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Acres Gaming Reports Record Q2 2001

9 February 2001

LAS VEGAS, Nevada--(Press Release)--Feb. 9, 2001--Acres Gaming Inc. (Nasdaq:AGAM) reported its results of operations for its second fiscal quarter and six-month period ended Dec. 31, 2000.

Revenues for the quarter ended Dec. 31, 2000, were $10.2 million, nearly double the $5.4 million of revenue recorded in the prior-year quarter. Net income for the quarter was $1.5 million ($.17 per share-basic and $.13 per share-diluted) compared to $420,000 ($.05 per share-basic and $.04 per share-diluted) in the prior-year quarter.

Revenues for the first half of fiscal 2001 were $13.0 million, 12 percent higher than the $11.6 million recorded in the same period in the prior year. The first-half net loss totaled $110,000 ($.01 per share-basic and diluted) vs. net income of $814,000 ($.09 per share-basic and $.07 per share-diluted) for the first half of fiscal 2000.

Net revenues for the current quarter were primarily from Acres Advantage(TM) products for properties operated by Station Casinos Inc., MGM MIRAGE and Mandalay Resort Group, as well as MonteCasino in South Africa and five Native American casinos in California. In the prior-year quarter, revenues were primarily from products for MotorCity Casino, a Mandalay Resort Group property in Detroit, and Crown Casino in Australia.

``We are very pleased with this revenue increase, our record high order backlog of $19.5 million as of December 31, 2000, and our continuing business with premier casino operators. We expect the momentum in revenue growth to continue in the second half,'' stated Bud Glisson, chairman and CEO.

Gross profit margin decreased to 40 percent in the current quarter vs. 53 percent in the prior-year quarter. For the first half of fiscal 2001, gross profit margins were 36 percent vs. 52 percent in the same period of fiscal 2000. The variances in gross profit margins are primarily the result of differences in product mix.

Net operating expenses increased to $2.6 million in the current quarter from $2.5 million in the prior-year quarter. This increase was the result of increased general and administrative costs partially offset by a $205,000 reduction related to the shift of certain employee efforts from development activities to customer support activities that are reported as cost of revenues.

For the six-month period ended Dec. 31, 2000, the shift of employee efforts amounted to $383,000 and accounted for the majority of the reduction in operating expenses, which decreased to $4.9 million from $5.3 million in the same period of the prior year.

At Dec. 31, 2000, the company had $5.5 million in cash and equivalents and no debt. Accounts receivable balances increased over the June 30, 2000, fiscal year-end balances by $3.1 million, reflecting the increased revenues recorded during the current quarter.

Current liabilities at Dec. 31, 2000, increased from the June 30, 2000, fiscal year-end balances by $7.8 million, primarily as a result of a $6.3 million increase in advance deposits collected from customers and a $1.4 million increase in accounts payable related to the timing of payments on inventory purchases.

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