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Acres Gaming Reports Increases in Q1 Results

1 November 2001

LAS VEGAS, Nevada --(Press Release)—Nov. 1, 2001--Acres Gaming Incorporated (Nasdaq:AGAM), the leader in Bonusing technology for the gaming industry, today announced financial results for the quarter ended September 30, 2001.

Net revenue for the first quarter of fiscal 2002 increased 126% to $6.1 million from $2.7 million for the same quarter last year. Net income for the quarter totaled $417,000, or $.04 per diluted share, compared to a net loss of $1.6 million, or ($.18) per diluted share for the first quarter of fiscal 2001.

Gross profit margin increased to 49% in the current quarter from 23% in the prior year quarter. The increase in gross profit margin was primarily attributable to the fact that software sales, which made up a greater percentage of the current quarter sales, carry a higher gross profit margin than the hardware sales recorded in the quarter ended September 30, 2000. The increase in gross profit margins was partially offset by an increase in fixed overhead expenses of approximately 29% related to an increase in staffing this quarter compared to the prior year quarter.

Net operating expenses in the current year quarter were $425,000 greater than the prior year quarter due primarily to an increase in research and development staff. Net operating expenses as a percentage of revenue were 44% this quarter compared to 82% in the prior year quarter.

At September 30, 2001, the Company had cash and equivalents of $8.8 million, compared to $12.0 million at June 30, 2001. The Company had no debt at either date. The decrease of $3.2 million is primarily attributed to the decrease in current liabilities of $3.7 million during the quarter. The Company's order backlog at September 30, 2001 was $18.5 million, compared to $13.7 million at September 30, 2000. Backlog, however, may not be a meaningful indicator of future revenues. The Company's revenues fluctuate significantly based on the timing of the delivery of any large order.

``While we had a substantial earnings increase compared to year-ago, timing issues on our major contracts depressed revenue from recent quarterly run rates,'' Bud Glisson, Acres' CEO, said.

``Even with this level of revenue, we were still profitable due to margins at nearly 50%, compared to the 36% reported for all of last year, reflecting this quarter's higher mix of software installations. We are in the Bonusing phase of several of our contracts, where the margins are better than on the basic system installations.''

During the quarter the Company received a $3.3 million order from MGM Mirage for an eleven-property player management system. Subsequent to quarter-end the

Company received a deposit of $860,000 from an international customer on an order estimated to total $3.4 million.

``New orders have been understandably slow in this uncertain business environment,'' Glisson continued. ``Most of our prospective customers have continued to pursue their systems projects, but target dates for signed contracts have been delayed. If business conditions continue to stabilize, we would expect to add several new contracts to our already strong backlog, and barring unanticipated regulatory delays, we would expect earnings for the fiscal year ended June 30, 2002 to increase by 20% to 30% over the prior year.''

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