Entertainment Gaming Asia Inc. (NYSE Amex: EGT) (“Entertainment Gaming Asia” or “the Company”), a leading provider of electronic gaming machines on a participation basis to the Pan-Asian gaming industry, today announced that it will reschedule reporting operating results for the fourth quarter and fiscal year ended December 31, 2010 from March 1, 2011 to March 11, 2011 in order to complete an accounting quasi-reorganization. In addition, the Company released certain preliminary fourth quarter and fiscal year ended December 31, 2010 operating figures, which represent significant year-over-year improvement.
A quasi-reorganization is an elective accounting method used to eliminate the deficit in retained earnings against additional paid-in capital combined with fair market value adjustment to assets and liabilities. It enables companies such as Entertainment Gaming Asia, which have undergone a shift in business focus, to establish a fresh start from an accounting perspective. The quasi-reorganization adjustments have no effect on the Company’s cash flow and result in a balance sheet that more accurately reflects the Company’s retained earnings.
While the Company has dramatically improved its operating results and has the expectation of future profitability, it is believed that it is not realistic to expect to be able to recover the existing accumulated deficit in the short to medium term. Therefore, the Company’s Board of Directors authorized management to effect a quasi-reorganization in accordance with Section 210 of the Codification of Financial Reporting Policies. A necessary component of this Codification is the adjustment of assets and liabilities to fair market value as well. As such, the Company has engaged a third-party financial advisor to perform a valuation analysis of the fair value of its assets and liabilities. The results of this analysis may or may not result in a non-cash impairment charge during the fourth quarter 2010 period.
Giving effect to the quasi-reorganization, the Company has eliminated its accumulated deficit account, with a commensurate reduction in its additional paid-in capital, for purposes of establishing a new earned surplus account for the accumulation of future earnings from current operations. The quasi-reorganization was effective as of December 31, 2010.
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