other receivables	63	78
Inventories	1,856	2,378
Prepaid expenses and other current assets	468	295
Contract amendment fees	0	18
Total current assets	34,158	34,431
Gaming equipment, net	2,583	2,985
Casino contracts	95	528
Property and equipment, net	5,589	5,919
Goodwill	340	332
Intangible assets, net	650	391
Deferred tax asset	280	274
Prepaids, deposits and other assets	434	425
Total assets	44,129	45,285
Current liabilities:
Accounts payable	900	288
Amounts due to related parties	48	239
Accrued expenses	1,843	1,755
Income tax payable	106	2
Deferred revenue	0	9
Customer deposits and other current liabilities	188	529
Total current liabilities	3,085	2,822
Other liabilities	892	880
Deferred tax liability	29	29
Total liabilities	$ 4,006	$ 3,731
Commitments and contingencies
Stockholders' equity:
Common stock, $.001 par value, 38,000,000 shares authorized; 14,464,220 shares issued and outstanding	$ 14	$ 14
Additional paid-in-capital	47,778	47,763
Accumulated other comprehensive income	738	709
Accumulated losses	(8,408)	(6,933)
Total EGT stockholders’ equity	40,122	41,553
Non-controlling interest	1	1
Total stockholders’ equity	40,123	41,554
Total liabilities and stockholders' equity	$ 44,129	$ 45,285

XML

Consolidated Balance Sheets [Parenthetical] - $ / shares	Mar. 31, 2016	Dec. 31, 2015
Common stock, par value (in dollars per share)	$ 0.001	$ 0.001
Common stock, shares authorized	38,000,000	38,000,000
Common stock, shares issued	14,464,220	14,464,220
Common stock, shares outstanding	14,464,220	14,464,220

XML

Consolidated Statements of Comprehensive Loss / Income - USD ($) shares in Thousands, $ in Thousands	3 Months Ended
	Mar. 31, 2016	Mar. 31, 2015
Revenues:
Gaming operations	$ 3,851	$ 4,010
Gaming products	1,305	4,272
Total revenues	5,156	8,282
Cost of gaming operations
Gaming property and equipment depreciation	482	819
Casino contract amortization	434	611
Other gaming related intangibles amortization	63	63
Other operating costs	1,396	822
Cost of gaming products	1,761	3,662
Selling, general and administrative expenses	1,960	1,612
Gain on disposition of assets	0	(5)
Research and development expenses	448	35
Depreciation and amortization	52	54
Total operating costs and expenses	6,596	7,673
(Loss)/income from operations	(1,440)	609
Other income/(expenses):
Interest expense and finance fees	0	(1)
Interest income	3	3
Foreign currency gains/(losses)	72	(30)
Other	9	9
Total other income/(expenses)	84	(19)
Loss/(income) before income tax	(1,356)	590
Income tax expenses	(119)	(20)
Net (loss)/income attributable to EGT stockholders	(1,475)	570
Other comprehensive income:
Foreign currency translation	29	1
Total other comprehensive income, net of tax	29	1
Comprehensive (loss)/income attributable to EGT stockholders	$ (1,446)	$ 571
Per share data (basic and diluted):
(Loss)/earnings	$ (0.1)	$ 0.04
Weighted average common shares outstanding:
Basic	14,460	14,450
Diluted	14,460	14,467

XML

Consolidated Statements of Cash Flows - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2016	Mar. 31, 2015
Cash flows provided by operating activities:
Net (loss)/income	$ (1,475)	$ 570
Adjustments to reconcile net (loss)/income to net cash provided by operating activities:
Foreign currency losses	17	7
Depreciation of gaming equipment and property and equipment	796	1,130
Amortization of casino contracts	434	611
Amortization of intangible assets	75	75
Amortization of contract amendment fees	18	27
Stock-based compensation expenses	14	30
Gain on disposition of assets	0	(5)
Changes in operating assets and liabilities:
Accounts receivable and other receivables	(335)	156
Inventories	523	(664)
Prepaid expenses and other current assets	(173)	786
Prepaids, deposits and other assets	(8)	172
Accounts payable	612	1,213
Amounts due from/to related parties	64	329
Accrued expenses and other liabilities	99	(59)
Income tax payable	104	5
Customer deposits and other current liabilities	(341)	(37)
Deferred revenue	(9)	0
Net cash provided by operating activities	415	4,346
Cash flows used in investing activities:
Purchases of property and equipment	(46)	(864)
Purchases of gaming machines and systems	0	(169)
Proceeds from sale of gaming equipment	0	7
Proceeds from sale of subsidiary related to discontinued operations	0	200
Development/purchase of intangibles	(334)	0
Net cash used in investing activities	(380)	(826)
Cash flows used in financing activities:
Net cash used in financing activities	0	0
Effect of exchange rate changes on cash	(31)	(1)
Increase in cash and cash equivalents	4	3,519
Cash and cash equivalents at beginning of period	30,681	17,301
Cash and cash equivalents at end of period	$ 30,685	$ 20,820

XML

Description of Business and Significant Accounting Policies

3 Months Ended

Mar. 31, 2016

Accounting Policies [Abstract]

Organization, Consolidation, Basis of Presentation, Business Description and Accounting Policies [Text Block]

Note 1. Description of Business and Significant Accounting Policies

The business activities of the Company entail: (i) the owning and leasing of electronic gaming machines (EGMs) placed in resorts, hotels and other venues in Cambodia and the Philippines on a fixed lease or revenue sharing basis with venue owners; (ii) the design, manufacture and distribution of gaming chips and plaques under our Dolphin brand and distribution of third-party gaming products to major casinos in Southeast Asia and Australia; and (iii) the development of a social casino gaming platform designed for the Pan-Asian market.

Basis of Presentation

These consolidated financial statements are prepared pursuant to generally accepted accounting principles in the United States for interim financial information and with the instructions to Form 10-Q and Rule 8-03 of Regulation S-X promulgated by the Securities and Exchange Commission (“SEC”) and reflect all adjustments, consisting of normal recurring adjustments and other adjustments, which management believes are necessary to fairly present the financial position, results of operations and cash flows of the Company, for the respective periods presented. The results of operations for an interim period are not necessarily indicative of the results that may be expected for any other interim period or the year as a whole. The accompanying unaudited consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto in the Company’s Annual Report on Form 10-K for the year ended December 31, 2015, filed with the SEC on March 30, 2016.

The Company effected a 1-for-4 reverse stock split of its common shares as of February 26, 2015. All historical share amounts and share price information presented in the financial statements and notes have been proportionally adjusted to reflect the impact of this reverse stock split, including but not limited to basic and diluted weighted-average shares issued and outstanding.

Principles of Consolidation

These consolidated financial statements include the accounts of Entertainment Gaming Asia Inc. and all its subsidiaries. All intercompany balances and transactions have been eliminated in consolidation.

Use of Estimates

The Company is required to make estimates, judgments and assumptions that it believes are reasonable based on its historical experience, contract terms, observance of known trends in the Company and the industry as a whole, and information available from other outside sources. These estimates affect the reported amounts of assets, liabilities, revenues and expenses and related disclosures of contingent assets and liabilities. On a regular basis, the Company evaluates its estimates, including those related to revenue recognition, product returns, long-lived assets, inventory obsolescence, stock-based compensation, income taxes, bad debts, warranty obligations, long-term contracts, contingencies and litigation. Actual results may differ from those estimates.

Cash and Cash Equivalents

All highly-liquid instruments with original maturities of three months or less are considered cash equivalents. The Company places its cash and temporary investments with financial institutions. As of March 31, 2016, the Company had deposits with financial institutions in excess of Federal Deposit Insurance Corporation (FDIC) insured limits by approximately $30.4 million.

 

Accounts Receivable and Allowance for Doubtful Accounts

Accounts receivable are stated at face value less any allowances for doubtful accounts. Allowances for doubtful accounts are maintained at levels determined by Company management to adequately provide for uncollectible amounts. In determining the estimated uncollectable amounts, the Company evaluates a combination of factors, including, but not limited to, activity in the related market, financial condition of customers, specific customer collection experience and history of write-offs and collections. Interest income is imposed on overdue accounts receivable after the Company evaluates a combination of factors, including but not limited to, customer collection experiences, customer relationship and contract terms. Accounts receivable balances are written off after all collection efforts have been exhausted.

Inventories

Inventories are stated at the lower of cost, determined using the first-in, first-out method, or market. Cost elements included in work-in-process and finished goods include raw materials, direct labor and manufacturing overheads. Inventories included a lower of cost or market (LCM) write-down of approximately $89,000 and $14,000 for the three-month periods ended March 31, 2016 and 2015, respectively.

Long-Lived Assets

The Company accounts for impairment of long-lived assets in accordance with Financial Accounting Standards Board (FASB) Accounting Standards Codification (ASC) 360,  Property, Plant and Equipment. Long-lived assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. In such instances, the Company estimates the undiscounted future cash flows that result from the use of the asset and its ultimate disposition. If the sum of the undiscounted cash flows is less than the carrying value, the Company recognizes an impairment loss, measured as the amount by which the carrying value exceeds the fair value of the asset, determined principally using discounted cash flows. There were no impairment charges for long-lived assets for the three-month periods ended March 31, 2016 and 2015.

Prepaids, Deposits and Other Assets

Prepaids, deposits and other assets consist primarily of prepaid lease, prepaid value-added taxes in foreign countries, prepayments to suppliers, rental and utilities and other deposits.

Gaming Equipment

Gaming equipment consists primarily of EGMs and systems. Gaming equipment is stated at cost. The Company depreciates new EGMs and systems over a five-year useful life and depreciates refurbished EGMs and systems over a three-year useful life once placed in service. Depreciation of gaming equipment of approximately $425,000 and $660,000 was included in cost of gaming operations in the consolidated statements of comprehensive income for the three-month periods ended March 31, 2016 and 2015, respectively.

Property and Equipment

Property and equipment are stated at cost. Depreciation is computed using the straight-line method over the useful lives of the assets currently estimated to be three to twenty years, which in the case of leasehold improvements, is limited to the life of the lease and throughout the renewal period as long as renewal is reasonably assured.

The Company capitalizes certain direct and incremental costs related to the design and construction, project payroll, and applicable portions of interest incurred for potential projects in property and equipment.

Depreciation of property and equipment of approximately $57,000 and $159,000 was included in the cost of gaming operations in the consolidated statements of comprehensive income for the three-month periods ended March 31, 2016 and 2015, respectively.

Depreciation of property and equipment of approximately $268,000 and $256,000 was included in cost of gaming products in the consolidated statements of comprehensive income for the three-month periods ended March 31, 2016 and 2015, respectively.

Goodwill and Intangible Assets, Including Casino Contracts

Intangible assets consist of patents, trademarks, technical know-how, gaming operation agreement, casino contracts and goodwill. Intangible assets other than goodwill are amortized on the straight-line basis over the period of time the asset is expected to contribute directly or indirectly to future cash flows, which ranges from four to ten years. The straight-line amortization method is utilized because the Company believes there is no more reliably determinable method of reflecting the pattern for which the economic benefits of the intangible assets are consumed or otherwise used.

The Company capitalizes certain costs relating to software developed to solely meet the Company’s internal requirements and for which there are no substantive plans to market the software. These costs mainly include payroll and payroll-related costs for employees who are directly associated with and who devote time to the internal-use software projects during the application development stage until the software is substantially complete and ready for its intended use. The Company also capitalizes certain costs related to the development of the social gaming application for marketing purposes. These costs are capitalized once technological feasibility has been established. Costs incurred prior to the criteria met for capitalization are expensed to research and development expenses as incurred. Management has committed the resources of developing social gaming application, and it is probable that the social gaming application will be completed and the software will be used as intended. Such capitalized costs are amortized on a straight-line basis over the estimated useful life of the related assets.

Amortization expenses related to casino contracts were approximately $434,000 and $611,000 for the three-month periods ended March 31, 2016 and 2015, respectively. Amortization expenses related to other gaming related intangibles were approximately $63,000 for the three-month periods ended March 31, 2016 and 2015. The amounts were accounted for as cost of gaming operations in the consolidated statements of comprehensive income. Amortization expenses related to technical know-how were approximately $6,000 for the three-month periods ended March 31, 2016 and 2015. The amounts were accounted for as cost of gaming products in the consolidated statements of comprehensive income. Amortization expenses related to patents and trademarks were approximately $6,000 for the three-month periods ended March 31, 2016 and 2015. The amounts were accounted for as selling, general and administrative expenses in the consolidated statements of comprehensive income.

The Company measures and tests finite-lived intangibles for impairment when there are indicators of impairment in accordance with ASC 360-10-05, Property, Plant and Equipment.

The Company measures and tests goodwill for impairment, at least annually in accordance with ASC 350-10-05, Intangibles — Goodwill and Other.

Impairment testing for goodwill and other intangibles requires judgment, including the identification of reporting units, allocation of related goodwill, assignment of corporate shared assets and liabilities to reporting units, estimated future cash flows and determinations of fair values. While the Company believes its estimates of future revenues and future cash flows are reasonable, different assumptions could materially affect the assessment of useful lives, recoverability and fair values. No impairment charges relating to intangible assets were recorded for the three-month periods ended March 31, 2016 and 2015, respectively.

Litigation and Other Contingencies

In the performance of its ordinary course of business operations, the Company is subject to risks of various legal matters, litigation and claims of various types. The Company has regular litigation reviews, including updates from corporate and outside counsel, to assess the need for accounting recognition or disclosure of these contingencies. See Note 15.

ASC 450, Contingencies, requires that liabilities for contingencies be recorded when it is probable that a liability has been incurred and that the amount can be reasonably estimated. Significant management judgment is required related to contingent liabilities and the outcome of litigation because both are difficult to predict. For a contingency for which an unfavorable outcome is reasonably possible and which is significant, the Company discloses the nature of the contingency and, when feasible, an estimate of the possible loss.

Revenue Recognition

The Company recognizes revenue when all of the following have been satisfied:

· Persuasive evidence of an arrangement exists;

· The price to the customer is fixed and determinable;

· Delivery has occurred and any acceptance terms have been fulfilled;

· No significant contractual obligations remain; and

· Collection is reasonably assured.

Gaming Revenue and Promotional Allowances

The Company earns recurring gaming revenue from its gaming operations.

For gaming operations, the Company earns recurring revenue by providing customers with EGMs and casino management systems which track game performance and provide statistics on installed EGMs owned by the Company and leased to venue owners. Revenues are recognized on the contractual terms of the EGM agreements between the Company and the venue owners and are based on either a fixed lease fee or the Company’s share of net winnings and reimbursement of expenses, net of customer incentives and commitment fees.

Revenues are recognized as earned unless collection is not reasonably assured, in which case revenues are recognized when the payment is received. All slot operations revenues were recognized as earned during the three-month periods ended March 31, 2016 and 2015, respectively.

Commitment fees paid to the venue operators relating to contract amendments which are not recoverable from daily net win are capitalized as assets and amortized as a reduction of revenue over the term of the amended contracts. The Company had commitment fee balances related to contract amendments of $NIL and approximately $18,000 as of March 31, 2016 and December 31, 2015, respectively.

Gaming Products Sales

The Company recognizes revenue from the sale of its gaming products and accessories to end users upon shipment against customer contracts or purchase orders. In accordance with the criteria of ASC 605-45, Reporting Revenue Gross as a Principal versus Net as an Agent, the Company recognizes gross revenue when it acts as a principal, has discretion to choose suppliers and establish selling price, bears credit risk and provides the products or services required in the transaction. If the above criteria are not met, in which the supplier is the primary obligor in the arrangement and bears the general inventory risk, the Company recognizes revenue net of related costs. The Company also recognizes revenue for the maintenance services of gaming products on the straight line basis over the contract term in accordance with ASC 605, Revenue Recognition.

Stock-Based Compensation

Under the fair value recognition provisions of ASC 718, Compensation-Stock Compensation, the Company recognizes stock-based compensation expenses for all service-based awards to employees and non-employee directors with graded vesting schedules on the straight-line basis over the requisite service period for the entire award. Estimates are revised if subsequent information indicates that forfeitures will differ from previous estimates, and the cumulative effect on compensation cost of a change in the estimated forfeitures is recognized in the period of the change. For non-employee awards, the Company remeasures compensation cost each period until the service condition is complete and recognizes compensation cost on the straight-line basis over the requisite service period. Option valuation models require the input of highly subjective assumptions, and changes in the assumptions used can materially affect the fair value estimates. Judgment is required in estimating stock price volatility, forfeiture rates, expected dividends, and expected terms that options remain outstanding. For restricted stock awards with performance conditions, the Company evaluates if performance conditions are probable in each reporting period. The compensation expense of restricted awards is recognized ratably over the implicit service period if achieving performance conditions is probable. Cumulative catch-up adjustments are required in the event of changes in assessment of probability. See Note 12 for additional information relating to stock-based compensation assumptions. Stock-based compensation expenses totaled approximately $14,000 and $30,000 for the three-month periods ended March 31, 2016 and 2015, respectively.

Research and Development

Research and development expenses are expensed as incurred. Employee-related costs associated with research and development and certain costs associated with the development of the social casino platform are included in research and development expenses.  Research and development expenses were approximately $448,000 and $35,000 for the three-month periods ended March 31, 2016 and 2015, respectively.

 

Leases

Leases are classified at the inception date as either a capital lease or an operating lease. A lease is a capital lease if any of the following conditions exists:

· Ownership is transferred to the lessee by the end of the lease term;

· There is a bargain purchase option;

· The lease term is at least 75% of the property’s estimated remaining economic life; or

· The present value of the minimum lease payments at the beginning of the lease term is 90% or more of the fair value of the leased property to the lessor at the inception date.

A capital lease is accounted for as if there was an acquisition of an asset and an incurrence of an obligation at the inception of the lease. All other leases are accounted for as operating leases wherein rental payments are expensed as incurred. The Company had no capital leases as of March 31, 2016 and December 31, 2015.

Income Taxes

The Company is subject to income taxes in the United States (including federal and state) and several foreign jurisdictions in which it operates. Deferred income tax balances reflect the effects of temporary differences between the carrying amounts of assets and liabilities and their tax basis and are stated at enacted tax rates expected to be in effect when taxes are actually paid or recovered. ASC 740, Income Taxes, requires that deferred tax assets be evaluated for future realization and reduced by a valuation allowance to the extent the Company believes a portion will not be realized. The Company considers many factors when assessing the likelihood of future realization of its deferred tax assets, including its recent cumulative earnings experience and expectations of future taxable income by taxing jurisdiction, the carry-forward periods available to the Company for tax reporting purposes, and other relevant factors.

The Company accounts for uncertain tax positions in accordance with ASC 740, which contains a two-step approach to recognizing and measuring uncertain tax positions. The first step is to evaluate the tax position for recognition by determining if the weight of available evidence indicates it is more likely than not that the position will be sustained on audit, including resolution of related appeals or litigation processes, if any. The second step is to measure the tax benefit as the largest amount which is more than 50% likely to be realized upon ultimate settlement. The Company considers many factors when evaluating and estimating its tax positions and tax benefits, which may require periodic adjustments and which may not accurately anticipate actual outcomes. The Company recognizes interest and penalties, if any, related to unrecognized tax benefits in the provision for income taxes in the statements of comprehensive income.

As of that date, the Company’s deferred taxes were reported in conformity with applicable income tax accounting standards described above, net of applicable valuation allowances. Deferred tax assets and liabilities were recognized for differences between the assigned values and the tax basis of the recognized assets and liabilities with corresponding valuation allowances as appropriate.

(Loss)/Earnings per Share

Basic (loss)/earnings per share are computed by dividing the reported net (loss)/earnings by the weighted average number of shares of common stock outstanding during the period. Diluted earnings per share is computed by dividing the net income by the weighted average number of shares of common stock and shares issuable from stock options and restricted shares during the period. The computation of diluted earnings per share excludes the impact of stock options and restricted shares that are anti-dilutive. There was no difference in diluted loss per share from basic loss per share for three-month period ended March 31, 2016 as the assumed exercise of common stock equivalents would have an anti-dilutive effect due to losses.

Foreign Currency Translations and Transactions

The functional currency of the Company’s international subsidiaries, except for its operations in Cambodia whose functional currency is also U.S. dollars, is generally the local currency. For these subsidiaries, the Company translates the assets and liabilities at exchange rates in effect at the balance sheet date and income and expense accounts at average exchange rates during the year. Resulting currency translation adjustments are recorded directly to accumulated other comprehensive income within stockholders’ equity. Gains and losses resulting from transactions in non-functional currencies are recorded in the consolidated statements of comprehensive income.

Below is a summary of closing exchange rates as of March 31, 2016 and December 31, 2015 and average exchange rates for the three-month periods ended March 31, 2016 and 2015.

(US$1 to foreign currency)	March 31, 2016		December 31, 2015
Australian dollar		1.30		1.37
Hong Kong dollar		7.75		7.75
Philippine peso		46.11		47.17
Thai baht		35.18		36.07

	Three-Month Periods Ended March 31,
(US$1 to foreign currency)	2016		2015
Australian dollar		1.33		1.27
Hong Kong dollar		7.76		7.76
Philippine peso		46.72		44.37
Thai baht		35.20		32.53

Fair Value Measurement

Fair value is defined under ASC 820, Fair Value Measurements and Disclosures, as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. Valuation techniques used to measure fair value under ASC 820 must maximize the use of observable inputs and minimize the use of unobservable inputs. The standard establishes a fair value hierarchy based on three levels of input, of which the first two are considered observable and the last unobservable.

· Level 1 — Quoted prices in active markets for identical assets or liabilities. These are typically obtained from real-time quotes for transactions in active exchange markets involving identical assets.

· Level 2 — Input, other than quoted prices included within Level 1, which are observable for the asset or liability, either directly or indirectly. These are typically obtained from readily-available pricing sources for comparable instruments.

· Level 3 — Unobservable input, where there is little or no market activity for the asset or liability. This input reflects the reporting entity’s own assumptions of the data that participants would use in pricing the asset or liability, based on the best information available under the circumstances.

As of March 31, 2016, the fair values of financial assets and liabilities approximate carrying values due to the short maturity of these items.

Defined Benefit Pension Plan

The Company provides pension benefits to all regular full-time employees in the Philippines through a defined benefit plan. A defined benefit plan is a pension plan that defines an amount of pension benefit that an employee will receive on retirement, usually dependent on one or more factors such as age, years of service and salary.

The defined benefit obligation is calculated annually by independent actuaries using the projected unit credit method. The present value of the defined benefit obligation is determined by discounting the estimated future cash outflows using interest rates of high quality corporate bonds that are denominated in the currency in which the benefits will be paid and that have terms to maturity approximating to the terms of the related pension liability.

The accounting guidance related to employers’ accounting for defined benefit pension plan requires recognition in the balance sheet of the present value of the defined benefit obligation at the reporting date, together with adjustments for unrecognized actuarial gains or losses and past service costs or credits in other comprehensive income.

There were no adjustments for unrecognized actuarial gains or losses and past service costs or credits to equity through other comprehensive income for the three-month periods ended March 31, 2016 and 2015.

Asset Retirement Obligations  

Asset retirement obligations are legal obligations associated with the retirement of long-lived assets resulting from the acquisition, construction, development and/or normal use of the underlying assets. Recognition of a liability for an asset retirement obligation is required in the period in which it is incurred at its estimated fair value. The associated asset retirement costs are capitalized as part of the carrying amount of the underlying asset and depreciated over the estimated useful life of the asset. The liability is accreted through charges to operating expenses. If the asset retirement obligation is settled for other than the carrying amount of the liability, the Company recognizes a gain or loss on settlement.

The Company records all asset retirement obligations for which we have legal obligations to remove all installation works and reinstate the manufacturing facilities to its original state at estimated fair value. For the three-month period ended March 31, 2016 and 2015, the Company recognized approximately $4,000 as asset retirement obligation operating costs related to accretion of the liabilities and depreciation of the assets.

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Segments

3 Months Ended

Mar. 31, 2016

Segment Reporting [Abstract]

Segment Reporting Disclosure [Text Block]

Note 2. Segments

During the reported periods, the Company conducted business under three operating segments: (i) gaming operations, which include leasing of its owned EGMs on a fixed or revenue-sharing basis; (ii) gaming products, which consist of the design, manufacture and distribution of gaming chips and plaques as well as the distribution of third-party gaming products; and (iii) the development of a social casino gaming platform. On May 11, 2016, the Company sold substantially all of the assets of the gaming products operations (Note 20).

 

The following table presents the financial information for each of the Company’s operating segments.

	Three-Month Periods Ended March 31,
(amounts in thousands)	2016		2015
	(Unaudited)		(Unaudited)
Revenues:
Gaming operations	$	3,851	$	4,010
Gaming products		1,305		4,272
Total revenues	$	5,156	$	8,282
Operating (loss)/income:
Gaming operations	$	1,476	$	1,700
Gaming products		(506)		575
Social casino gaming platform		(398)		—
Corporate and other operating costs and expenses		(2,012)		(1,666)
Total operating (loss)/income	$	(1,440)	$	609
Depreciation and amortization:
Gaming operations	$	987	$	1,504
Gaming products		295		282
Social casino gaming platform		4		—
Corporate		20		24
Total depreciation and amortization	$	1,306	$	1,810

Geographic segment revenues for the three-month periods ended March 31, 2016 and 2015 consisted of the following:

	Three-Month Periods Ended March 31,
(amounts in thousands)	2016		2015
	(Unaudited)		(Unaudited)
Cambodia	$	3,246	$	3,324
Macau		52		561
Philippines		1,738		3,644
Australia		92		753
Other		28		—
Total	$	5,156	$	8,282

For the three-month periods ended March 31, 2016 and 2015, in the gaming operations segment, the largest customer represented 62% and 73%, respectively, of total gaming operations revenue. For the three-month periods ended March 31, 2016 and 2015, in the gaming products segment, the largest customer represented 37% and 68%, respectively, of total gaming products sales.

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Inventories

3 Months Ended

Mar. 31, 2016

Inventory Disclosure [Abstract]

Inventory Disclosure [Text Block]

Note 3. Inventories

Inventories consisted of the following:

(amounts in thousands)	March 31, 2016		December 31, 2015
	(Unaudited)
Raw materials	$	1,567	$	1,742
Work-in-process		157		80
Finished goods (1)		—		443
Spare parts		132		113
Total	$	1,856	$	2,378

(1) Finished goods decreased from December 31, 2015 to March 31, 2016 due to an order for the gaming products division delivered in the three-month period ended March 31, 2016.

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Prepaid Expenses and Other Current Assets

3 Months Ended

Mar. 31, 2016

Prepaid Expense and Other Assets, Current [Abstract]

Deferred Costs Capitalized Prepaid And Other Assets [Text Block]

Note 4. Prepaid Expenses and Other Current Assets

Prepaid expenses and other current assets consisted of the following:

(amounts in thousands)	March 31, 2016		December 31, 2015
	(Unaudited)
Prepayments to suppliers	$	465	$	292
Prepaid leases		3		3
Total	$	468	$	295

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Receivables

3 Months Ended

Mar. 31, 2016

Receivables [Abstract]

Loans, Notes, Trade and Other Receivables Disclosure [Text Block]

Note 5. Receivables

Accounts and other receivables consisted of the following:

(amounts in thousands)	March 31, 2016		December 31, 2015
	(Unaudited)
Trade receivables	$	1,084	$	724
Other receivables		63		78
		1,147		802
Less: allowance for doubtful accounts		—		—
Net	$	1,147	$	802

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Gaming Equipment

3 Months Ended

Mar. 31, 2016

Electronic Gaming Machines Egms and Systems And Other Gaming Equipment Disclosure [Abstract]

Electronic Gaming Machines EGMs and Systems [Text Block]

Note 6. Gaming Equipment

Gaming equipment is stated at cost. The major categories of gaming equipment and accumulated depreciation consisted of the following:

(amounts in thousands)	Useful Life (years)	March 31, 2016		December 31, 2015
		(Unaudited)
EGMs	3-5	$	16,312	$	16,215
Systems	5		1,296		1,335
			17,608		17,550
Less: accumulated depreciation			(15,025)		(14,565)
Net		$	2,583	$	2,985

Depreciation expense of approximately $425,000 and $660,000 was included in cost of gaming operations in the consolidated statements of comprehensive income for the three-month periods ended March 31, 2016 and 2015, respectively.

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Property and Equipment

3 Months Ended

Mar. 31, 2016

Property, Plant and Equipment [Abstract]

Property And Equipment Excluding Gaming Equipment And Systems Disclosure [Text Block]

Note 7. Property and Equipment

Property and equipment are stated at cost. The major categories of property and equipment and accumulated depreciation consisted of the following:

(amounts in thousands)	Useful Life (years)	March 31, 2016		December 31, 2015
		(Unaudited)
Equipment, vehicles, furniture and fixtures	3-10	$	6,338	$	6,290
Land and building	5		1,506		1,506
Leasehold improvements	1-6		1,400		1,400
			9,244		9,196
Less: accumulated depreciation			(3,655)		(3,277)
Net		$	5,589	$	5,919

Depreciation expense of property and equipment of approximately $57,000 and $159,000 was included in cost of gaming operations in the consolidated statements of comprehensive income for the three-month periods ended March 31, 2016 and 2015, respectively.

Depreciation expense of property and equipment of approximately $268,000 and $256,000 was included in cost of gaming products in the consolidated statement of comprehensive income for the three-month periods ended March 31, 2016 and 2015, respectively.

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Goodwill and Intangible Assets, including Casino Contracts

3 Months Ended

Mar. 31, 2016

Goodwill and Intangible Assets Disclosure [Abstract]

Goodwill and Intangible Assets Disclosure [Text Block]

Note 8. Goodwill and Intangible Assets, including Casino Contracts

Goodwill and intangible assets are stated at cost. The major categories of goodwill and intangible assets and accumulated amortization consisted of the following:

(amounts in thousands)	Useful Life (years)	March 31, 2016		December 31, 2015
		(Unaudited)
Gaming operation agreement	4-5	$	1,166	$	1,166
Less: accumulated amortization			(1,133)		(1,070)
			33		96
Goodwill	N/A		340		332
Patents	5-6		114		114
Less: accumulated amortization			(109)		(104)
			5		10
Trademarks	5-9		26		26
Less: accumulated amortization			(16)		(15)
			10		11
Technical know-how	10		261		261
Less: accumulated amortization			(100)		(94)
			161		167
Casino contracts	5-6		12,684		12,637
Less: accumulated amortization			(12,589)		(12,109)
			95		528
Internal-use software			441		107
Net carrying value		$	1,085	$	1,251

Amortization expenses for finite-lived intangible assets were approximately $509,000 and $686,000 for the three-month periods ended March 31, 2016 and 2015, respectively.

Goodwill movements during the periods consisted of the following:

(amounts in thousands)	2016		2015
	(Unaudited)
Balance as of January 1	$	332	$	351
Foreign currency translation adjustment		8		(19)
Balance as of March 31/December 31	$	340	$	332

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Prepaids, Deposits and Other Assets

3 Months Ended

Mar. 31, 2016

Prepaid Deposits and Other Assets Disclosure [Abstract]

Prepaid Deposits and Other Assets Noncurrent Disclosure [Text Block]

Note 9. Prepaids, Deposits and Other Assets

Prepaids, deposits and other assets consisted of the following:

(amounts in thousands)	March 31, 2016		December 31, 2015
	(Unaudited)
Prepaid taxes	$	17	$	—
Prepayments to suppliers		27		34
Rentals, utilities and other deposits		390		391
Total	$	434	$	425

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Accrued Expenses

3 Months Ended

Mar. 31, 2016

Payables and Accruals [Abstract]

Accrued Expenses Disclosure [Text Block]

Note 10. Accrued Expenses

Accrued expenses consisted of the following:

(amounts in thousands)	March 31, 2016		December 31, 2015
	(Unaudited)
Payroll and related costs	$	629	$	626
Professional fees		219		339
Withholding tax expenses		630		549
Other tax expenses		44		44
Other expenses		321		197
Total	$	1,843	$	1,755

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Other Liabilities

3 Months Ended

Mar. 31, 2016

Other Liabilities [Abstract]

Other Liabilities Disclosure [Text Block]

Note 11. Other Liabilities

Other liabilities consisted of the following:

(amounts in thousands)	March 31, 2016		December 31, 2015
	(Unaudited)
Other tax liabilities	$	769	$	754
Other		123		126
Total	$	892	$	880

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Stock-Based Compensation

3 Months Ended

Mar. 31, 2016

Disclosure Of Compensation Related Costs, Share-Based Payments [Abstract]

Disclosure of Compensation Related Costs, Share-based Payments [Text Block]

Note 12. Stock-Based Compensation

The Company effected a 1-for-4 reverse stock split of its common shares as of February 26, 2015. All historical share amounts and share price information presented below have been proportionally adjusted to reflect the impact of this reverse split.

At the annual shareholders meeting held on September 8, 2008, a new stock option plan, the 2008 Stock Incentive Plan, was voted on and became effective on January 1, 2009, which replaced two previous plans, the Amended and Restated 1999 Stock Option Plan and the Amended and Restated 1999 Directors’ Stock Option Plan, thereby terminating both of the previous plans on December 31, 2008.

The 2008 Plan allows for incentive awards to eligible recipients consisting of:

⋅	Options to purchase shares of common stock that qualify as incentive stock options within the meaning of the Internal Revenue Code;
⋅	Non-statutory stock options that do not qualify as incentive options;
⋅	Restricted stock awards; and
⋅	Performance stock awards which are subject to future achievement of performance criteria or free of any performance or vesting.

The maximum number of shares reserved for issuance under the 2008 Plan is 1,250,000 shares. The exercise price of options granted under the 2008 Plan shall not be less than 100% of the fair market value of one share of common stock on the date of grant, unless the participant owns more than 10% of the total combined voting power of all classes of stock of the Company or any parent or subsidiary corporation of the Company, in which case the exercise price shall then be 110% of the fair market value. The outstanding stock options generally vest over three years and have ten-year contractual terms.

In the three-month period ended March 31, 2016, there were no grants of stock options or restricted stock awards and there were no exercises of outstanding stock options.

Prior to January 1, 2009, the Company had two stock options plans, the Amended and Restated 1999 Stock Option Plan and the Amended and Restated 1999 Directors’ Stock Option Plan, through which 937,500 shares and 18,750 shares were authorized, respectively. Both of these previous plans expired on December 31, 2008. However, options granted under these previous plans that were outstanding as of the date of termination remain outstanding and subject to termination according to their terms.

As of March 31, 2016, stock options for the purchase of 226,252 shares and 3,751 shares of common stock, respectively, were outstanding in relation to the Amended and Restated 1999 Stock Option Plan and the Amended and Restated 1999 Director’s Stock Option Plan.

As of March 31, 2016, stock options for the purchase of 536,848 shares of common stock were outstanding under the 2008 Plan.

As of March 31, 2016, stock options for the purchase of 755,601 shares of common stock were exercisable with a weighted average exercise price of $7.91, a weighted average fair value of $3.35 and an aggregate intrinsic value of approximately $38,000. The total fair value of shares vested during the three-month period ended March 31, 2016 was approximately $62,000. As of March 31, 2016, an aggregate of 11,250 options granted under all plans was subject to vesting with a total compensation cost of approximately $6,000. The amount is expected to be recognized over 0.76 years.

A summary of all current and expired plans as of March 31, 2016 and changes during the period then ended are presented in the following table:

Options

					Weighted Average
					Remaining Contractual		Aggregate
	Number of		Weighted Average		Life		Intrinsic Value
	Options		Exercise Price		(in years)		(in thousands)
Outstanding as of December 31, 2015		767,476	$	7.90		4.28	$	34
Granted		—		—		—		—
Exercised		—		—		—		—
Forfeited or expired		(625)		48.48		—		—
Outstanding as of March 31, 2016		766,851		7.86		4.03		38
Exercisable as of March 31, 2016		755,601	$	7.91		3.98	$	38

Restricted Stock

					Weighted Average
			Weighted Average		Remaining
			Fair Value at		Contractual Life
	Number of shares		Grant Date		(in years)
Unvested balance as of December 31, 2015		3,750	$	4.84		0.41
Granted		—		—		—
Vested		—		—		—
Unvested balance as of March 31, 2016		3,750	$	4.84		0.16

Recognition and Measurement

The fair value of each stock-based award to employees and non-employee directors is estimated on the measurement date which generally is the grant date while awards to non-employees and restricted common stock with performance criteria are measured at the earlier of the performance commitment date or the service completion date using the Black-Scholes-Merton option-pricing model. Option valuation models require the input of highly subjective assumptions, and changes in assumptions used can materially affect the fair value estimates. The Company estimates the expected life of the award by taking into consideration the vesting period, contractual term, historical exercise data, expected volatility, blackout periods and other relevant factors. Volatility is estimated by evaluating the Company’s historical volatility data. The risk-free interest rate on the measurement date is based on U.S. Treasury constant maturity rates for a period approximating the expected life of the award. The Company historically has not paid dividends, nor does it expect to pay dividends in the foreseeable future and, therefore, the expected dividend rate is zero.

The following table summarizes the range of assumptions utilized in the Black-Scholes-Merton option-pricing model for the valuation of stock options granted during the three-month periods ended March 31, 2016 and 2015.

	Three-Month Periods Ended March 31,
	2016						2015
Range of values:	Low			High			Low			High
Expected volatility		81.78	%		87.26	%		78.74	%		80.91	%
Expected dividends		—			—			—			—
Expected term (in years)		4.78			7.11			4.78			8.11
Risk free rate		1.17	%		1.69	%		1.13	%		1.80	%

For stock-based compensation accrued to employees and non-employee directors, the Company recognizes stock-based compensation expenses for all service-based awards with graded vesting schedules on the straight-line basis over the requisite service period for the entire award. Initial accruals of compensation expense are based on the estimated number of shares for which requisite service is expected to be rendered. Estimates are revised if subsequent information indicates that forfeitures will differ from previous estimates, and the cumulative effect on compensation cost of a change in the estimated forfeitures is recognized in the period of the change.

For non-employee awards, the Company remeasures compensation cost each period until the service condition is complete and recognizes compensation cost on the straight-line basis over the requisite service period.

The Company estimates forfeitures and recognizes compensation cost only for those awards expected to vest assuming all awards would vest and reverse recognized compensation cost for forfeited awards when the awards are actually forfeited.

For awards with service conditions and graded vesting that were granted prior to the adoption of ASC 718, the Company estimates the requisite service period and the number of shares expected to vest, and recognizes compensation expense for each tranche on the straight-line basis over the estimated requisite service period.

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Related Party Transactions

3 Months Ended

Mar. 31, 2016

Related Party Transactions [Abstract]

Related Party Transactions Disclosure [Text Block]

Note 13. Related Party Transactions

Significant revenues, purchases and expenses arising from transactions with related parties consisted of the following:

	Three-Month Periods Ended March 31,
(amounts in thousands)	2016		2015
	(Unaudited)		(Unaudited)
Related party transactions provided to:
Melco Crown (Macau) Limited
Sales of gaming products	$	—	$	349
MCE Leisure (Philippines) Corporation
Sales of gaming products	$	159	$	2,892
Melco Crown Entertainment Limited
Sales of gaming products	$	—	$	212
Related party transactions provided by:
Melco Services Limited
Technical services	$	1	$	1
Services agreement	$	63	$	4
Golden Future (Management Services) Limited
Management services	$	63	$	61

Melco Services Limited is a wholly-owned subsidiary of Melco International Development Limited, which owns 64.8% of Entertainment Gaming Asia Inc.

Melco International Development Limited owns 34.3% of Melco Crown Entertainment Limited, which owns 90% of Melco Crown (Macau) Limited and 72.6% of MCE Leisure (Philippines) Corporation.

Golden Future (Management Services) Limited is a wholly-owned subsidiary of Melco Crown (Macau) Limited.

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Income Taxes

3 Months Ended

Mar. 31, 2016

Income Tax Disclosure [Abstract]

Income Tax Disclosure [Text Block]

Note 14. Income Taxes

The Company recorded income tax expenses of $119,000 and $20,000 for the three-month periods ended March 31, 2016 and 2015, respectively. The Company’s effective income tax rates were (8.8%) and 3.4% for the three-month periods ended March 31, 2016 and 2015, respectively. The EGT Cambodia entity is income tax exempt and only pays a fixed monthly tax rather than a tax on income. The change in effective tax rate was mainly due to an increase in the consolidated pre-tax loss.

The fixed obligation tax arrangement is subject to annual renewal and negotiation. The Company is working to renew the fixed obligation tax arrangement for EGT Cambodia for 2016.

The Company is subject to income tax examinations by tax authorities in jurisdictions in which it operates. The Company’s 2010 to 2015 United Status income tax returns remain open to examination by the Internal Revenue Service. The Company’s 2009 to 2013 Australian income tax returns remain open to examination by the Australian Taxation Office. The Company’s 2015 Cambodian income tax returns remain open to examination by the General Department of Taxation. The Company’s 2013 to 2015 Philippines income tax returns remain open to examination by the Philippines Bureau of Internal Revenue. The Company’s 2009 to 2015 Hong Kong income tax returns remain open to examination by the Hong Kong Inland Revenue Department.

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Commitments and Contingencies

3 Months Ended

Mar. 31, 2016

Commitments and Contingencies Disclosure [Abstract]

Commitments and Contingencies Disclosure [Text Block]

Note 15. Commitments and Contingencies

Legal Matters

Gaming Partners International Corporation Litigation

On December 21, 2015, Gaming Partners International Corporation, or GPIC, commenced a legal action in the High Court of the Hong Kong Special Administrative Region against Dolphin Products Limited, or Dolphin, our wholly-owned subsidiary.

On January 6, 2016, GPIC filed its Statement of Claim and set out its causes of action, which included inducing a breach of contract, breach of confidence, unlawful interference with trade or business and conspiracy to injure by unlawful means. GPIC claimed, amongst others, (1) an injunction restraining Dolphin from using, accessing, disclosing and/or publishing all confidential information of GPIC for any purpose without GPIC’s consent, (2) an order that Dolphin discloses to GPIC’s solicitors all information, documents and/or items belonging to GPIC in Dolphin’s possession, custody or power and (3) damages to be assessed, interest and costs. On February 17, 2016, Dolphin filed its Defense denying any breach or wrongdoing on its part. 

On May 11, 2016, GPIC agreed to irrevocably withdraw, terminate and discontinue the legal action mentioned above. On the same date, the Company agreed to sell substantially all the assets of Dolphin to GPIC and to discontinue Dolphin’s business of designing, manufacturing and distributing gaming chips and plaques and distributing third-party table gaming products.

Given the action was at a preliminary stage, it was not possible to accurately predict the likely outcome of the case. Therefore, no accrual had been made for any possible losses in connection with this matter.

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(Loss)/Earnings Per Share

3 Months Ended

Mar. 31, 2016

Earnings Per Share [Abstract]

Earnings Per Share [Text Block]

Note 16. (Loss)/Earnings Per Share

Computation of the basic and diluted (loss)/earnings per share from continuing operations consisted of the following:

	Three-Month Periods Ended March 31,
	2016						2015
	(Unaudited)						(Unaudited)
(amounts in thousands, except per share data)	Loss		Number of Shares		Per Share Amount		Income		Number of Shares		Per Share Amount
Basic
Net (loss)/income attributable to equity shareholders	$	(1,475)		14,460		(0.10)	$	570		14,450	$	0.04
Effect of dilutive securities
Dilutive stock options/restricted shares (1)				—						17
Diluted
Net (loss)/income attributable to equity shareholders plus assumed conversion	$	(1,475)		14,460		(0.10)	$	570		14,467	$	0.04

(1) There was no difference in diluted loss per share from basic loss per share as the assumed exercise of common stock equivalents would have an anti-dilutive effect due to losses for the three-month period ended March 31, 2016.

  

For the three-month periods ended March 31, 2016 and 2015, outstanding stock options of 743,630 and 753,988, respectively, shares of common stock were excluded from the calculation of diluted earnings per share as their effect would be anti-dilutive.

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Retirement Plan

3 Months Ended

Mar. 31, 2016

Compensation and Retirement Disclosure [Abstract]

Pension and Other Postretirement Benefits Disclosure [Text Block]

Note 17. Retirement Plan

The components of accrued retirement benefits consisted of the following: 

(amounts in thousands)	2016		2015
	(Unaudited)
Balance as of January 1	$	23	$	29
Service cost		—		8
Interest cost		—		1
Actuarial gain and others		—		(15)
Balance as of March 31/December 31	$	23	$	23

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Asset Retirement Obligations

3 Months Ended

Mar. 31, 2016

Asset Retirement Obligation Disclosure [Abstract]

Asset Retirement Obligation Disclosure [Text Block]

Note 18. Asset Retirement Obligations

Reconciliations of the carrying amounts of the Company’s asset retirement obligations are as follows:

(amounts in thousands)	2016		2015
	(Unaudited)
Balance as of January 1	$	99	$	92
Accretion expense		—		7
Balance as of March 31/December 31	$	99	$	99

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Accumulated Other Comprehensive Income

3 Months Ended

Mar. 31, 2016

Comprehensive Income Loss Disclosure [Abstract]

Comprehensive Income (Loss) Note [Text Block]

Note 19. Accumulated Other Comprehensive Income

The accumulated balances in respect of other comprehensive income consisted of the following:

					Accumulated
			Foreign		Other
	Defined Benefit		Currency		Comprehensive
(amounts in thousands)	Pension Plan		Translation		Income
Balances as of January 1, 2015	$	87	$	666	$	753
Current period other comprehensive income/(loss)		3		(47)		(44)
Balances as of December 31, 2015		90		619		709
Current period other comprehensive income		—		29		29
Balances as of March 31, 2016 (Unaudited)	$	90	$	648	$	738

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Subsequent Events

3 Months Ended

Mar. 31, 2016

Subsequent Events [Abstract]

Subsequent Events [Text Block]

Note 20. Subsequent Events

On April 21, 2016, the Company’s wholly-owned Hong Kong subsidiary, Dolphin Products Limited, or Dolphin, entered into a binding letter of intent, or LOI, to sell its assets to Gaming Partners International Corporation, or GPIC. Under the terms of the LOI, GPIC will acquire the assets of Dolphin including fixed assets, raw materials and inventory and intellectual property for an estimated cash consideration of approximately $5.9 million, subject to physical inventory counts at closing. The purchase price will be paid out in installments over a 24-month period after closing. In addition, GPIC will make earn out payments to the Company over the next five years, or longer in the case of sales to the Company’s related parties, based on varying percentages of net revenues on certain select sales to specific Asian-based casinos. The asset sale represents Dolphin’s and the Company’s exit from the table game equipment business and, as part of the transaction, Dolphin and the Company will each agree not to engage in the manufacture of table game equipment in competition with GPIC.

On May 11, 2016, the Company entered into a definitive asset purchase agreement and closed the transaction. The final consideration was $5.9 million, excluding the future earn-out payments to be paid by GPIC to the Company. Also that day, GPIC agreed to irrevocably withdraw, terminate and discontinue the above-mentioned legal action between the parties (Note 15).

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Description of Business and Significant Accounting Policies (Policies)

3 Months Ended

Mar. 31, 2016

Accounting Policies [Abstract]

Basis of Accounting, Policy [Policy Text Block]

Basis of Presentation

These consolidated financial statements are prepared pursuant to generally accepted accounting principles in the United States for interim financial information and with the instructions to Form 10-Q and Rule 8-03 of Regulation S-X promulgated by the Securities and Exchange Commission (“SEC”) and reflect all adjustments, consisting of normal recurring adjustments and other adjustments, which management believes are necessary to fairly present the financial position, results of operations and cash flows of the Company, for the respective periods presented. The results of operations for an interim period are not necessarily indicative of the results that may be expected for any other interim period or the year as a whole. The accompanying unaudited consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto in the Company’s Annual Report on Form 10-K for the year ended December 31, 2015, filed with the SEC on March 30, 2016.

The Company effected a 1-for-4 reverse stock split of its common shares as of February 26, 2015. All historical share amounts and share price information presented in the financial statements and notes have been proportionally adjusted to reflect the impact of this reverse stock split, including but not limited to basic and diluted weighted-average shares issued and outstanding.

Consolidation, Policy [Policy Text Block]

Principles of Consolidation

These consolidated financial statements include the accounts of Entertainment Gaming Asia Inc. and all its subsidiaries. All intercompany balances and transactions have been eliminated in consolidation.

Use of Estimates, Policy [Policy Text Block]

Use of Estimates

The Company is required to make estimates, judgments and assumptions that it believes are reasonable based on its historical experience, contract terms, observance of known trends in the Company and the industry as a whole, and information available from other outside sources. These estimates affect the reported amounts of assets, liabilities, revenues and expenses and related disclosures of contingent assets and liabilities. On a regular basis, the Company evaluates its estimates, including those related to revenue recognition, product returns, long-lived assets, inventory obsolescence, stock-based compensation, income taxes, bad debts, warranty obligations, long-term contracts, contingencies and litigation. Actual results may differ from those estimates.

Cash and Cash Equivalents, Policy [Policy Text Block]

Cash and Cash Equivalents

All highly-liquid instruments with original maturities of three months or less are considered cash equivalents. The Company places its cash and temporary investments with financial institutions. As of March 31, 2016, the Company had deposits with financial institutions in excess of Federal Deposit Insurance Corporation (FDIC) insured limits by approximately $30.4 million.

Accounts Receivable And Allowance For Doubtful Accounts [Policy Text Block]

Accounts Receivable and Allowance for Doubtful Accounts

Accounts receivable are stated at face value less any allowances for doubtful accounts. Allowances for doubtful accounts are maintained at levels determined by Company management to adequately provide for uncollectible amounts. In determining the estimated uncollectable amounts, the Company evaluates a combination of factors, including, but not limited to, activity in the related market, financial condition of customers, specific customer collection experience and history of write-offs and collections. Interest income is imposed on overdue accounts receivable after the Company evaluates a combination of factors, including but not limited to, customer collection experiences, customer relationship and contract terms. Accounts receivable balances are written off after all collection efforts have been exhausted.

Inventory, Policy [Policy Text Block]

Inventories

Inventories are stated at the lower of cost, determined using the first-in, first-out method, or market. Cost elements included in work-in-process and finished goods include raw materials, direct labor and manufacturing overheads. Inventories included a lower of cost or market (LCM) write-down of approximately $89,000 and $14,000 for the three-month periods ended March 31, 2016 and 2015, respectively.

Impairment or Disposal of Long-Lived Assets, Policy [Policy Text Block]

Long-Lived Assets

The Company accounts for impairment of long-lived assets in accordance with Financial Accounting Standards Board (FASB) Accounting Standards Codification (ASC) 360,  Property, Plant and Equipment. Long-lived assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. In such instances, the Company estimates the undiscounted future cash flows that result from the use of the asset and its ultimate disposition. If the sum of the undiscounted cash flows is less than the carrying value, the Company recognizes an impairment loss, measured as the amount by which the carrying value exceeds the fair value of the asset, determined principally using discounted cash flows. There were no impairment charges for long-lived assets for the three-month periods ended March 31, 2016 and 2015.

Prepaid Deposits And Other Assets [Policy Text Block]

Prepaids, Deposits and Other Assets

Prepaids, deposits and other assets consist primarily of prepaid lease, prepaid value-added taxes in foreign countries, prepayments to suppliers, rental and utilities and other deposits.

Electronic Gaming Machines EGMs and Systems [Policy Text Block]

Gaming Equipment

Gaming equipment consists primarily of EGMs and systems. Gaming equipment is stated at cost. The Company depreciates new EGMs and systems over a five-year useful life and depreciates refurbished EGMs and systems over a three-year useful life once placed in service. Depreciation of gaming equipment of approximately $425,000 and $660,000 was included in cost of gaming operations in the consolidated statements of comprehensive income for the three-month periods ended March 31, 2016 and 2015, respectively.

Property, Plant and Equipment, Policy [Policy Text Block]

Property and Equipment

Property and equipment are stated at cost. Depreciation is computed using the straight-line method over the useful lives of the assets currently estimated to be three to twenty years, which in the case of leasehold improvements, is limited to the life of the lease and throughout the renewal period as long as renewal is reasonably assured.

The Company capitalizes certain direct and incremental costs related to the design and construction, project payroll, and applicable portions of interest incurred for potential projects in property and equipment.

Depreciation of property and equipment of approximately $57,000 and $159,000 was included in the cost of gaming operations in the consolidated statements of comprehensive income for the three-month periods ended March 31, 2016 and 2015, respectively.

Depreciation of property and equipment of approximately $268,000 and $256,000 was included in cost of gaming products in the consolidated statements of comprehensive income for the three-month periods ended March 31, 2016 and 2015, respectively.

Goodwill and Intangible Assets, Policy [Policy Text Block]

Goodwill and Intangible Assets, Including Casino Contracts

Intangible assets consist of patents, trademarks, technical know-how, gaming operation agreement, casino contracts and goodwill. Intangible assets other than goodwill are amortized on the straight-line basis over the period of time the asset is expected to contribute directly or indirectly to future cash flows, which ranges from four to ten years. The straight-line amortization method is utilized because the Company believes there is no more reliably determinable method of reflecting the pattern for which the economic benefits of the intangible assets are consumed or otherwise used.

The Company capitalizes certain costs relating to software developed to solely meet the Company’s internal requirements and for which there are no substantive plans to market the software. These costs mainly include payroll and payroll-related costs for employees who are directly associated with and who devote time to the internal-use software projects during the application development stage until the software is substantially complete and ready for its intended use. The Company also capitalizes certain costs related to the development of the social gaming application for marketing purposes. These costs are capitalized once technological feasibility has been established. Costs incurred prior to the criteria met for capitalization are expensed to research and development expenses as incurred. Management has committed the resources of developing social gaming application, and it is probable that the social gaming application will be completed and the software will be used as intended. Such capitalized costs are amortized on a straight-line basis over the estimated useful life of the related assets.

Amortization expenses related to casino contracts were approximately $434,000 and $611,000 for the three-month periods ended March 31, 2016 and 2015, respectively. Amortization expenses related to other gaming related intangibles were approximately $63,000 for the three-month periods ended March 31, 2016 and 2015. The amounts were accounted for as cost of gaming operations in the consolidated statements of comprehensive income. Amortization expenses related to technical know-how were approximately $6,000 for the three-month periods ended March 31, 2016 and 2015. The amounts were accounted for as cost of gaming products in the consolidated statements of comprehensive income. Amortization expenses related to patents and trademarks were approximately $6,000 for the three-month periods ended March 31, 2016 and 2015. The amounts were accounted for as selling, general and administrative expenses in the consolidated statements of comprehensive income.

The Company measures and tests finite-lived intangibles for impairment when there are indicators of impairment in accordance with ASC 360-10-05, Property, Plant and Equipment.

The Company measures and tests goodwill for impairment, at least annually in accordance with ASC 350-10-05, Intangibles — Goodwill and Other.

Impairment testing for goodwill and other intangibles requires judgment, including the identification of reporting units, allocation of related goodwill, assignment of corporate shared assets and liabilities to reporting units, estimated future cash flows and determinations of fair values. While the Company believes its estimates of future revenues and future cash flows are reasonable, different assumptions could materially affect the assessment of useful lives, recoverability and fair values. No impairment charges relating to intangible assets were recorded for the three-month periods ended March 31, 2016 and 2015, respectively.

Litigation And Other Contingencies [Policy Text Block]

Litigation and Other Contingencies

In the performance of its ordinary course of business operations, the Company is subject to risks of various legal matters, litigation and claims of various types. The Company has regular litigation reviews, including updates from corporate and outside counsel, to assess the need for accounting recognition or disclosure of these contingencies. See Note 15.

ASC 450, Contingencies, requires that liabilities for contingencies be recorded when it is probable that a liability has been incurred and that the amount can be reasonably estimated. Significant management judgment is required related to contingent liabilities and the outcome of litigation because both are difficult to predict. For a contingency for which an unfavorable outcome is reasonably possible and which is significant, the Company discloses the nature of the contingency and, when feasible, an estimate of the possible loss.

Revenue Recognition, Policy [Policy Text Block]

Revenue Recognition

The Company recognizes revenue when all of the following have been satisfied:

⋅ Persuasive evidence of an arrangement exists;

⋅ The price to the customer is fixed and determinable;

⋅ Delivery has occurred and any acceptance terms have been fulfilled;

⋅ No significant contractual obligations remain; and

⋅ Collection is reasonably assured.

Gaming Revenue and Promotional Allowances

The Company earns recurring gaming revenue from its gaming operations.

For gaming operations, the Company earns recurring revenue by providing customers with EGMs and casino management systems which track game performance and provide statistics on installed EGMs owned by the Company and leased to venue owners. Revenues are recognized on the contractual terms of the EGM agreements between the Company and the venue owners and are based on either a fixed lease fee or the Company’s share of net winnings and reimbursement of expenses, net of customer incentives and commitment fees.

Revenues are recognized as earned unless collection is not reasonably assured, in which case revenues are recognized when the payment is received. All slot operations revenues were recognized as earned during the three-month periods ended March 31, 2016 and 2015, respectively.

Commitment fees paid to the venue operators relating to contract amendments which are not recoverable from daily net win are capitalized as assets and amortized as a reduction of revenue over the term of the amended contracts. The Company had commitment fee balances related to contract amendments of $NIL and approximately $18,000 as of March 31, 2016 and December 31, 2015, respectively.

Gaming Products Sales

The Company recognizes revenue from the sale of its gaming products and accessories to end users upon shipment against customer contracts or purchase orders. In accordance with the criteria of ASC 605-45, Reporting Revenue Gross as a Principal versus Net as an Agent, the Company recognizes gross revenue when it acts as a principal, has discretion to choose suppliers and establish selling price, bears credit risk and provides the products or services required in the transaction. If the above criteria are not met, in which the supplier is the primary obligor in the arrangement and bears the general inventory risk, the Company recognizes revenue net of related costs. The Company also recognizes revenue for the maintenance services of gaming products on the straight line basis over the contract term in accordance with ASC 605, Revenue Recognition.

Share-based Compensation, Option and Incentive Plans Policy [Policy Text Block]

Stock-Based Compensation

Under the fair value recognition provisions of ASC 718, Compensation-Stock Compensation, the Company recognizes stock-based compensation expenses for all service-based awards to employees and non-employee directors with graded vesting schedules on the straight-line basis over the requisite service period for the entire award. Estimates are revised if subsequent information indicates that forfeitures will differ from previous estimates, and the cumulative effect on compensation cost of a change in the estimated forfeitures is recognized in the period of the change. For non-employee awards, the Company remeasures compensation cost each period until the service condition is complete and recognizes compensation cost on the straight-line basis over the requisite service period. Option valuation models require the input of highly subjective assumptions, and changes in the assumptions used can materially affect the fair value estimates. Judgment is required in estimating stock price volatility, forfeiture rates, expected dividends, and expected terms that options remain outstanding. For restricted stock awards with performance conditions, the Company evaluates if performance conditions are probable in each reporting period. The compensation expense of restricted awards is recognized ratably over the implicit service period if achieving performance conditions is probable. Cumulative catch-up adjustments are required in the event of changes in assessment of probability. See Note 12 for additional information relating to stock-based compensation assumptions. Stock-based compensation expenses totaled approximately $14,000 and $30,000 for the three-month periods ended March 31, 2016 and 2015, respectively.

Research and Development Expense, Policy [Policy Text Block]

Research and Development

Research and development expenses are expensed as incurred. Employee-related costs associated with research and development and certain costs associated with the development of the social casino platform are included in research and development expenses.  Research and development expenses were approximately $448,000 and $35,000 for the three-month periods ended March 31, 2016 and 2015, respectively.

Lease, Policy [Policy Text Block]

Leases

Leases are classified at the inception date as either a capital lease or an operating lease. A lease is a capital lease if any of the following conditions exists:

⋅ Ownership is transferred to the lessee by the end of the lease term;

⋅ There is a bargain purchase option;

⋅ The lease term is at least 75% of the property’s estimated remaining economic life; or

⋅ The present value of the minimum lease payments at the beginning of the lease term is 90% or more of the fair value of the leased property to the lessor at the inception date.

A capital lease is accounted for as if there was an acquisition of an asset and an incurrence of an obligation at the inception of the lease. All other leases are accounted for as operating leases wherein rental payments are expensed as incurred. The Company had no capital leases as of March 31, 2016 and December 31, 2015.

Income Tax, Policy [Policy Text Block]

Income Taxes

The Company is subject to income taxes in the United States (including federal and state) and several foreign jurisdictions in which it operates. Deferred income tax balances reflect the effects of temporary differences between the carrying amounts of assets and liabilities and their tax basis and are stated at enacted tax rates expected to be in effect when taxes are actually paid or recovered. ASC 740, Income Taxes, requires that deferred tax assets be evaluated for future realization and reduced by a valuation allowance to the extent the Company believes a portion will not be realized. The Company considers many factors when assessing the likelihood of future realization of its deferred tax assets, including its recent cumulative earnings experience and expectations of future taxable income by taxing jurisdiction, the carry-forward periods available to the Company for tax reporting purposes, and other relevant factors.

The Company accounts for uncertain tax positions in accordance with ASC 740, which contains a two-step approach to recognizing and measuring uncertain tax positions. The first step is to evaluate the tax position for recognition by determining if the weight of available evidence indicates it is more likely than not that the position will be sustained on audit, including resolution of related appeals or litigation processes, if any. The second step is to measure the tax benefit as the largest amount which is more than 50% likely to be realized upon ultimate settlement. The Company considers many factors when evaluating and estimating its tax positions and tax benefits, which may require periodic adjustments and which may not accurately anticipate actual outcomes. The Company recognizes interest and penalties, if any, related to unrecognized tax benefits in the provision for income taxes in the statements of comprehensive income.

As of that date, the Company’s deferred taxes were reported in conformity with applicable income tax accounting standards described above, net of applicable valuation allowances. Deferred tax assets and liabilities were recognized for differences between the assigned values and the tax basis of the recognized assets and liabilities with corresponding valuation allowances as appropriate.

Earnings Per Share, Policy [Policy Text Block]

(Loss)/Earnings per Share

Basic (loss)/earnings per share are computed by dividing the reported net (loss)/earnings by the weighted average number of shares of common stock outstanding during the period. Diluted earnings per share is computed by dividing the net income by the weighted average number of shares of common stock and shares issuable from stock options and restricted shares during the period. The computation of diluted earnings per share excludes the impact of stock options and restricted shares that are anti-dilutive. There was no difference in diluted loss per share from basic loss per share for three-month period ended March 31, 2016 as the assumed exercise of common stock equivalents would have an anti-dilutive effect due to losses.

Foreign Currency Transactions and Translations Policy [Policy Text Block]

Foreign Currency Translations and Transactions

The functional currency of the Company’s international subsidiaries, except for its operations in Cambodia whose functional currency is also U.S. dollars, is generally the local currency. For these subsidiaries, the Company translates the assets and liabilities at exchange rates in effect at the balance sheet date and income and expense accounts at average exchange rates during the year. Resulting currency translation adjustments are recorded directly to accumulated other comprehensive income within stockholders’ equity. Gains and losses resulting from transactions in non-functional currencies are recorded in the consolidated statements of comprehensive income.

Below is a summary of closing exchange rates as of March 31, 2016 and December 31, 2015 and average exchange rates for the three-month periods ended March 31, 2016 and 2015.

(US$1 to foreign currency)	March 31, 2016		December 31, 2015
Australian dollar		1.30		1.37
Hong Kong dollar		7.75		7.75
Philippine peso		46.11		47.17
Thai baht		35.18		36.07

	Three-Month Periods Ended March 31,
(US$1 to foreign currency)	2016		2015
Australian dollar		1.33		1.27
Hong Kong dollar		7.76		7.76
Philippine peso		46.72		44.37
Thai baht		35.20		32.53

Fair Value Measurement, Policy [Policy Text Block]

Fair Value Measurement

Fair value is defined under ASC 820, Fair Value Measurements and Disclosures, as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. Valuation techniques used to measure fair value under ASC 820 must maximize the use of observable inputs and minimize the use of unobservable inputs. The standard establishes a fair value hierarchy based on three levels of input, of which the first two are considered observable and the last unobservable.

⋅ Level 1 — Quoted prices in active markets for identical assets or liabilities. These are typically obtained from real-time quotes for transactions in active exchange markets involving identical assets.

⋅ Level 2 — Input, other than quoted prices included within Level 1, which are observable for the asset or liability, either directly or indirectly. These are typically obtained from readily-available pricing sources for comparable instruments.

⋅ Level 3 — Unobservable input, where there is little or no market activity for the asset or liability. This input reflects the reporting entity’s own assumptions of the data that participants would use in pricing the asset or liability, based on the best information available under the circumstances.

As of March 31, 2016, the fair values of financial assets and liabilities approximate carrying values due to the short maturity of these items.

Postemployment Benefit Plans, Policy [Policy Text Block]

Defined Benefit Pension Plan

The Company provides pension benefits to all regular full-time employees in the Philippines through a defined benefit plan. A defined benefit plan is a pension plan that defines an amount of pension benefit that an employee will receive on retirement, usually dependent on one or more factors such as age, years of service and salary.

The defined benefit obligation is calculated annually by independent actuaries using the projected unit credit method. The present value of the defined benefit obligation is determined by discounting the estimated future cash outflows using interest rates of high quality corporate bonds that are denominated in the currency in which the benefits will be paid and that have terms to maturity approximating to the terms of the related pension liability.

The accounting guidance related to employers’ accounting for defined benefit pension plan requires recognition in the balance sheet of the present value of the defined benefit obligation at the reporting date, together with adjustments for unrecognized actuarial gains or losses and past service costs or credits in other comprehensive income.

There were no adjustments for unrecognized actuarial gains or losses and past service costs or credits to equity through other comprehensive income for the three-month periods ended March 31, 2016 and 2015.

Asset Retirement Obligations, Policy [Policy Text Block]

Asset Retirement Obligations  

Asset retirement obligations are legal obligations associated with the retirement of long-lived assets resulting from the acquisition, construction, development and/or normal use of the underlying assets. Recognition of a liability for an asset retirement obligation is required in the period in which it is incurred at its estimated fair value. The associated asset retirement costs are capitalized as part of the carrying amount of the underlying asset and depreciated over the estimated useful life of the asset. The liability is accreted through charges to operating expenses. If the asset retirement obligation is settled for other than the carrying amount of the liability, the Company recognizes a gain or loss on settlement.

The Company records all asset retirement obligations for which we have legal obligations to remove all installation works and reinstate the manufacturing facilities to its original state at estimated fair value. For the three-month period ended March 31, 2016 and 2015, the Company recognized approximately $4,000 as asset retirement obligation operating costs related to accretion of the liabilities and depreciation of the assets.

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Description of Business and Significant Accounting Policies (Tables)

3 Months Ended

Mar. 31, 2016

Accounting Policies [Abstract]

Foreign Currency Translations and Transactions [Table Text Block]

Below is a summary of closing exchange rates as of March 31, 2016 and December 31, 2015 and average exchange rates for the three-month periods ended March 31, 2016 and 2015.

(US$1 to foreign currency)	March 31, 2016		December 31, 2015
Australian dollar		1.30		1.37
Hong Kong dollar		7.75		7.75
Philippine peso		46.11		47.17
Thai baht		35.18		36.07

	Three-Month Periods Ended March 31,
(US$1 to foreign currency)	2016		2015
Australian dollar		1.33		1.27
Hong Kong dollar		7.76		7.76
Philippine peso		46.72		44.37
Thai baht		35.20		32.53

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Segments (Tables)

3 Months Ended

Mar. 31, 2016

Segment Reporting [Abstract]

Reconciliation of Revenue from Segments to Consolidated [Table Text Block]

The following table presents the financial information for each of the Company’s operating segments.

	Three-Month Periods Ended March 31,
(amounts in thousands)	2016		2015
	(Unaudited)		(Unaudited)
Revenues:
Gaming operations	$	3,851	$	4,010
Gaming products		1,305		4,272
Total revenues	$	5,156	$	8,282
Operating (loss)/income:
Gaming operations	$	1,476	$	1,700
Gaming products		(506)		575
Social casino gaming platform		(398)		—
Corporate and other operating costs and expenses		(2,012)		(1,666)
Total operating (loss)/income	$	(1,440)	$	609
Depreciation and amortization:
Gaming operations	$	987	$	1,504
Gaming products		295		282
Social casino gaming platform		4		—
Corporate		20		24
Total depreciation and amortization	$	1,306	$	1,810

Schedule of Segment Reporting Information, by Segment [Table Text Block]

Geographic segment revenues for the three-month periods ended March 31, 2016 and 2015 consisted of the following:

	Three-Month Periods Ended March 31,
(amounts in thousands)	2016		2015
	(Unaudited)		(Unaudited)
Cambodia	$	3,246	$	3,324
Macau		52		561
Philippines		1,738		3,644
Australia		92		753
Other		28		—
Total	$	5,156	$	8,282

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Inventories (Tables)

3 Months Ended

Mar. 31, 2016

Inventory Disclosure [Abstract]

Schedule of Inventory, Current [Table Text Block]

Inventories consisted of the following:

(amounts in thousands)	March 31, 2016		December 31, 2015
	(Unaudited)
Raw materials	$	1,567	$	1,742
Work-in-process		157		80
Finished goods (1)		—		443
Spare parts		132		113
Total	$	1,856	$	2,378

(1) Finished goods decreased from December 31, 2015 to March 31, 2016 due to an order for the gaming products division delivered in the three-month period ended March 31, 2016.

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Prepaid Expenses and Other Current Assets (Tables)

3 Months Ended

Mar. 31, 2016

Prepaid Expense and Other Assets, Current [Abstract]

Schedule Of Prepaid Expenses And Other Current Assets [Table Text Block]

Prepaid expenses and other current assets consisted of the following:

(amounts in thousands)	March 31, 2016		December 31, 2015
	(Unaudited)
Prepayments to suppliers	$	465	$	292
Prepaid leases		3		3
Total	$	468	$	295

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Receivables (Tables)

3 Months Ended

Mar. 31, 2016

Receivables [Abstract]

Schedule Of Accounts And Other Receivables [Table Text Block]

Accounts and other receivables consisted of the following:

(amounts in thousands)	March 31, 2016		December 31, 2015
	(Unaudited)
Trade receivables	$	1,084	$	724
Other receivables		63		78
		1,147		802
Less: allowance for doubtful accounts		—		—
Net	$	1,147	$	802

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Gaming Equipment (Tables)

3 Months Ended

Mar. 31, 2016

Electronic Gaming Machines Egms and Systems And Other Gaming Equipment Disclosure [Abstract]

Disclosure Of Electronic Gaming Machines EGMs and Systems [Table Text Block]

Gaming equipment is stated at cost. The major categories of gaming equipment and accumulated depreciation consisted of the following:

(amounts in thousands)	Useful Life (years)	March 31, 2016		December 31, 2015
		(Unaudited)
EGMs	3-5	$	16,312	$	16,215
Systems	5		1,296		1,335
			17,608		17,550
Less: accumulated depreciation			(15,025)		(14,565)
Net		$	2,583	$	2,985

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Property and Equipment (Tables)

3 Months Ended

Mar. 31, 2016

Property, Plant and Equipment [Abstract]

Property, Plant and Equipment [Table Text Block]

Property and equipment are stated at cost. The major categories of property and equipment and accumulated depreciation consisted of the following:

(amounts in thousands)	Useful Life (years)	March 31, 2016		December 31, 2015
		(Unaudited)
Equipment, vehicles, furniture and fixtures	3-10	$	6,338	$	6,290
Land and building	5		1,506		1,506
Leasehold improvements	1-6		1,400		1,400
			9,244		9,196
Less: accumulated depreciation			(3,655)		(3,277)
Net		$	5,589	$	5,919

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Goodwill and Intangible Assets, including Casino Contracts (Tables)

3 Months Ended

Mar. 31, 2016

Goodwill and Intangible Assets Disclosure [Abstract]

Schedule of Intangible Assets and Goodwill [Table Text Block]

Goodwill and intangible assets are stated at cost. The major categories of goodwill and intangible assets and accumulated amortization consisted of the following:

(amounts in thousands)	Useful Life (years)	March 31, 2016		December 31, 2015
		(Unaudited)
Gaming operation agreement	4-5	$	1,166	$	1,166
Less: accumulated amortization			(1,133)		(1,070)
			33		96
Goodwill	N/A		340		332
Patents	5-6		114		114
Less: accumulated amortization			(109)		(104)
			5		10
Trademarks	5-9		26		26
Less: accumulated amortization			(16)		(15)
			10		11
Technical know-how	10		261		261
Less: accumulated amortization			(100)		(94)
			161		167
Casino contracts	5-6		12,684		12,637
Less: accumulated amortization			(12,589)		(12,109)
			95		528
Internal-use software			441		107
Net carrying value		$	1,085	$	1,251

Schedule of Goodwill [Table Text Block]

Goodwill movements during the periods consisted of the following:

(amounts in thousands)	2016		2015
	(Unaudited)
Balance as of January 1	$	332	$	351
Foreign currency translation adjustment		8		(19)
Balance as of March 31/December 31	$	340	$	332

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Prepaids, Deposits and Other Assets (Tables)

3 Months Ended

Mar. 31, 2016

Prepaid Deposits and Other Assets Disclosure [Abstract]

Schedule Of Prepaid Deposits And Other Assets [Table Text Block]

Prepaids, deposits and other assets consisted of the following:

(amounts in thousands)	March 31, 2016		December 31, 2015
	(Unaudited)
Prepaid taxes	$	17	$	—
Prepayments to suppliers		27		34
Rentals, utilities and other deposits		390		391
Total	$	434	$	425

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Accrued Expenses (Tables)

3 Months Ended

Mar. 31, 2016

Payables and Accruals [Abstract]

Schedule of Accrued Liabilities [Table Text Block]

Accrued expenses consisted of the following:

(amounts in thousands)	March 31, 2016		December 31, 2015
	(Unaudited)
Payroll and related costs	$	629	$	626
Professional fees		219		339
Withholding tax expenses		630		549
Other tax expenses		44		44
Other expenses		321		197
Total	$	1,843	$	1,755

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Other Liabilities (Tables)

3 Months Ended

Mar. 31, 2016

Other Liabilities [Abstract]

Other Liabilities [Table Text Block]

Other liabilities consisted of the following:

(amounts in thousands)	March 31, 2016		December 31, 2015
	(Unaudited)
Other tax liabilities	$	769	$	754
Other		123		126
Total	$	892	$	880

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Stock-Based Compensation (Tables)

3 Months Ended

Mar. 31, 2016

Disclosure Of Compensation Related Costs, Share-Based Payments [Abstract]

Schedule of Share-based Compensation, Stock Options, Activity [Table Text Block]

A summary of all current and expired plans as of March 31, 2016 and changes during the period then ended are presented in the following table:

Options

					Weighted Average
					Remaining Contractual		Aggregate
	Number of		Weighted Average		Life		Intrinsic Value
	Options		Exercise Price		(in years)		(in thousands)
Outstanding as of December 31, 2015		767,476	$	7.90		4.28	$	34
Granted		—		—		—		—
Exercised		—		—		—		—
Forfeited or expired		(625)		48.48		—		—
Outstanding as of March 31, 2016		766,851		7.86		4.03		38
Exercisable as of March 31, 2016		755,601	$	7.91		3.98	$	38

Schedule of Nonvested Restricted Stock Units Activity [Table Text Block]

Restricted Stock

					Weighted Average
			Weighted Average		Remaining
			Fair Value at		Contractual Life
	Number of shares		Grant Date		(in years)
Unvested balance as of December 31, 2015		3,750	$	4.84		0.41
Granted		—		—		—
Vested		—		—		—
Unvested balance as of March 31, 2016		3,750	$	4.84		0.16

Schedule of Share-based Payment Award, Stock Options, Valuation Assumptions [Table Text Block]

The following table summarizes the range of assumptions utilized in the Black-Scholes-Merton option-pricing model for the valuation of stock options granted during the three-month periods ended March 31, 2016 and 2015.

	Three-Month Periods Ended March 31,
	2016						2015
Range of values:	Low			High			Low			High
Expected volatility		81.78	%		87.26	%		78.74	%		80.91	%
Expected dividends		—			—			—			—
Expected term (in years)		4.78			7.11			4.78			8.11
Risk free rate		1.17	%		1.69	%		1.13	%		1.80	%

XML

Related Party Transactions (Tables)

3 Months Ended

Mar. 31, 2016

Schedule Of Transactions With Related Parties [Table Text Block]

Significant revenues, purchases and expenses arising from transactions with related parties consisted of the following:

	Three-Month Periods Ended March 31,
(amounts in thousands)	2016		2015
	(Unaudited)		(Unaudited)
Related party transactions provided to:
Melco Crown (Macau) Limited
Sales of gaming products	$	—	$	349
MCE Leisure (Philippines) Corporation
Sales of gaming products	$	159	$	2,892
Melco Crown Entertainment Limited
Sales of gaming products	$	—	$	212
Related party transactions provided by:
Melco Services Limited
Technical services	$	1	$	1
Services agreement	$	63	$	4
Golden Future (Management Services) Limited
Management services	$	63	$	61

XML

(Loss)/Earnings Per Share (Tables)

3 Months Ended

Mar. 31, 2016

Earnings Per Share [Abstract]

Schedule of Earnings Per Share, Basic and Diluted [Table Text Block]

Computation of the basic and diluted (loss)/earnings per share from continuing operations consisted of the following:

	Three-Month Periods Ended March 31,
	2016						2015
	(Unaudited)						(Unaudited)
(amounts in thousands, except per share data)	Loss		Number of Shares		Per Share Amount		Income		Number of Shares		Per Share Amount
Basic
Net (loss)/income attributable to equity shareholders	$	(1,475)		14,460		(0.10)	$	570		14,450	$	0.04
Effect of dilutive securities
Dilutive stock options/restricted shares (1)				—						17
Diluted
Net (loss)/income attributable to equity shareholders plus assumed conversion	$	(1,475)		14,460		(0.10)	$	570		14,467	$	0.04

(1) There was no difference in diluted loss per share from basic loss per share as the assumed exercise of common stock equivalents would have an anti-dilutive effect due to losses for the three-month period ended March 31, 2016.

XML

Retirement Plan (Tables)

3 Months Ended

Mar. 31, 2016

Compensation and Retirement Disclosure [Abstract]

Schedule of Defined Benefit Plan Amounts Recognized in Other Comprehensive Income (Loss) [Table Text Block]

The components of accrued retirement benefits consisted of the following: 

(amounts in thousands)	2016		2015
	(Unaudited)
Balance as of January 1	$	23	$	29
Service cost		—		8
Interest cost		—		1
Actuarial gain and others		—		(15)
Balance as of March 31/December 31	$	23	$	23

XML

Asset Retirement Obligations (Tables)

3 Months Ended

Mar. 31, 2016

Asset Retirement Obligation Disclosure [Abstract]

Schedule of Asset Retirement Obligations [Table Text Block]

Reconciliations of the carrying amounts of the Company’s asset retirement obligations are as follows:

(amounts in thousands)	2016		2015
	(Unaudited)
Balance as of January 1	$	99	$	92
Accretion expense		—		7
Balance as of March 31/December 31	$	99	$	99

XML

Accumulated Other Comprehensive Income (Tables)

3 Months Ended

Mar. 31, 2016

Comprehensive Income Loss Disclosure [Abstract]

Schedule of Comprehensive Income (Loss) [Table Text Block]

The accumulated balances in respect of other comprehensive income consisted of the following:

					Accumulated
			Foreign		Other
	Defined Benefit		Currency		Comprehensive
(amounts in thousands)	Pension Plan		Translation		Income
Balances as of January 1, 2015	$	87	$	666	$	753
Current period other comprehensive income/(loss)		3		(47)		(44)
Balances as of December 31, 2015		90		619		709
Current period other comprehensive income		—		29		29
Balances as of March 31, 2016 (Unaudited)	$	90	$	648	$	738

XML

Description of Business and Significant Accounting Policies (Details)	3 Months Ended
	Mar. 31, 2016	Mar. 31, 2015	Dec. 31, 2015
Australian dollar [Member]
Accounting Polices [Line Items]
Foreign Currency Exchange Rate, Translation	1.3		1.37
Average Foreign Currency Exchange Rate Translation	1.33	1.27
Hong Kong dollar [Member]
Accounting Polices [Line Items]
Foreign Currency Exchange Rate, Translation	7.75		7.75
Average Foreign Currency Exchange Rate Translation	7.76	7.76
Philippine Peso [Member]
Accounting Polices [Line Items]
Foreign Currency Exchange Rate, Translation	46.11		47.17
Average Foreign Currency Exchange Rate Translation	46.72	44.37
Thai baht [Member]
Accounting Polices [Line Items]
Foreign Currency Exchange Rate, Translation	35.18		36.07
Average Foreign Currency Exchange Rate Translation	35.2	32.53

XML

Description of Business and Significant Accounting Policies (Details Textual) - USD ($)	3 Months Ended		12 Months Ended
	Mar. 31, 2016	Mar. 31, 2015	Dec. 31, 2015
Accounting Polices [Line Items]
Excess Cash Limits, FDIC Insured Amount	$ 30,400,000
Casino contract amortization	434,000	$ 611,000
Commitment	0		$ 18,000
Stock-based compensation expenses	14,000	30,000
Product development expenses	$ 448,000	35,000
Minimum Percentage Of Tax Benefit Likely To Be Realized Upon Ultimate Settlement	50.00%
Gaming property and equipment depreciation	$ 425,000	660,000	660,000
Amortization	$ 509,000	686,000
Lease Term Percentage	75.00%
Present Value Of Future Minimum Lease Payments Percentage Description	90% or more of the fair value of the leased property to the lessor at the inception date.
Inventory Valuation Reserves	$ 89,000	14,000
Asset Retirement Obligation, Cash Paid to Settle	4,000	4,000
Gaming Products [Member]
Accounting Polices [Line Items]
Cost of Goods Sold, Depreciation	268,000	256,000	256,000
Gaming Operation [Member]
Accounting Polices [Line Items]
Cost of Goods Sold, Depreciation	57,000	159,000	$ 159,000
Patents and Trademarks [Member]
Accounting Polices [Line Items]
Amortization	6,000	6,000
Technical Know How [Member]
Accounting Polices [Line Items]
Amortization	6,000	6,000
Other Gaming Related Intangible Assets [Member]
Accounting Polices [Line Items]
Amortization	$ 63,000	$ 63,000

XML

Segments (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2016	Mar. 31, 2015
Segment Reporting Information [Line Items]
Revenues	$ 5,156	$ 8,282
Operating (loss)/income	(1,440)	609
Depreciation and amortization	1,306	1,810
Gaming operations [Member]
Segment Reporting Information [Line Items]
Revenues	3,851	4,010
Operating (loss)/income	1,476	1,700
Depreciation and amortization	987	1,504
Gaming products [Member]
Segment Reporting Information [Line Items]
Revenues	1,305	4,272
Operating (loss)/income	(506)	575
Depreciation and amortization	295	282
Corporate and Other Operating Costs and Expenses [Member]
Segment Reporting Information [Line Items]
Operating (loss)/income	(2,012)	(1,666)
Depreciation and amortization	20	24
Social Casino Gaming Platform [Member]
Segment Reporting Information [Line Items]
Operating (loss)/income	(398)	0
Depreciation and amortization	$ 4	$ 0

XML

Segments (Details 1) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2016	Mar. 31, 2015
Segment Reporting Information [Line Items]
Revenues	$ 5,156	$ 8,282
Cambodia [Member]
Segment Reporting Information [Line Items]
Revenues	3,246	3,324
Macau [Member]
Segment Reporting Information [Line Items]
Revenues	52	561
Philippines [Member]
Segment Reporting Information [Line Items]
Revenues	1,738	3,644
Australia [Member]
Segment Reporting Information [Line Items]
Revenues	92	753
Others [Member]
Segment Reporting Information [Line Items]
Revenues	$ 28	$ 0

XML

Segments (Details Textual)	3 Months Ended
	Mar. 31, 2016	Mar. 31, 2015
Gaming Products [Member]
Segment Reporting Information [Line Items]
Concentration Risk, Percentage	37.00%	68.00%
Gaming Operations [Member]
Segment Reporting Information [Line Items]
Concentration Risk, Percentage	62.00%	73.00%

XML

Inventories (Details) - USD ($) $ in Thousands		Mar. 31, 2016	Dec. 31, 2015
Inventory [Line Items]
Raw materials		$ 1,567	$ 1,742
Work-in-process		157	80
Finished goods	[1]	0	443
Spare parts		132	113
Total		$ 1,856	$ 2,378

[1] Finished goods decreased from December 31, 2015 to March 31, 2016 due to an order for the gaming products division delivered in the three-month period ended March 31, 2016.

XML

Prepaid Expenses and Other Current Assets (Details) - USD ($) $ in Thousands	Mar. 31, 2016	Dec. 31, 2015
Prepaid expenses and other current assets [Line Items]
Prepaid expenses and other current assets	$ 468	$ 295
Prepayments to suppliers [Member]
Prepaid expenses and other current assets [Line Items]
Prepaid expenses and other current assets	465	292
Prepaid leases [Member]
Prepaid expenses and other current assets [Line Items]
Prepaid expenses and other current assets	$ 3	$ 3

XML

Receivables (Details) - USD ($) $ in Thousands	Mar. 31, 2016	Dec. 31, 2015
Receivables [Line Items]
Trade receivables	$ 1,084	$ 724
Other receivables	63	78
Accounts Receivable, Gross, Current	1,147	802
Less: allowance for doubtful accounts	0	0
Net	$ 1,147	$ 802

XML

Gaming Equipment (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2016	Dec. 31, 2015
Gaming equipment [Line Items]
Gaming equipment, Gross	$ 17,608	$ 17,550
Less: accumulated depreciation	(15,025)	(14,565)
Net carrying value	2,583	2,985
EGMs [Member]
Gaming equipment [Line Items]
Gaming equipment, Gross	$ 16,312	16,215
EGMs [Member] | Minimum [Member]
Gaming equipment [Line Items]
Tangible Asset, Useful Life	3 years
EGMs [Member] | Maximum [Member]
Gaming equipment [Line Items]
Tangible Asset, Useful Life	5 years
Systems [Member]
Gaming equipment [Line Items]
Tangible Asset, Useful Life	5 years
Gaming equipment, Gross	$ 1,296	$ 1,335

XML

Gaming Equipment (Details Textual) - USD ($)	3 Months Ended		12 Months Ended
	Mar. 31, 2016	Mar. 31, 2015	Dec. 31, 2015
Gaming Equipment [Line Items]
Cost Of Services Electronic Gaming Machine Depreciation and Amortization	$ 425,000	$ 660,000	$ 660,000

XML

Property and Equipment (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2016	Dec. 31, 2015
Property, Plant and Equipment [Line Items]
Equipment, vehicles, furniture and fixtures	$ 6,338	$ 6,290
Land and buildings	1,506	1,506
Leasehold improvements	1,400	1,400
Property, Plant and Equipment, Gross	9,244	9,196
Less: accumulated depreciation	(3,655)	(3,277)
Net	$ 5,589	$ 5,919
Equipment, vehicles, furniture and fixtures [Member] | Minimum [Member]
Property, Plant and Equipment [Line Items]
Property, Plant and Equipment, Useful Life	3 years
Equipment, vehicles, furniture and fixtures [Member] | Maximum [Member]
Property, Plant and Equipment [Line Items]
Property, Plant and Equipment, Useful Life	10 years
Land and buildings [Member] | Maximum [Member]
Property, Plant and Equipment [Line Items]
Property, Plant and Equipment, Useful Life	5 years
Leasehold improvements [Member] | Minimum [Member]
Property, Plant and Equipment [Line Items]
Property, Plant and Equipment, Useful Life	1 year
Leasehold improvements [Member] | Maximum [Member]
Property, Plant and Equipment [Line Items]
Property, Plant and Equipment, Useful Life	6 years

XML

Property and Equipment (Details Textual) - USD ($)	3 Months Ended		12 Months Ended
	Mar. 31, 2016	Mar. 31, 2015	Dec. 31, 2015
Gaming Products [Member]
Property, Plant and Equipment [Line Items]
Cost of Goods Sold, Depreciation	$ 268,000	$ 256,000	$ 256,000
Gaming Operation [Member]
Property, Plant and Equipment [Line Items]
Cost of Goods Sold, Depreciation	$ 57,000	$ 159,000	$ 159,000

XML

Goodwill and Intangible Assets, including Casino Contracts (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2016	Dec. 31, 2015
Gaming operation agreement [Member]
Finite and Indefinite-lived Intangible Assets [Line Items]
Definite-life intangible assets	$ 1,166	$ 1,166
Less: accumulated amortization	(1,133)	(1,070)
Net carrying value	$ 33	96
Gaming operation agreement [Member] | Maximum [Member]
Finite and Indefinite-lived Intangible Assets [Line Items]
Acquired Finite-lived Intangible Assets, Weighted Average Useful Life	5 years
Gaming operation agreement [Member] | Minimum [Member]
Finite and Indefinite-lived Intangible Assets [Line Items]
Acquired Finite-lived Intangible Assets, Weighted Average Useful Life	4 years
Goodwill [Member]
Finite and Indefinite-lived Intangible Assets [Line Items]
Definite-life intangible assets	$ 340	332
Patents [Member]
Finite and Indefinite-lived Intangible Assets [Line Items]
Definite-life intangible assets	114	114
Less: accumulated amortization	(109)	(104)
Net carrying value	$ 5	10
Patents [Member] | Maximum [Member]
Finite and Indefinite-lived Intangible Assets [Line Items]
Acquired Finite-lived Intangible Assets, Weighted Average Useful Life	6 years
Patents [Member] | Minimum [Member]
Finite and Indefinite-lived Intangible Assets [Line Items]
Acquired Finite-lived Intangible Assets, Weighted Average Useful Life	5 years
Trademarks [Member]
Finite and Indefinite-lived Intangible Assets [Line Items]
Definite-life intangible assets	$ 26	26
Less: accumulated amortization	(16)	(15)
Net carrying value	$ 10	11
Trademarks [Member] | Maximum [Member]
Finite and Indefinite-lived Intangible Assets [Line Items]
Acquired Finite-lived Intangible Assets, Weighted Average Useful Life	9 years
Trademarks [Member] | Minimum [Member]
Finite and Indefinite-lived Intangible Assets [Line Items]
Acquired Finite-lived Intangible Assets, Weighted Average Useful Life	5 years
Technical know-how [Member]
Finite and Indefinite-lived Intangible Assets [Line Items]
Definite-life intangible assets	$ 261	261
Less: accumulated amortization	(100)	(94)
Net carrying value	$ 161	167
Acquired Finite-lived Intangible Assets, Weighted Average Useful Life	10 years
Casino contracts [Member]
Finite and Indefinite-lived Intangible Assets [Line Items]
Definite-life intangible assets	$ 12,684	12,637
Less: accumulated amortization	(12,589)	(12,109)
Net carrying value	$ 95	528
Casino contracts [Member] | Maximum [Member]
Finite and Indefinite-lived Intangible Assets [Line Items]
Acquired Finite-lived Intangible Assets, Weighted Average Useful Life	6 years
Casino contracts [Member] | Minimum [Member]
Finite and Indefinite-lived Intangible Assets [Line Items]
Acquired Finite-lived Intangible Assets, Weighted Average Useful Life	5 years
Internal Use Software [Member]
Finite and Indefinite-lived Intangible Assets [Line Items]
Net carrying value	$ 1,085	1,251
Indefinite-Lived Intangible Assets (Excluding Goodwill)	$ 441	$ 107

XML

Goodwill and Intangible Assets, including Casino Contracts (Details 1) - USD ($) $ in Thousands	3 Months Ended	12 Months Ended
	Mar. 31, 2016	Dec. 31, 2015
Indefinite-lived Intangible Assets [Line Items]
Balance at the beginning	$ 332	$ 351
Foreign currency translation adjustment	8	(19)
Balance at the ending	$ 340	$ 332

XML

Goodwill and Intangible Assets, including Casino Contracts (Details Textual) - USD ($)	3 Months Ended
	Mar. 31, 2016	Mar. 31, 2015
Finite-Lived Intangible Assets [Line Items]
Amortization of intangible assets	$ 509,000	$ 686,000

XML

Prepaids, Deposits and Other Assets (Details) - USD ($) $ in Thousands	Mar. 31, 2016	Dec. 31, 2015
Prepaids, Deposits and Other Assets [Line Items]
Prepaids, deposits and other assets	$ 434	$ 425
Prepaid taxes [Member]
Prepaids, Deposits and Other Assets [Line Items]
Prepaids, deposits and other assets	17	0
Prepayments to suppliers [Member]
Prepaids, Deposits and Other Assets [Line Items]
Prepaids, deposits and other assets	27	34
Rentals, utilities and other deposits [Member]
Prepaids, Deposits and Other Assets [Line Items]
Prepaids, deposits and other assets	$ 390	$ 391

XML

Accrued Expenses (Details) - USD ($) $ in Thousands	Mar. 31, 2016	Dec. 31, 2015
Accrued Expenses [Line Items]
Payroll and related costs	$ 629	$ 626
Professional fees	219	339
Withholding tax expenses	630	549
Other tax expenses	44	44
Other expenses	321	197
Total	$ 1,843	$ 1,755

XML

Other Liabilities (Details) - USD ($) $ in Thousands	Mar. 31, 2016	Dec. 31, 2015
Other Liabilities [Line Items]
Other tax liabilities	$ 769	$ 754
Other	123	126
Total	$ 892	$ 880

XML

Stock-Based Compensation (Details) - Employee Stock Option [Member] - USD ($) $ / shares in Units, $ in Thousands	3 Months Ended
	Mar. 31, 2016	Mar. 31, 2015
Stock Based Compensation [Line Items]
Outstanding, Number of Options, Beginning Balance	767,476
Granted, Number of Options	0
Exercised, Number of Options	0
Forfeited or expired, Number of Options	(625)
Outstanding, Number of Options, Ending Balance	766,851
Exercisable, Number of Options	755,601
Outstanding, Weighted Average Exercise Price, Beginning Balance (in dollars per share)	$ 7.90
Granted, Weighted Average Exercise Price (in dollars per share)	0
Exercised, Weighted Average Exercise Price (in dollars per share)	0
Forfeited or expired, Weighted Average Exercise Price (in dollars per share)	48.48
Outstanding, Weighted Average Exercise Price, Ending Balance (in dollars per share)	7.86
Exercisable, Weighted Average Exercise Price (in dollars per share)	$ 7.91
Outstanding, Weighted Average Remaining Contractual Life (in years)	4 years 11 days	4 years 3 months 11 days
Exercisable, Weighted Average Remaining Contractual Life (in years)	3 years 11 months 23 days
Outstanding, Aggregate Intrinsic Value, Beginning Balance	$ 34
Granted, Aggregate Intrinsic Value	0
Exercised, Aggregate Intrinsic Value	0
Forfeited or expired, Aggregate Intrinsic Value	0
Outstanding, Aggregate Intrinsic Value, Ending Balance	38
Exercisable, Aggregate Intrinsic Value	$ 38

XML

Stock-Based Compensation (Details 1) - Restricted Stock [Member] - $ / shares	3 Months Ended
	Mar. 31, 2016	Mar. 31, 2015
Stock Based Compensation [Line Items]
Unvested Balance, Number of Shares, Beginning Balance	3,750
Granted, Number of Shares	0
Vested, Number of Shares	0
Unvested Balance, Number of Shares, Ending Balance	3,750
Unvested Balance, Weighted Average Fair Value at Grant Date, Beginning Balance	$ 4.84
Granted, Weighted Average Fair Value at Grant Date	0
Vested, Weighted Average Fair Value at Grant Date	0
Unvested Balance, Weighted Average Fair Value at Grant Date, Ending Balance	$ 4.84
Unvested balance, Weighted Average Remaining Contractual Life (in years)	1 month 28 days	4 months 28 days

XML

Stock-Based Compensation (Details 2)	3 Months Ended
	Mar. 31, 2016	Mar. 31, 2015
Stock Based Compensation [Line Items]
Expected volatility - Low	81.78%	78.74%
Expected volatility - High	87.26%	80.91%
Expected dividends - Low	0.00%	0.00%
Expected dividends - High	0.00%	0.00%
Risk free rate - Low	1.17%	1.13%
Risk free rate - High	1.69%	1.80%
Minimum [Member]
Stock Based Compensation [Line Items]
Expected term (in years)	4 years 9 months 11 days	4 years 9 months 11 days
Maximum [Member]
Stock Based Compensation [Line Items]
Expected term (in years)	7 years 1 month 10 days	8 years 1 month 10 days

XML

Stock-Based Compensation (Details Textual) - USD ($)	1 Months Ended	3 Months Ended
	Feb. 26, 2016	Mar. 31, 2016	Dec. 31, 2015	Jan. 01, 2009
Stock Based Compensation [Line Items]
Stockholders' Equity, Reverse Stock Split	1-for-4
Employee Stock Option [Member]
Stock Based Compensation [Line Items]
Outstanding, Number of Shares, Options		766,851	767,476
Share Based Compensation Arrangement By Share Based Payment Award Options Exercisable Weighted Average Fair Value, Options		$ 3.35
Exercisable, Aggregate Intrinsic Value, Options		$ 38,000
Share-based Compensation Arrangement by Share-based Payment Award, Options, Vested in Period, Fair Value		62,000
Employee Service Share-based Compensation, Nonvested Awards, Total Compensation Cost Not yet Recognized, Options		$ 6,000
Employee Service Share-based Compensation, Nonvested Awards, Total Compensation Cost Not yet Recognized, Period for Recognition, Options		9 months 4 days
Share-Based Compensation Arrangement By Share-Based Payment Award, Equity Instruments Other Than Options, Grants In Period, Weighted Average Grant Date Fair Value		$ 7.91
Exercisable, Number Of Shares		755,601
Share-based Compensation Arrangement by Share-based Payment Award, Options, Vested and Expected to Vest, Outstanding, Number		11,250
Stock Option Plan 2008 [Member]
Stock Based Compensation [Line Items]
Common Stock, Capital Shares Reserved for Future Issuance		1,250,000
Outstanding, Number of Shares, Options		536,848
Stock Option Plan 2008 [Member] | Upto Ten Percentage Of Total Combined Voting Power [Member]
Stock Based Compensation [Line Items]
Maximum Exercise Price Percentage On Fair Market Value		100.00%
Stock Option Plan 2008 [Member] | More Than Ten Percentage Of Total Combined Voting Power [Member]
Stock Based Compensation [Line Items]
Maximum Exercise Price Percentage On Fair Market Value		110.00%
Amended and Restated 1999 Stock Option Plan [Member]
Stock Based Compensation [Line Items]
Outstanding, Number of Shares, Options		226,252
Share-based Compensation Arrangement by Share-based Payment Award, Number of Shares Authorized				937,500
Amended and Restated 1999 Directors Stock Option Plan [Member]
Stock Based Compensation [Line Items]
Outstanding, Number of Shares, Options		3,751
Share-based Compensation Arrangement by Share-based Payment Award, Number of Shares Authorized				18,750

XML

Related Party Transactions (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2016	Mar. 31, 2015
Related party transactions provided to:
Sales of gaming products	$ 5,156	$ 8,282
Melco Crown (Macau) Limited [Member]
Related party transactions provided to:
Sales of gaming products	0	349
MCE Leisure (Philippines) Corporation [Member]
Related party transactions provided to:
Sales of gaming products	159	2,892
Melco Crown Entertainment Limited [Member]
Related party transactions provided to:
Sales of gaming products	0	212
Melco Services Limited [Member]
Related party transactions provided by:
Technical services	1	1
Golden Future (Management Services) Ltd [Member]
Related party transactions provided by:
Management services	63	61
Melco Services Limited [Member]
Related party transactions provided by:
Services agreement	$ 63	$ 4

XML

Related Party Transactions (Details Textual)	Mar. 31, 2016
Melco Services Limited [Member]
Related Party Transaction [Line Items]
Noncontrolling Interest, Ownership Percentage by Parent	64.80%
Melco Crown (Macau) Limited [Member]
Related Party Transaction [Line Items]
Noncontrolling Interest, Ownership Percentage by Parent	90.00%
Melco Crown Entertainment Limited [Member]
Related Party Transaction [Line Items]
Noncontrolling Interest, Ownership Percentage by Parent	34.30%
MCE Leisure (Philippines) Corporation [Member]
Related Party Transaction [Line Items]
Noncontrolling Interest, Ownership Percentage by Parent	72.60%

XML

Income Taxes (Details Textual) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2016	Mar. 31, 2015
Income tax expenses
Income Tax Expenses	$ 119	$ 20
Effective Income Tax Rate Reconciliation, at Federal Statutory Income Tax Rate, Percent	8.80%	3.40%

XML

(Loss)/Earnings Per Share (Details) - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands		3 Months Ended
		Mar. 31, 2016	Mar. 31, 2015
Basic
Net (loss)/income attributable to equity shareholders		$ (1,475)	$ 570
Net (loss)/income attributable to equity shareholders - Number of Shares		14,460	14,450
Net (loss)/income attributable to equity shareholders, Per share Amount (in dollars per share)		$ (0.1)	$ 0.04
Effect of dilutive securities
Dilutive stock options/restricted shares	[1]	0	17
Diluted
Net (loss)/income attributable to equity shareholders plus assumed conversion		$ (1,475)	$ 570
Net (loss)/income attributable to equity shareholders plus assumed conversion - Number of shares		14,460	14,467
Net (loss)/income attributable to equity shareholders plus assumed conversion - Per Share Amount (in dollars per share)		$ (0.1)	$ 0.04

[1] There was no difference in diluted loss per share from basic loss per share as the assumed exercise of common stock equivalents would have an anti-dilutive effect due to losses for the three-month period ended March 31, 2016.

XML

(Loss)/Earnings Per Share (Details Textual) - shares	3 Months Ended
	Mar. 31, 2016	Mar. 31, 2015
Earnings Loss Per Share [Line Items]
Antidilutive Securities Excluded from Computation of Earnings Per Share, Amount	743,630	753,988

XML

Retirement Plan (Details 1) - USD ($) $ in Thousands	3 Months Ended	12 Months Ended
	Mar. 31, 2016	Dec. 31, 2015
Balance at the beginning	$ 23	$ 29
Service cost	0	8
Interest cost	0	1
Actuarial gain and others	0	(15)
Balance at the ending	$ 23	$ 23

XML

Asset Retirement Obligations (Details) - USD ($) $ in Thousands	3 Months Ended	12 Months Ended
	Mar. 31, 2016	Dec. 31, 2015
Balance at the beginning	$ 99	$ 92
Accretion expense	0	7
Balance at the ending	$ 99	$ 99

XML

Accumulated Other Comprehensive Income (Details) - USD ($) $ in Thousands	3 Months Ended	12 Months Ended
	Mar. 31, 2016	Dec. 31, 2015
Accumulated Other Comprehensive Income (Loss) [Line Items]
Defined Benefit Pension Plan, Beginning Balance	$ 90	$ 87
Defined Benefit Pension Plan, Current period other comprehensive income/(loss)	0	3
Defined Benefit Pension Plan, Ending Balance	90	90
Foreign Currency Translation, Beginning Balance	619	666
Foreign Currency Translation, Current period other comprehensive income/(loss)	29	(47)
Foreign Currency Translation, Ending Balance	648	619
Accumulated Other Comprehensive Income, Beginning Balance	709	753
Accumulated Other Comprehensive Income, Current period other comprehensive income/(loss)	29	(44)
Accumulated Other Comprehensive Income, Ending Balance	$ 738	$ 709

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Subsequent Events (Details Textual) - Subsequent Event [Member] - USD ($)	May. 11, 2016	Apr. 21, 2016
Subsequent Event [Line Items]
Estimated Purchase Price Allocation for Assets Acquired		$ 5,900,000
Final Purchase Price Excluding Earn Out Payments	$ 5.9