Elixir Gaming Technologies Reports 2009 Second Quarter Results and Provides Market Update

Recent Highlights:

-- Consolidated adjusted EBITDA (earnings before interest, taxes, depreciation, amortization, and non-cash charges) was $1.5 million for the second quarter of 2009.

-- Average win per unit per day (WUD) for the second quarter 2009 was $95, an increase of 53% on a quarterly sequential basis. Average WUD for the Philippines and Cambodia was $58 and $197, respectively, up 2% and 156% on a quarterly sequential basis. -- Average WUD at Premier Club at NagaWorld exceeded $200 in May, June, and third quarter of 2009 to date.

-- Total net revenue from machines on participation for the second quarter 2009 was $1.7 million, an increase of 184% on a quarterly sequential basis reflecting strong performance at Premier Club at NagaWorld, a full quarter contribution from the Company's operations at Premier Club, and steady WUD improvements from our Philippines operations.

-- Consolidated revenue for the second quarter of 2009 included $3.0 million from a large RFID gaming chip order to the new City of Dreams casino in Macau.

-- Continued progress on initiatives to reduce recurring operating costs with second quarter 2009 cash SG&A expense down 30% from the prior quarter and 55% from the year-ago period.

-- Settlement of two legacy legal suits, which resulted in a total gain of $2.4 million in the second quarter of 2009.

-- $9.5 million in cash as of June 30, 2009.

-- As of August 11, 2009, total installed units in operation were 1,216 in eight venues, comprised of seven venues in the Philippines with a total of 976 installed units (includes 135 machines in one venue still in a soft open phase) and one venue in Cambodia with a total of 240 installed units. -- Approximately 365 additional machines under contract to be installed within the next two months, including 200 additional machines at NagaWorld and approximately 165 machines in one venue in the Philippines.

-- In July, amended note terms with Elixir International (ELI) to defer principal and interest payments until July 2010 providing immediate cash flow benefits to Elixir Gaming and improved financial flexibility.

Clarence Chung, Chairman and Chief Executive Officer of Elixir Gaming, commented, "Elixir Gaming has successfully restructured its operations and streamlined its cost structure. The results are beginning to be reflected in our financial performance with the achievement of record quarterly results for both consolidated and core gaming machine participation revenue and consolidated adjusted EBITDA since our new business model was first effected in September 2007. With solid momentum in our core gaming participation operations, the successful refocusing of our operations and execution of our cost reduction initiatives, and greatly improved financial flexibility due to the recently announced forbearance terms of our note due to ELI, Elixir Gaming is better positioned to capitalize on selected expansion opportunities, realize the benefits from the inherent leverage in our business model, and grow shareholder value."

Strong Net Win per Unit per Day (WUD) for Gaming Machine Participation Operations

Consolidated average WUD for the second quarter 2009 was $95, up 53% from the first quarter 2009 and up 228% from the prior-year period. The improvement was primarily driven by strong performance at Premier Club at NagaWorld in Cambodia as well as steady gains in average WUD in the Philippines operations.

Average WUD for the quarter for Premier Club at NagaWorld, the Company's sole venue in operation in Cambodia, was $197, up 156% from $77 in the first quarter of 2009. Since the Company's initial machine placements at Premier Club at the end of January 2009, Elixir Gaming has experienced aggressive growth in average WUD. In May, June, and third quarter to date, the Company has achieved average WUD in excess of $200 on a stable average operating machine base of 240 units.

In the Philippines, Elixir Gaming continued to generate modest improvements in average WUD during the second quarter 2009. Average WUD increased to $58, up 2% from $57 in the first quarter 2009 and up 61% from $36 in the prior-year period. The tempered quarterly sequential growth rate reflects normal seasonal weakness in the summer months. Seasonality along with severe rainstorms in the metro Manila area in the Philippines in recent weeks have resulted in some softness to the Company's WUD in the first half of the third quarter of 2009. Further, given the recent and upcoming planned growth in the installed machine base, which is primarily focused on the opening of new venues, and the typical WUD ramp-up period associated with new venues, these new installations may have a near-term negative impact on the average WUD as their operations scale up.

However, the Company recently began implementing more targeted marketing and promotion initiatives, which it believes will help to counter these current conditions and accelerate future growth in WUD in this market. Further, the strength of the Company's operations in NagaWorld and anticipated growth in gaming machine placements should more than offset the softness in the beginning of the quarter in Philippines WUD, resulting in projected quarterly sequential improvement in gaming machine participation revenue in the third quarter 2009.

Clarence Chung continued, "Elixir Gaming's successful operations at Premier Club and contract to install 200 additional machines in NagaWorld demonstrate our expertise in slot management. We look forward to expanding our slot operations within NagaWorld and working with our partners there to develop and implement marketing strategies aimed at maximizing gaming participation revenue and average net win results from our growing base of installed units.

"In the Philippines, we continue to be proactive in our efforts to improve net wins and are working closely with our venue partners in this market on the implementation of additional marketing and promotional initiatives. We expect to realize the full benefits of these initiatives, which leverage our expertise in marketing and promotional programs that have been proven successful in our operations at Premier Club at NagaWorld, in several quarters time. In addition, with the incremental benefit of several new, well-located venues becoming operational in the second half of the year, we remain confident that we can improve our revenues and long-term net win per machine derived from our venues in the Philippines."

Gaming Machine Installation Growth

Elixir Gaming's operating machine base as of August 11, 2009 was 1,216, up 14% from the end of the first quarter of 2009. The Company has a total of eight venues in operation, comprised of seven venues in the Philippines with a total of 976 installed units and one venue in Cambodia with a total of 240 installed units. This compares to a total of 6 venues in operation, comprised of 5 venues in the Philippines with a total of 831 installed units and 1 venue in Cambodia with a total of 237 installed units as of March 31, 2009.

The growth in the Company's operating machine base since the end of the first quarter of 2009 was driven by the opening of two new venues with a total of 179 machine placements in the Philippines. These 179 placements include 44 machines at one new venue, which is now fully deployed under the current contract, and 135 machines of a total contracted 150 machines in another venue, which is currently operating as a soft open until the remainder of the machines are deployed in August. The additional machine placements were offset by the removal of a total of 34 machines from two of our venues in the Philippines as a result of routine machine mix shifts driven by Elixir Gaming's WUD optimization initiatives.

The Company has approximately 365 additional machines currently under contract, which it expects will be in operation within the next two months. These installations include approximately 165 machines at two venues in the Philippines and, as recently announced, 200 additional machines at a prominent location on the casino floor at NagaWorld in Cambodia.

Mr. Chung added, "Our expansion plans to add approximately 365 machine placements to our installed base within the next two months are on track. Importantly, these new machine installations will be sourced primarily from our existing inventory, thereby minimizing required amounts of capital expenditures. In addition, we continue to explore selected expansion opportunities in our existing and new markets for potential deployment as early as the fourth quarter of 2009."

Successful Implementation of Cost Reduction Initiatives

While executing measures to improve WUD and expand the Company's installed base, Elixir Gaming has successfully executed against its expense reduction initiatives and materially streamlined its cost structure. Elixir Gaming reduced selling, general, and administrative (SG&A) cash expense for the second quarter and the first half of 2009 to $1.8 million and $4.4 million, representing dramatic declines of 55% and 39% from the respective year-ago periods.

Based on the Company's successful execution of its cost reduction initiatives, Elixir Gaming expects to maintain quarterly SG&A cash expense at under $2.0 million. Maintaining quarterly SG&A cash expense at under $2.0 million would represent annualized savings of 45% in this metric compared to 2008 levels, and would provide further flexibility to pursue growth.

Q2 2009 Financial Review

Elixir Gaming's second quarter 2009 total revenues were $5.8 million compared to $1.8 million in the first quarter of 2009 and $3.3 million for the second quarter of 2008. The second quarter of 2009 revenue included a $3.0 million RFID gaming chip order to the new City of Dreams casino in Macau. Revenue from gaming machines on participation was $1.7 million in the second quarter of 2009 compared to revenue of $0.9 million in the first quarter of 2009 and $0.8 million in the second quarter of 2008. Revenue from gaming machines on participation was impacted in the quarter by the strong WUD growth at Premier Club at NagaWorld, a full quarter of contribution from the Company's operations at Premier Club at NagaWorld, and steady improvement in average WUD at the Company's Philippine venues.

In Cambodia, the Company recorded revenue from gaming machines on participation of $1.0 million, up 216% from the first quarter of 2009 and up 215% from the year-ago period. In the Philippines, revenue from gaming machines on participation for the second quarter of 2009 was $0.7 million, up 17% from the first quarter of 2009 and up 64% from the year-ago period.

The Company continues to recognize revenue from 180 machines at one venue in the Philippines on a cash basis. The Company believes this is an isolated situation and its machine placements in this venue remain in operation as Elixir Gaming believes it is making solid progress in finalizing a settlement agreement with the owner.

Adjusted EBITDA (earnings before interest, taxes, depreciation, amortization, and non-cash charges) was $1.5 million in for the second quarter of 2009 compared to a loss of $2.5 million in the first quarter of 2009 and a loss of $3.0 million in the second quarter of 2008.

Elixir Gaming reported a second quarter 2009 net loss of $132,607, or $0.00 per share, on a weighted average share count of approximately 115.0 million shares compared to a net loss for the second quarter of 2008 of $9.6 million, or $0.08 per share, on a weighted average share count of approximately 115.0 million shares. The second quarter 2009 net loss declined significantly compared to the net loss in the prior-year period due to: higher revenues from table game products; higher gaming participation revenues driven by improving average WUD; substantially reduced operating expenses; net income from discontinued operations of $1.8 million, or $0.02 per share, in the second quarter of 2009 related to the sale of the shuffler business; a one-time gain of $0.7 million related to the settlement of a legacy legal suit; and foreign exchange gains compared to losses in the second quarter 2008; all of which were partially offset by the higher depreciation impact on the Company's gaming machine participation business as it continues to ramp up net wins, lower sales and resulting gross margins in the Company's non-gaming business, and income tax expense compared to a benefit in the second quarter of 2008.

Elixir Gaming is hosting a conference call and simultaneous webcast at 8:30 a.m. ET today, August 13, both of which are open to the general public. The conference call number is 800/753-0594 or 212/231-2900. Questions and answers will be reserved for call-in analysts and investors. Interested parties may also access the live call on the Internet at www.elixirgaming.com; please allow 15 minutes to register and download and install any necessary software. Following its completion, a replay of the call can be accessed for thirty days on the Internet at www.elixirgaming.com.

About Elixir Gaming Technologies, Inc.

Elixir Gaming Technologies, Inc. (NYSE Amex: EGT | Quote | Chart | News | PowerRating) is a provider of gaming technology solutions. The Company secures long-term contracts to provide comprehensive turn-key solutions to 3, 4, and 5 star hotels and other well-located venues in Asia that seek to offer casino gaming products. The Company retains ownership of the gaming machines and systems and receives recurring daily fees based on an agreed upon percentage of the net gaming win per machine and provides on-site maintenance. The Company has established a strategic presence in the Asia Pacific region with a focus on the Philippines and Cambodia markets. For more information please visit www.elixirgaming.com.

Forward Looking Statements

This press release contains forward-looking statements concerning Elixir Gaming, within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Those forward-looking statements include statements regarding expectations for the business of Elixir Gaming, its working capital requirements and future revenue and profitability. Such statements are subject to certain risks and uncertainties, and actual circumstances, events or results may differ materially from those projected in such forward-looking statements. Factors that could cause or contribute to differences include, but are not limited to, risks related to Elixir Gaming's inability to place gaming machines at significant levels, whether the gaming machines placed generate the expected amount of net-win, the ability of Elixir Gaming to acquire additional capital as and when needed, the ability of Elixir Gaming to collect revenue and protect its assets and those other risks set forth in Elixir Gaming's annual report on Form 10-K for the year ended December 31, 2008 filed with the SEC on March 30, 2009 and our Form 10-Q for the three months ended March 31, 2009 filed on May 15, 2009. Elixir Gaming cautions readers not to place undue reliance on any forward-looking statements. Elixir Gaming does not undertake, and specifically disclaims any obligation to update or revise such statements to reflect new circumstances or unanticipated events as they occur.

Elixir Gaming Technologies
Consolidated Statements of Operations
(Unaudited)
                                                               Three Months Ended June 30,    Six Months Ended June 30,
                                                               2009           2008            2009           2008
Revenues:
Gaming machine participation                                $  1,743,063    $ 768,911      $  2,688,798    $ 1,287,528
Table game products                                            3,190,978      236,842         3,269,044      340,836
Non-gaming products                                            838,685        2,328,581       1,517,294      4,061,458
                                                               5,772,726      3,334,334       7,475,136      5,689,822
Operating costs and expenses:
Cost of sales gaming machine participation:
Machine depreciation                                           2,425,220      2,095,892       4,815,685      3,388,646
Write-down of gaming assets                                    --             --              378,980        --
Other operating costs                                          174,528        113,849         515,532        209,296
Cost of table game products                                    1,890,800      177,021         1,873,061      264,776
Cost of non-gaming products                                    994,470        1,938,385       1,750,884      3,470,870
Selling, general and administrative                            2,075,218      6,598,356       4,872,914      11,600,107
Impairment of assets                                           --             1,368,829       --             1,368,829
Research and development                                       74,658         232,548         129,547        467,822
Depreciation and amortization                                  255,417        232,503         564,771        456,850
Restructuring charges                                          88,631         2,706           587,799        168,276
                                                               7,978,942      12,760,089      15,489,173     21,395,472
Loss from operations                                           (2,206,216)    (9,425,755)     (8,014,037)    (15,705,650)
Other income (expense):
Interest expense and finance fees                              (112,258)      (220,234)       (248,196)      (274,520)
Interest income                                                26,044         155,436         64,432         522,187
Loss on dispositions                                           (93,868)       --              (93,698)       --
Foreign currency gain/(loss)                                   64,037         (198,439)       (62,529)       641,527
Other                                                          725,642        79,768          737,850        160,294
                                                               609,597        (183,469)       397,859        1,049,488
Loss before income tax and discontinued operations             (1,596,619)    (9,609,224)     (7,616,178)    (14,656,162)
Income tax benefit/(expense)                                   (295,902)      9,643           (299,094)      (22,498)
Net profit (loss) from continuing operations                   (1,892,521)    (9,599,581)     (7,915,272)    (14,678,660)
Net profit (loss) from discontinued operations, net of tax     1,759,914      48,535          1,541,817      (173,937)
Net profit (loss)                                           $  (132,607)    $ (9,551,046)  $  (6,373,455)  $ (14,852,597)
Earnings (loss) per share
Income (loss) from continuing operations                    $  (0.02)       $ (0.08)       $  (0.07)       $ (0.13)
Income (loss) from discontinued operations                  $  0.02         $ 0.00         $  0.01           0.00
Basic and diluted loss per share                            $  0.00         $ (0.08)       $  (0.06)       $ (0.13)
Weighted average common shares outstanding                     114,956,671    114,956,451     114,956,671    114,940,007

Elixir Gaming Technologies, Inc.
Consolidated Balance Sheets
                                                                          June 30,            December 31,
                                                                          2009                2008
ASSETS                                                                    (Unaudited)
Current assets:
Cash and cash equivalents                                            $    9,514,655      $    14,504,433
Accounts receivable, trade, net of allowance for uncollectibles of        2,682,369           1,336,261
$634,618 in 2009 and $923,603 in 2008
Due from a related party                                                  8,176               531,109
Other receivables                                                         329,297             78,082
Inventories                                                               454,375             1,096,046
Prepaid expenses and other current assets                                 967,194             1,299,487
Total current assets                                                      13,956,066          18,845,418
Gaming equipment and systems, net of accumulated depreciation of          44,144,417          48,351,545
$11,232,207 in 2009 and $7,081,817 in 2008
Property and equipment, net of accumulated depreciation of                3,463,417           3,724,467
$3,241,840 in 2009 and $2,917,153 in 2008
Intangible assets, net of accumulated amortization of $1,669,327 in       3,663,275           4,123,403
2009 and $2,356,271 in 2008
Goodwill                                                                  84,210              84,210
Deposits and other assets                                                 966,649             1,284,679
Total assets                                                         $    66,278,034     $    76,413,722
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable                                                     $    1,169,132      $    806,538
Amount due to a related party                                             4,490               27,672
Accrued expenses                                                          1,711,780           2,712,758
Deferred revenue                                                          318,614             --
Short-term debt                                                           --                  29,372
Notes payable to a related party, current portion                         6,032,691           5,884,049
Capital lease obligations, current portion                                219,088             269,371
Customer deposits                                                         40,172              1,525,569
Total current liabilities                                                 9,495,967           11,255,329
Notes payable to a related party, net of current portion                  3,131,118           6,185,088
Capital lease obligations, net of current portion                         444,124             468,424
Other liabilities                                                         775,495             525,986
Deferred tax liability                                                    769,459             495,560
Total liabilities                                                         14,616,163          18,930,387
Stockholders' equity:
Common stock, $.001 par value, 300,000,000 shares authorized;             114,957             114,957
114,956,671 and 114,956,671 shares issued and outstanding
Additional paid-in-capital                                                414,434,000         413,987,829
Accumulated other comprehensive income/ (losses)                          (1,946,973)         (2,107,842)
Accumulated deficit                                                       (360,940,113)       (354,511,609)
Total stockholders' equity                                                51,661,871          57,483,335
Total liabilities and stockholders' equity                           $    66,278,034     $    76,413,722

Elixir Gaming Technologies
Adjusted EBITDA
(Unaudited)
                                            Three Months Ended June 30,    Six Months Ended June 30,
                                            2009           2008            2009           2008
Net loss from continuing operations      $  (1,892,521)  $ (9,599,581)  $  (7,915,272)  $ (14,678,660)
Depreciation and amortization               2,745,407      2,442,628       5,555,652      4,064,739
Interest expense                            112,258        220,234         248,196        274,520
Income tax expense                          295,902        (9,643)         299,094        22,498
Stock option expense                        244,315        2,565,258       446,170        4,367,579
Impairment/ Write down of gaming assets     --             1,368,829       378,980        1,368,829
EBITDA, as adjusted                      $  1,505,361    $ (3,012,275)  $  (987,180)    $ (4,580,495)

Note: The Company defines adjusted EBITDA as earnings before interest, taxes, depreciation, amortization, and non-cash charges.

SOURCE: Elixir Gaming Technologies, Inc.

Elixir Gaming 
Traci Mangini, 702-617-4741 
SVP, Corporate Finance