Entertainment Gaming Asia to Sell Non-Gaming Manufacturing Operations in Australia, Will Relocate Production of Dolphin Gaming Chips, Plaques to Hong Kong

Entertainment Gaming Asia Inc. (NASDAQ: EGT) (“Entertainment Gaming Asia” or“the Company”), a leading gaming company focused on emerging gaming markets inPan-Asia, today announced it plans to sell its non-gaming manufacturingoperations of its wholly-owned Dolphin Products subsidiary in Melbourne,Australia (“Dolphin Australia”) in a management-led buyout and relocate itsmanufacturing operations for its gaming chips and plaques to a high-tech andhigh-security facility in Hong Kong. These actions enable the Company to exita non-core, legacy business and are expected to enhance the profitability ofits higher potential gaming chips and plaques division and better penetrateand service the growing Asian gaming markets. Dolphin Australia presentlymanufactures and sells a comprehensive suite of RFID and traditional gamingchips and plaques with state-of-the-art security features as well as plasticcomponents primarily for the automotive industry. Both gaming chips andplaques and the non-gaming businesses, referred to on a combined basis as“Other Products” in the Company's financial statements, contributed $7.9million in revenue for the first nine months of 2012.Over the last several years, the Company has made a strategic shift in focusof its “Other Products” operations toward the manufacture and sale of gamingchips and plaques and away from the lower-margin, non-gaming plasticcomponents. With investments in gaming product development and targetedmarketing programs, the Company has made significant progress in furtherstrengthening its existing customer relationships in its core gaming marketsof Australia and Macau and broadening its customer base in existing and newgeographies, such as the Philippines and Indo-China. As a result, the Companyhas achieved strong improvement in gaming chip and plaque revenue, whichreached approximately $3.2 million for the first nine months of 2012 comparedto approximately $756,000 for the same period in 2011.After reviewing its other alternatives, such as liquidation of the non-gamingbusiness or the possibility of selling it to an unrelated third party, theCompany has elected to sell the non-gaming manufacturing operations in amanagement-led buyout to Dolphin Australia's existing general manager ofoperations. Total consideration for the sale of these assets is AUD$350,000(approximately US$361,000 based on conversion rates as of February 22, 2013)to be paid upon completion of the transaction on or before March 28, 2013.Prior to completion, all business and assets that relate to the gaming chipand plaque production operations, including but not limited to, the equipmentand tooling, finished goods, work-in-progress, raw materials, business orders,technology know-how, and related intellectual property rights, will betransferred to the new Dolphin operations in Hong Kong. For a period of up tofive years after the completion of the sale, the non-gaming operations underthe new ownership will not be permitted to engage in the gaming business inAustralia and certain countries in Asia. The Company will terminate theemployment of all existing Dolphin Australia employees, including the existinggeneral manager of operations, and pay the severance costs to them as part ofthe transaction although some of them may be re-employed in the non-gamingoperations under the new ownership.The Company expects to record one-time cash costs associated with the sale andrelocation, which include severance and new facility set-up, of approximately$1.7 million, net of the consideration for the sale of the non-gamingmanufacturing assets. These costs will be incurred in 2013 and will be fundedfrom the Company's available working capital. The Company expects the newDolphin facility in Hong Kong to commence operations in the second quarter of2013 and that there should be minimal to no disruption in fulfilling gamingchip and plaque orders during the transition of the relocation.During 2012, the Company made investments in new equipment and the developmentof in-house manufacturing processes for Dolphin Australia to improveproduction efficiency and capacity. The benefits of those investments will beretained and transferred to the new Hong Kong facility. The relocation ofgaming chip and plaque production to Hong Kong is anticipated to furtherenhance production efficiencies, escalate the development of its product rangeand high-security features by availing the Company to greater high-techresources, improve monitoring and controls, and reduce estimated annualoverhead costs by over $1 million. The cost reductions are primarily relatedto payroll (average hourly casual labor rate in Australia is approximately $20compared to $5 in Hong Kong) and administration by consolidating certainsupport functions. The Company believes that these efforts will enable it tomaintain the price competitiveness of its gaming products and broaden anddeepen its customer relationships in the growing gaming markets in Asia.