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Acres Gaming Picks Up $4.6 Million Order

When finalized, the contract is expected to generate more than $4.6 million in revenue. Shipments of hardware to Monte Casino are expected to begin in the Company's fourth fiscal quarter with final installation scheduled for the fall of 2000.

"The Monte Casino order represents our first venture into the new and exciting South African market. It also replenishes our backlog which now totals $5.7 million," commented Reed Alewel, Vice President and CFO. "Our revenues continue to come in the form of large contracts which can cause significant variations in our quarterly revenues depending on the timing of order receipt and product delivery.

"Through the first nine months of this fiscal year, Acres has shown notable top-line growth and significant bottom-line improvements. We expect this trend to continue in the fourth fiscal quarter."

Bud Glisson, President and CEO, put the last twelve months in perspective by noting, "March is the first anniversary of the initial installation of the Acres Advantage casino-wide slot system. Beginning with the Mandalay Bay installation, we have completed the development of Wizard (TM) slot accounting, Prophet (TM) player tracking and Merlin (TM) graphical analysis.

"The first installation of Coinless Transit (TM) cashless wagering is nearly complete in Australia and the first modules of Guardian(TM) cage and credit software are in our quality assurance testing lab. We are quite proud that, since its initial introduction, the Acres Advantage product line has generated over $25 million in orders."

Acres also reported its results of operations for its third fiscal quarter and nine-month period ended March 31, 2000. The Company recorded a net loss of $1.1 million ($.13 per share-basic and diluted) in the current year quarter versus a net income of $83,000 ($.01 per share-basic and diluted) in the prior year quarter.

For the nine-month period ended March 31, 2000, operating results improved $2.6 million to a net loss of $327,000 ($.04 per share-basic and diluted) versus a net loss of $2.9 million ($.33 per share-basic and diluted) for the same period in the prior year. Year-to-date EBITDA improved over the prior year by $2.8 million to a positive $1.0 million.

Revenues for the quarter ended March 31, 2000 were $2.2 million versus $6.4 million recorded in the prior year quarter. The current quarter's revenues were primarily the result of continuing progress on the Crown Casino Coinless Transit project in Melbourne, Australia, which is scheduled for completion before the end of the Company's fiscal year.

The prior year quarter's revenues were primarily related to the Acres Advantage installation at Mandalay Bay. Revenues for the first nine months of fiscal 2000 were $13.8 million versus $12.8 million recorded in the same period in the prior year.

Gross profit margin increased to 63 percent in the current quarter from 46 percent in the prior year quarter. For the first nine months of fiscal 2000, gross profit margins were 54 percent versus 46 percent in the same period of fiscal 1999. The current quarter's sales were primarily software related and carry a higher gross profit margin than the prior quarter's sales, which included hardware sales to Mandalay Bay.

Net operating expenses decreased to $2.6 million in the current quarter from $2.9 million in the prior year quarter and decreased to $7.8 million for the first nine months of fiscal 2000 from $9.0 million in the first nine months of the prior year. Reductions in staffing generated $674,000 and $1.7 million in operating expense savings in the quarter and nine-month periods ended March 31, 2000, respectively, as compared to the same periods in the prior year.

The current quarter savings were partially offset by a $315,000 reduction in the amount of certain software customization costs that were allocated out of operating expenses and into cost of goods sold. The year-to-date savings were partially offset by a $371,000 reduction in amounts capitalized as software development costs. At March 31, 2000, the Company had $871,000 in cash and equivalents. In April 2000, after the close of the current quarter, the Company received a $1.2 million deposit from Tsogo Sun, Ltd. The Company currently does not have any debt but has obtained a commitment from its commercial bank to provide up to $2.0 million in short-term financing.

Accounts receivable balances increased over the June 30, 1999 fiscal year end balances by $1.2 million reflecting the payment terms of the Crown Casino contract, which calls for final payment upon completion of the Coinless Transit project. Inventory balances decreased by $1.4 million from the June 30, 1999 fiscal year end balances primarily due to hardware deliveries to MotorCity and Crown Casino.

Current liabilities at March 31, 2000 decreased from the June 30, 1999 fiscal year end balances by $5.5 million primarily as a result of revenue recognition of the advance deposits collected from customers. The timing of cash payments and general reductions in amounts owed to vendors accounted for a $781,000 reduction in current liabilities.

Additionally, the June 30, 1999 current liability balance included a $386,000 accrual related to relocating the Company's headquarters to Las Vegas that was fully paid by March 31, 2000.

Acres Gaming provides products and services to casinos worldwide, using its proprietary Acres Bonusing Technology(TM) to increase player enjoyment and casino efficiency and profitability. Detailed descriptions of the promotions made available by Acres Bonusing(TM) as well as other products offered by Acres Gaming, are available at the Company's Web site, www.acresgaming.com. The Company has offices in Las Vegas, Nevada and Corvallis, Oregon.

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