Gaming Partners International CORP (Form: 10-Q, Received: 08/11/2016 09:36:31)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

(Mark One)
x		QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the Quarterly Period Ended: June 30, 2016

OR

¨		TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission file number: 0-23588

GAMING PARTNERS INTERNATIONAL CORPORATION

(Exact name of registrant as specified in its charter)

NEVADA		88-0310433
(State or other jurisdiction		(I.R.S. Employer Identification No.)
of incorporation or organization)

3945 West Cheyenne Avenue,		89032
North Las Vegas, Nevada		(Zip Code)
(Address of principal executive offices)

(702) 384-2425

(Registrant’s telephone number, including area code)

None

(Former name, former address and former fiscal year, if changed since last report)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that registrant was required to submit and post such files). Yes x No ¨

Indicate by check mark whether the registrant is a large accelerated filer an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer,” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer ¨		Accelerated filer ¨

Non-accelerated filer ¨		Smaller reporting company x
(Do not check if a smaller reporting company)

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ¨ No x

The number of shares outstanding of each of the registrant’s classes of common stock as of July 28, 2016, the latest practicable date, was 7,928,594 shares of Common Stock.

GAMING PARTNERS INTERNATIONAL CORPORATION

QUARTERLY REPORT ON FORM 10-Q FOR THE QUARTER ENDED JUNE 30, 2016

TABLE OF CONTENTS

PART I.	FINANCIAL INFORMATION	1

ITEM 1.	FINANCIAL STATEMENTS	1

	CONDENSED CONSOLIDATED BALANCE SHEETS (unaudited)	1
	CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (unaudited)	2
	CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (unaudited)	3
	CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (unaudited)	4
	CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited)	5
	NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)	6

ITEM 2.	MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS	15

ITEM 3.	QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK	23

ITEM 4.	CONTROLS AND PROCEDURES	23

PART II.	OTHER INFORMATION	24

ITEM 1.	LEGAL PROCEEDINGS	24

ITEM 1A.	RISK FACTORS	24

ITEM 2.	UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS	24

ITEM 3.	DEFAULTS UPON SENIOR SECURITIES	24

ITEM 4.	MINE SAFETY DISCLOSURES	24

ITEM 5.	OTHER INFORMATION	24

ITEM 6.	EXHIBITS	25

SIGNATURES		26

PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

CONDENSED CONSOLIDATED BALANCE SHEETS

(unaudited)

(in thousands, except share amounts)

	June 30,			December 31,
	2016			2015
ASSETS
Current Assets:
Cash and cash equivalents	$	11,026		$	17,788
Marketable securities		1,674			3,503
Accounts receivable, net		11,591			10,677
Inventories		13,402			10,199
Prepaid expenses		726			947
Deferred income tax assets		2,085			1,640
Other current assets		2,708			1,576
Total current assets		43,212			46,330
Property and equipment, net		21,805			14,102
Goodwill		10,292			10,292
Intangible assets, net		2,368			2,505
Deferred income tax assets		644			710
Inventories, non-current		898			670
Other assets, non-current		2,642			2,635
Total assets Total assets	$	81,861		$	77,244

LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable	$	3,619		$	4,498
Accrued liabilities		6,154			6,456
Customer deposits and deferred revenue		5,101			2,080
Current portion of long-term debt		1,359			1,343
Income taxes payable		1,107			824
Total current liabilities		17,340			15,201
Long-term debt		7,325			8,002
Deferred income tax liabilities		107			170
Other liabilities, non-current		1,076			83
Total liabilities Total liabilities		25,848			23,456
Commitments and contingencies - see Note 9
Stockholders' Equity:
Preferred stock, authorized 10,000,000 shares, $0.01 par value, none issued and outstanding		-			-
Common stock, authorized 30,000,000 shares, $0.01 par value, 8,219,577 shares issued and 7,928,594 shares outstanding		82			82
Additional paid-in capital		20,009			20,033
Treasury stock at cost: 290,983 shares		(2,263	)		(2,263	)
Retained earnings		39,809			37,812
Accumulated other comprehensive loss		(1,624	)		(1,876	)
Total stockholders' equity		56,013			53,788
Total liabilities and stockholders' equity	$	81,861		$	77,244

See notes to unaudited condensed consolidated financial statements.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(unaudited)

(in thousands, except per-share amounts)

	Three Months Ended					Six Months Ended
	June 30,					June 30,
	2016		2015			2016			2015
Revenues	$	20,344	$	16,249		$	36,437		$	34,905
Cost of revenues		13,027		11,615			25,152			23,947
Gross profit		7,317		4,634			11,285			10,958

Marketing and sales		1,573		1,384			3,098			3,184
General and administrative		2,519		2,466			4,692			4,882
Research and development		352		311			659			650
Operating income		2,873		473			2,836			2,242
Other income (expense), net		7		(103	)		(75	)		(68	)
Income before income taxes		2,880		370			2,761			2,174
Income tax provision		803		511			764			358
Net income (loss)	$	2,077	$	(141	)	$	1,997		$	1,816

Earnings per share:
Basic	$	0.26	$	(0.02	)	$	0.25		$	0.23
Diluted	$	0.26	$	(0.02	)	$	0.25		$	0.23
Weighted-average shares of common stock outstanding:
Basic		7,929		7,929			7,929			7,922
Diluted		8,037		7,929			8,038			8,035

See notes to unaudited condensed consolidated financial statements.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(unaudited)

(in thousands)

	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2016			2015			2016		2015
Net income (loss)	$	2,077		$	(141	)	$	1,997	$	1,816
Other comprehensive (loss) income:
Foreign currency translation adjustment		(293	)		301			252		(1,320	)
Other comprehensive (loss) income		(293	)		301			252		(1,320	)
Total comprehensive income	$	1,784		$	160		$	2,249	$	496

See notes to unaudited condensed consolidated financial statements.

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(unaudited)

(in thousands, except share amounts)

													Accumulated
	Common Stock				Additional Paid-In			Treasury			Retained		Other Comprehensive
	Shares		Amount		Capital			Stock			Earnings		(Loss) Income			Total

Balance, January 1, 2015		7,916,094	$	82	$	19,886		$	(2,263	)	$	30,881	$	(321	)	$	48,265
Net income		-		-		-			-			1,816		-			1,816
Common stock options exercised		12,500		-		87			-			-		-			87
Stock compensation expense		-		-		38			-			-		-			38
Tax impact of stock options		-		-		3			-			-		-			3
Foreign currency translation adjustment		-		-		-			-			-		(1,320	)		(1,320	)
Balance, June 30, 2015		7,928,594	$	82	$	20,014		$	(2,263	)	$	32,697	$	(1,641	)	$	48,889

Balance, January 1, 2016		7,928,594	$	82	$	20,033		$	(2,263	)	$	37,812	$	(1,876	)	$	53,788
Net income		-		-		-			-			1,997		-			1,997
Stock compensation expense		-		-		43			-			-		-			43
Tax impact of stock options		-		-		(67	)		-			-		-			(67	)
Foreign currency translation adjustment		-		-		-			-			-		252			252
Balance, June 30, 2016		7,928,594	$	82	$	20,009		$	(2,263	)	$	39,809	$	(1,624	)	$	56,013

See notes to unaudited condensed consolidated financial statements.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(unaudited)

(in thousands)

	Six Months Ended
	June 30,
	2016			2015

Cash Flows from Operating Activities
Net income	$	1,997		$	1,816
Adjustments to reconcile net income to net cash (used in) provided by operating activities:
Depreciation of property and equipment		1,329			1,317
Amortization of intangible assets		138			149
Provision for bad debt		115			533
Deferred income taxes		(445	)		(1,107	)
Stock compensation expense		43			38
Tax impact of stock options		(67	)		3
Gain on sale or disposal of property, plant and equipment		-			(26	)
Gain on sale of marketable securities		(1	)		(2	)
Change in operating assets and liabilities:
Accounts receivable		(1,027	)		2,157
Inventories		(3,379	)		(691	)
Prepaid expenses and other current assets		(890	)		(647	)
Non-current other assets		21			110
Accounts payable		(950	)		929
Accrued liabilities		(1,700	)		190
Customer deposits and deferred revenue		3,019			3,323
Income taxes payable		283			1,072
Net cash (used in) provided by operating activities		(1,514	)		9,164

Cash Flows from Investing Activities
Purchases of marketable securities		-			(6,252	)
Proceeds from sale of marketable securities		1,903			3,797
Proceeds from sale of property and equipment		-			31
Capital expenditures		(6,568	)		(790	)
Net cash used in investing activities		(4,665	)		(3,214	)

Cash Flows from Financing Activities
Cash paid for demand line of credit		-			(10,000	)
Proceeds from debt obligation		-			10,000
Principal payments on long-term debt		(662	)		-
Proceeds from exercise of stock options		-			87
Net cash (used in) provided by financing activities		(662	)		87
Effect of exchange rate changes on cash		79			(381	)
Net (decrease) increase in cash and cash equivalents		(6,762	)		5,656
Cash and cash equivalents, beginning of period		17,788			8,969
Cash and cash equivalents, end of period	$	11,026		$	14,625

Supplemental disclosures of cash flow information
Cash paid for interest	$	123		$	124
Cash paid for income taxes, net of refunds	$	1,038		$	280

Supplemental disclosures of non-cash investing and financing activities
Property, plant, and equipment acquired through accounts payable	$	2,400		$	46

See notes to unaudited condensed consolidated financial statements.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

Note 1. Nature of Business and Significant Accounting Policies

Organization and Nature of Business

Gaming Partners International Corporation (GPIC or the Company) is headquartered in North Las Vegas, Nevada. Our business activities include the manufacture and sale of casino currencies, playing cards, table layouts, gaming furniture, table accessories, dice, roulette wheels, and radio frequency identification (RFID) readers and software, all of which are used with casino table games such as blackjack, poker, baccarat, craps, and roulette.

The Company has three operating subsidiaries: Gaming Partners International USA, Inc. (GPI USA) (including GPI Mexicana S.A. de C.V. (GPI Mexicana), our maquiladora manufacturing operation in Mexico, and GPI USA Blue Springs, our manufacturing facility in Missouri); Gaming Partners International SAS (GPI SAS); and Gaming Partners International Asia Limited (GPI Asia). Our subsidiaries have the following distribution and product focus:

•

GPI USA sells in the United States, Canada, the Caribbean, and Latin America. GPI USA sells our full product line, with most of the products manufactured in either San Luis Rio Colorado, Mexico, or Blue Springs, Missouri. The remainder of our products is either manufactured in France or purchased from United States vendors. We warehouse inventory in San Luis, Arizona; Blue Springs, Missouri; and North Las Vegas, Nevada. We have sales offices in North Las Vegas, Nevada; Atlantic City, New Jersey; Gulfport, Mississippi; and Blue Springs, Missouri.

•

GPI SAS sells primarily in Europe and Africa out of its office in Beaune, France. GPI SAS predominantly sells casino currencies, including both American-style, known as chips, and European-style, known as plaques and jetons. Most of the products sold by GPI SAS are manufactured in France, with the remainder manufactured in Mexico.

•

GPI Asia, located in Macau S.A.R., China, distributes our full product line in the Asia-Pacific region. GPI Asia also sells table layouts that it manufactures in Macau S.A.R.

Significant Accounting Policies

Basis of Consolidation and Presentation. The accompanying unaudited condensed consolidated financial statements include the accounts of GPIC and its wholly-owned subsidiaries GPI SAS, GPI USA, and GPI Asia. All material intercompany balances and transactions have been eliminated in consolidation. The unaudited condensed consolidated financial statements of the Company and its subsidiaries have been prepared in accordance with accounting principles generally accepted in the United States (U.S. GAAP) for interim financial information and in the form prescribed by the Securities and Exchange Commission (SEC), and do not include all of the information and notes required by U.S. GAAP for complete financial statements. These statements should be read in conjunction with our annual audited consolidated financial statements and related notes included in our most recent Annual Report on Form 10-K for the fiscal year ended December 31, 2015, filed with the SEC on March 24, 2016.

These unaudited condensed consolidated financial statements, in the opinion of management, reflect only normal and recurring adjustments necessary for a fair presentation of results and cash flows for the interim periods presented. The results of operations for an interim period are not necessarily indicative of the results for any other interim period or a full fiscal year.

Recently Issued Accounting Standards.

In May 2016, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2016-12, Revenue from Contracts with Customers (Topic 606) , amending the new revenue recognition standard that it issued in 2014. The amendments do not change the core principles of the standard, but clarify the guidance on assessing collectibility, presenting sales taxes, measuring noncash consideration, and certain transition matters. The ASU becomes effective concurrently with ASU 2014-09.

In March 2016, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2016-09, Compensation – Stock Compensation (Topic 718) , to simplify several aspects of the accounting for share-based payment award transactions including: (a) income tax consequences; (b) classification of awards as either equity or liabilities; and (c) classification on the statement of cash flows. The amendments are effective for public companies for annual periods beginning after December 15, 2016, and interim periods within those annual periods. The Company has not adopted this guidance for 2016 and is currently evaluating the impact of adoption.

In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842), to increase transparency and comparability among organizations by reporting lease assets and lease liabilities, both finance (capital) and operating leases, on the balance sheet and disclosing key information about leasing arrangements. For public companies, the updated guidance is effective for the financial statements issued for fiscal years beginning after December 15, 2018 (including interim periods within those fiscal years). Early adoption is permitted. The Company has not adopted this guidance for 2016 and is currently evaluating the impact of adoption.

In November 2015, the FASB issued ASU 2015-17, Income Taxes (Topic 740): Balance Sheet Classification of Deferred Taxes . The guidance eliminates the current requirement for organizations to present deferred tax assets and liabilities as current and noncurrent in a classified balance sheet. Instead, organizations will be required to classify all deferred tax assets and liabilities as noncurrent. ASU 2015-17 shall be effective for public business entities for financial statements issued for annual periods beginning after December 15, 2016, and interim periods within those annual periods. The Company has not adopted this guidance for 2016 and is currently evaluating the impact of adoption.

In July 2015, the FASB issued ASU 2015-11, Inventory (Topic 330): Simplifying the Measurement of Inventory . The guidance applies to any entity measuring inventory using first-in, first-out or average cost. The main provision of this guidance requires an entity to measure inventory within the scope of this ASU at the lower of cost and net realizable value. This guidance is effective for fiscal years beginning after December 15, 2016, and interim periods within fiscal years beginning after December 15, 2017. A reporting entity should apply the amendments prospectively with earlier application permitted as of the beginning of an interim or annual reporting period. The Company has not adopted this guidance for 2016 and is currently evaluating the impact of adoption.

In May 2014, the FASB issued ASU 2014-09, Revenues from Contracts with Customers (Topic 606) . This guidance applies to any entity that either enters into contracts with customers to transfer goods or services or enters into contracts for the transfer of nonfinancial assets unless those contracts are within the scope of other standards. The core principle of this guidance is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. This guidance supersedes existing revenue recognition guidance, including most industry-specific guidance, as well as certain related guidance on accounting for contract costs. ASU 2016-08 comments on the effective date and transition of ASU 2014-09, stating public entities should apply the amendments in ASU 2014-09 for annual reporting periods beginning after December 15, 2017, including interim reporting periods therein. Early application is permitted though in no case could the new guidance be applied before the original effective date. The Company has not adopted this guidance for 2016 and is currently evaluating the impact of adoption.

Note 2. Dolphin asset acquisition

On May 11, 2016, the Company entered into an Asset Purchase Agreement to purchase certain assets used in the design and manufacture of casino currency from Dolphin Products Limited (Dolphin), a wholly owned subsidiary of Entertainment Gaming Asia Inc. (EGT). The Company closed on the acquisition on May 11, 2016. The purchased assets comprised mostly of equipment and inventory.

The acquisition was treated as an asset acquisition. The total cost of the acquisition is $7.1 million, with $4.0 million paid at closing, $0.5 million paid in August of 2016, $0.4 million of acquisition related cost and $1.1 million to be paid on each of the first two anniversaries of the closing. The acquisition cost has been allocated as follows (in thousands):

	Assets acquired
Property and equipment	$	5,438
Inventory		1,644

Total acquired	$	7,082

In connection with the acquisition, the Company and EGT settled and released each other from all claims related to the civil actions initiated by the Company against Dolphin in the High Court of the Hong Kong Special Administrative Region in December 2015, as described further in Part II, Item 1, “Legal Proceedings” of this Quarterly Report on Form 10-Q.

Note 3. Cash, Cash Equivalents, and Marketable Securities

We hold our cash, cash equivalents, and marketable securities in various financial institutions in the countries shown below. Substantially all accounts have balances in excess of government-insured limits. The following table summarizes our holdings (in thousands):

	June 30, 2016						December 31, 2015
	Cash and Cash Equivalents		Marketable Securities		Total		Cash and Cash Equivalents		Marketable Securities		Total
Macau S.A.R., China	$	5,602	$	-	$	5,602	$	4,040	$	-	$	4,040
France		2,729		1,674		4,403		887		3,503		4,390
United States (including Mexico)		2,695		-		2,695		12,861		-		12,861
Total	$	11,026	$	1,674	$	12,700	$	17,788	$	3,503	$	21,291

Available-for-sale marketable securities consist of investments in securities such as certificates of deposit offered by French banks and bond mutual funds (in thousands):

	June 30, 2016						December 31, 2015
	Cost		Unrealized Gain/(Loss)		Fair Value		Cost		Unrealized Gain/(Loss)		Fair Value
Certificates of deposit	$	1,666	$	-	$	1,666	$	2,727	$	-	$	2,727
Bond mutual funds		8		-		8		776		-		776
Total marketable securities	$	1,674	$	-	$	1,674	$	3,503	$	-	$	3,503

We present our marketable securities at their estimated fair value. Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. We have determined that all of our marketable securities are Level 1 financial instruments, with asset values recorded at quoted prices in active markets for identical assets.

Note 4. Accounts Receivable and Allowance for Doubtful Accounts

At June 30, 2016, and December 31, 2015, the same Macau S.A.R. casino customer, accounted for 24% and 33%, respectively, of our accounts receivable balance.

Note 5. Inventories

Inventories consist of the following (in thousands):

	June 30, 2016		December 31, 2015
Raw materials	$	9,012	$	7,653
Work in progress		2,453		668
Finished goods		2,835		2,548
Total inventories	$	14,300	$	10,869

We classified a portion of our inventories as non-current because we do not expect this portion to be used within one year. The classification of our inventories on our unaudited condensed consolidated balance sheets is as follows (in thousands):

	June 30, 2016		December 31, 2015
Current	$	13,402	$	10,199
Non-current		898		670
Total inventories	$	14,300	$	10,869

Note 6. Property and Equipment

Property and equipment consists of the following (in thousands):

	June 30, 2016			December 31, 2015
Land	$	649		$	520
Buildings and improvements		7,230			6,839
Equipment and furniture		32,675			26,912
Vehicles		410			403
Construction in progress		3,489			1,403
		44,453			36,077
Less accumulated depreciation		(22,648	)		(21,975	)
Property and equipment, net	$	21,805		$	14,102

Depreciation expense for the three months ended June 30, 2016 and 2015 was $661,000 and $637,000, respectively. Depreciation expense for the six months ended June 30, 2016 and 2015 was $1,329,000 and $1,317,000, respectively.

Note 7. Goodwill and Intangible Assets

We had goodwill valued at $10,292,000 as of June 30, 2016 and December 31, 2015.

Intangible assets consist of the following (in thousands):

	June 30, 2016							December 31, 2015
	Gross Carrying Amount		Accum. Amort.			Net Carrying Amount		Gross Carrying Amount		Accum. Amort.			Net Carrying Amount
Trademarks	$	1,772	$	(516	)	$	1,256	$	1,772		(454	)	$	1,318
Customer list		1,323		(299	)		1,024		1,323		(245	)		1,078
Patents		542		(523	)		19		542		(520	)		22
Other intangible assets		372		(303	)		69		372		(285	)		87
Total intangible assets	$	4,009	$	(1,641	)	$	2,368	$	4,009	$	(1,504	)	$	2,505

Amortization expense for intangible assets for the three months ended June 30, 2016 and 2015 was $68,000 and $72,000, respectively. Amortization expense for intangible assets for the six months ended June 30, 2016 and 2015 was $138,000 and $149,000, respectively.

Note 8. Debt

On June 26, 2015, the Company entered into a Credit Agreement with Nevada State Bank to borrow a combined $15.0 million, consisting of a $10.0 million seven-year Term Loan and a $5.0 million five-year Revolving Loan. The Company borrowed the full amount under the Term Loan and has not drawn on funds under the Revolving Loan. The Term Loan will mature on June 26, 2022, and the Revolving Loan will mature on June 26, 2020.

Interest on funds borrowed under the Term Loan and the Revolving Loan are charged at a rate per annum equal to LIBOR plus 2.25%. The Term Loan has a straight-line seven year amortization schedule.

At June 30, 2016, estimated repayment obligations for the principal balance of long-term debt are as follows (in thousands):

Year Ending	Long-term Debt
2016 (remaining 6 months)	$	681
2017		1,376
2018		1,409
2019		1,444
2020		1,480
Thereafter		2,294
Total	$	8,684

The above description of the material terms and conditions of the Credit Agreement does not purport to be complete and is qualified in its entirety by reference to the full texts of the Credit Agreement, the Pledge and Security Agreement and Irrevocable Proxy and the Guaranty, which are filed as Exhibits 10.1, 10.2, and 10.3 to Form 8-K filed with the SEC on July 2, 2015.

Note 9. Commitments and Contingencies

Operating Lease Commitments

The Company has various operating leases related primarily to equipment and manufacturing and office space.

On January 1, 2016, the Company commenced payments on a lease for its new corporate headquarters with payments of approximately $16,000 per month.

At June 30, 2016, minimum lease payment obligations are as follows (in thousands):

	Minimum
	Lease
Year Ending	Payments
2016	$	522
2017		906
2018		714
2019		287
2020		274
Thereafter		428
Total	$	3,131

Legal Proceedings and Contingencies

From time to time we are engaged in disputes and claims that arose in the normal course of business. We believe the ultimate outcome of these proceedings will not have a material adverse impact on our consolidated financial position or results of operations, but the outcome of these actions is inherently difficult to predict. There can be no assurance that we will prevail in any such litigation. Liabilities for material claims against us are accrued when a loss is considered probable and can be reasonably estimated. Legal costs associated with claims are expensed as incurred. See also the discussion at Part II, Item 1, “Legal Proceedings” of this Quarterly Report on Form 10-Q.

Note 10. Accumulated Other Comprehensive Income (Loss)

Changes in accumulated other comprehensive loss, net of tax, and by component were as follows (in thousands):

	Three Months Ended
	June 30, 2016
	Foreign Currency Translation			Unrealized Gains on Securities		Total
Balance at March 31, 2016	$	(1,331	)	$	-	$	(1,331	)
Other comprehensive loss		(293	)		-		(293	)
Balance at June 30, 2016	$	(1,624	)	$	-	$	(1,624	)

	Six Months Ended
	June 30, 2016
	Foreign Currency Translation			Unrealized Gains on Securities		Total
Balance at January 1, 2016	$	(1,876	)	$	-	$	(1,876	)
Other comprehensive income		252			-		252
Balance at June 30, 2016	$	(1,624	)	$	-	$	(1,624	)

Note 11. Geographic and Product Line Information

We manufacture and sell casino table game equipment in one operating segment - casino table game products. Although the Company derives its revenues from a number of different product lines, the Company neither allocates resources based on the operating results from the individual product lines, nor manages each individual product line as a separate business unit. Our chief operating decision maker is our Chief Executive Officer (CEO). The CEO manages our operations on a consolidated basis to make decisions about overall corporate resource allocation and to assess overall corporate profitability. Our CEO is also the chief operating manager for each of our entities in the United States, France, and Macau S.A.R.; that is, the individual locations do not have “segment” or “product line” managers who report to our CEO.

The following tables present our net sales by geographic area (dollars in thousands):

	Three Months Ended
	June 30,
	2016				2015
Revenues
The Americas	$	16,200	79.6	%	$	13,284	60.9	%
Asia-Pacific		2,596	12.8	%		2,235	34.1	%
Europe and Africa		1,548	7.6	%		730	5.0	%
Total	$	20,344	100.0	%	$	16,249	100.0	%

	Six Months Ended
	June 30,
	2016				2015
Revenues
The Americas	$	28,494	78.2	%	$	25,588	59.8	%
Asia-Pacific		5,357	14.7	%		8,204	35.1	%
Europe and Africa		2,586	7.1	%		1,113	5.1	%
Total	$	36,437	100.0	%	$	34,905	100.0	%

The following tables present our net sales by product line (dollars in thousands):

	Three Months Ended
	June 30,
	2016				2015

Casino currency without RFID	$	5,671	27.9	%	$	3,547	21.8	%
Casino currency with RFID		1,386	6.8	%		1,038	6.4	%
Total casino currency		7,057	34.7	%		4,585	28.2	%

Playing cards		6,481	31.9	%		5,852	36.0	%
Table accessories and other products		1,786	8.8	%		1,926	11.9	%
RFID solutions		1,450	7.1	%		594	3.7	%
Table layouts		1,351	6.6	%		1,430	8.8	%
Dice		791	3.9	%		736	4.5	%
Gaming furniture		629	3.1	%		376	2.3	%
Shipping		799	3.9	%		750	4.6	%
Total	$	20,344	100.0	%	$	16,249	100.0	%

	Six Months Ended
	June 30,
	2016				2015

Casino currency without RFID	$	8,479	23.3	%	$	6,626	19.0	%
Casino currency with RFID		3,525	9.7	%		4,657	13.3	%
Total casino currency		12,004	33.0	%		11,283	32.3	%

Playing cards		13,046	35.8	%		11,627	33.3	%
Table accessories and other products		3,153	8.6	%		3,568	10.2	%
Table layouts		2,716	7.5	%		3,124	9.0	%
RFID solutions		1,525	4.2	%		1,454	4.2	%
Dice		1,429	3.9	%		1,336	3.8	%
Gaming furniture		1,037	2.8	%		964	2.8	%
Shipping		1,527	4.2	%		1,549	4.4	%
Total	$	36,437	100.0	%	$	34,905	100.0	%

For the six month periods ended June 30, 2016, and June 30, 2015, no customer accounted for more than 10% of the Company’s revenues.

The following table presents our property and equipment by geographic area (in thousands):

	June 30, 2016		December 31, 2015
United States	$	9,423	$	7,000
Mexico		6,887		3,249
France		5,159		3,544
Asia		336		309
Total	$	21,805	$	14,102

The following table presents our intangible assets by geographic area (in thousands):

Intangible assets, net:	June 30, 2016		December 31, 2015
United States	$	1,889	$	2,006
Asia		479		497
France		-		2
Total	$	2,368	$	2,505

Note 12. Earnings per Share

Shares used to compute basic and diluted earnings per share from operations are as follows (in thousands):

	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2016		2015		2016		2015
Weighted-average number of common shares outstanding - basic		7,929		7,929		7,929		7,922
Potential dilution from equity grants		108		-		109		113
Weighted-average number of common shares outstanding - diluted		8,037		7,929		8,038		8,035

We have certain outstanding stock options to purchase common stock which have exercise prices greater than the average market price. These anti-dilutive options have been excluded from the computation of diluted net income per share (in thousands):

	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2016		2015		2016		2015
Outstanding anti-dilutive options		41		31		39		36

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

The following discussion is intended to assist in the understanding of our consolidated results of operations and our present financial condition and should be read in conjunction with our unaudited condensed consolidated financial statements and related notes and the other financial information included in this Quarterly Report on Form 10-Q. The unaudited condensed consolidated financial statements and the accompanying notes contain additional detailed information that should be referred to when reviewing this material. Statements in this discussion may be forward-looking. Such forward-looking statements involve risks and uncertainties that could cause actual results to differ significantly from those expressed. See Item 1A. “Risk Factors,” of our Annual Report on Form 10-K for the fiscal year ended December 31, 2015, filed with the SEC on March 24, 2016.

For a more extensive overview and information on our products, as well as general information, see Item 1, “Business” of our Annual Report on Form 10-K for the fiscal year ended December 31, 2015, filed with the SEC on March 24, 2016.

Overview of Our Business

We custom manufacture and supply casino currency, with multiple security and design options, playing cards, table layouts, gaming furniture, table accessories, dice, and roulette wheels. We also provide multiple RFID technologies including low- and high-frequency RFID casino currency, RFID solutions for casino currency (consisting of low- and high-frequency RFID casino currency readers, antennas, casino currency authentication software, casino currency inventory software applications, and software maintenance services). Our products and services are used with casino table games such as blackjack, poker, baccarat, craps, and roulette. GPIC sells its casino table game equipment under the brand names of Paulson ^® , Bourgogne et Grasset ^® (BG ^® ), Gemaco ^® , Blue Chip ^® (BC ^® ) and Bud Jones ^® .

GPIC is headquartered in North Las Vegas, Nevada, with offices in Blue Springs, Missouri; Atlantic City, New Jersey; Gulfport, Mississippi; San Luis Rio Colorado, Mexico; Beaune, France; and Macau S.A.R., China. We sell our products to licensed casinos worldwide. We operate in one segment and have three operating subsidiaries: GPI USA (including GPI Mexicana, our maquiladora manufacturing operation in Mexico, and our manufacturing operation in Blue Springs, Missouri), GPI SAS, and GPI Asia. Our subsidiaries have the following distribution and product focus:

•

GPI USA sells in the United States, Canada, the Caribbean, and Latin America. GPI USA sells our full product line, with most of the products manufactured in either San Luis Rio Colorado, Mexico, or Blue Springs, Missouri. The remainder is either manufactured in France or purchased from United States vendors. We warehouse inventory in San Luis, Arizona; Blue Springs, Missouri; and North Las Vegas, Nevada. We have sales offices in North Las Vegas, Nevada; Atlantic City, New Jersey; Gulfport, Mississippi; and Blue Springs, Missouri.

•

GPI Asia, located in Macau S.A.R., China, distributes our full product line in the Asia-Pacific region. GPI Asia also sells table layouts that it manufactures in Macau S.A.R.

Historically, we have experienced significant fluctuations in quarterly results primarily due to large, discrete currency orders as a result of casino openings, casino expansions, or large replacement orders. However, we continue to experience steady growth in our consumable products which now represent a significant percentage of our overall revenues. Our backlog, which reflects signed orders for the following twelve months, was as follows at June 30, 2016 and June 30, 2015 (in millions):

GPI USA

GPI Asia

GPI SAS

Total

June 30, 2016

9.6 million

13.1 million

0.1 million

22.8 million

June 30, 2015

5.7 million

9.1 million

0.9 million

15.7 million

Outlook

The acquisition of Dolphin’s assets strengthened our market position in the important Asian market. With this acquisition, our prospects in this region are very strong, both this year and beyond. While our backlog in Asia is strong with a number of casinos slated to open this year and in 2017, there is some uncertainty arising from Macau regulators’ decisions on the timing of casino openings and the number of tables allotted to each new casinos that could impact when we recognize revenue and how much revenue is recognized.

In the Americas, we have continued to experience steady growth in our consumable products, particularly playing cards. This has the promise of continuing to provide the Company with a more consistent and predictable revenue stream. We have experienced operational challenges associated with the rapid growth in playing card sales that we are mitigating with expanded facilities and new equipment.

Financial and Operational Highlights

For the second quarter of 2016, our revenues were $20.3 million, an increase of $4.1 million, or 25.2%, compared to revenues of $16.2 million for the same period of 2015. For the second quarter of 2016, our net income was $2.1 million, an increase of $2.2 million compared to a net loss of $0.1 million for the same period in 2015. The increase in our net income for the three months ended June 30, 2016 is primarily due to an increase in casino currency sales in the United States and an increase in sales of RFID solutions in Asia.

For the first six months of 2016, our revenues were $36.4 million, an increase of $1.5 million, or 4.4%, compared to revenues of $34.9 million for the same period of 2015. For the first six months of 2016, our net income was $2.0 million, compared to net income of $1.8 million for the same period of 2015. The increase in net income is primarily due to an increase in casino currency sales in the United States and in Europe and Africa, offset partially by a decline in casino currency sales in the Asia Pacific region.

Other Matters

See the discussion under “Contractual Obligations and Commercial Commitments” in Part I, Item 2, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” of this Quarterly Report on Form 10-Q.

CRITICAL ACCOUNTING ESTIMATES

Our condensed consolidated financial statements included in this Quarterly Report on Form 10-Q, while unaudited, have been prepared in accordance with U.S. GAAP. Financial statement preparation requires management to make estimates and judgments that affect the reported amounts of assets, liabilities, revenue and expenses, and disclosure of contingent assets and liabilities. The accompanying unaudited condensed consolidated financial statements are prepared using the same critical accounting estimates discussed in our Annual Report on Form 10-K for the fiscal year ended December 31, 2015, filed with the SEC on March 24, 2016. Management bases its estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.

RESULTS OF OPERATIONS

The following tables summarize selected items from our unaudited condensed consolidated statements of operations (dollars in thousands) and as a percentage of revenues:

	Three Months Ended
	June 30,									Period-to-Period
	2016				2015					Change
Revenues	$	20,344	100.0	%	$	16,249		100.0	%	$	4,095	25.2	%
Cost of revenues		13,027	64.0	%		11,615		71.5	%		1,412	12.2	%
Gross profit		7,317	36.0	%		4,634		28.5	%		2,683	57.9	%
Selling, administrative, and research and development		4,444	21.8	%		4,161		25.6	%		283	6.8	%
Operating income		2,873	14.2	%		473		2.9	%		2,400	507.4	%
Other income (expense), net		7	0.0	%		(103	)	(0.6	)%		110	(106.8	)%
Income before income taxes		2,880	14.2	%		370		2.3	%		2,510	678.4	%
Income tax provision		803	3.9	%		511		3.1	%		292	(57.1	)%
Net income	$	2,077	10.3	%	$	(141	)	(0.8	)%	$	2,218	(1,573.0	)%

	Six Months Ended
	June 30,										Period-to-Period
	2016					2015					Change
Revenues	$	36,437		100.0	%	$	34,905		100.0	%	$	1,532		4.4	%
Cost of revenues		25,152		69.0	%		23,947		68.6	%		1,205		5.0	%
Gross profit		11,285		31.0	%		10,958		31.4	%		327		3.0	%
Selling, administrative, and research and development		8,449		23.2	%		8,716		25.0	%		(267	)	(3.1	)%
Operating income		2,836		7.8	%		2,242		6.4	%		594		26.5	%
Other income (expense), net		(75	)	(0.2	)%		(68	)	(0.2	)%		(7	)	10.3	%
Income before income taxes		2,761		7.6	%		2,174		6.2	%		587		27.0	%
Income tax provision		764		2.1	%		358		1.0	%		406		113.4	%
Net income	$	1,997		5.5	%	$	1,816		5.2	%	$	181		10.0	%

The following tables present certain data by geographic area (dollars in thousands) and as a percentage of revenues:

	Three Months Ended
	June 30,								Period-to-Period
	2016				2015				Change
Revenues
The Americas	$	16,200	79.6	%	$	13,284	60.9	%	$	2,916	22.0	%
Asia-Pacific		2,596	12.8	%		2,235	34.1	%		361	16.2	%
Europe and Africa		1,548	7.6	%		730	5.0	%		818	112.1	%
Total	$	20,344	100.0	%	$	16,249	100.0	%	$	4,095	25.2	%

	Six Months Ended
	June 30,								Period-to-Period
	2016				2015				Change
Revenues
The Americas	$	28,494	78.2	%	$	25,588	59.8	%	$	2,906		11.4	%
Asia-Pacific		5,357	14.7	%		8,204	35.1	%		(2,847	)	(34.7	)%
Europe and Africa		2,586	7.1	%		1,113	5.1	%		1,473		132.3	%
Total	$	36,437	100.0	%	$	34,905	100.0	%	$	1,532		4.4	%

The following tables present our revenues by product line (in thousands) and as a percentage of revenues:

	Three Months Ended
	June 30,								Period-to-Period
	2016				2015				Change

Casino currency without RFID	$	5,671	27.9	%	$	3,547	21.8	%	$	2,124		59.9	%
Casino currency with RFID		1,386	6.8	%		1,038	6.4	%		348		33.5	%
Total casino currency		7,057	34.7	%		4,585	28.2	%		2,472		53.9	%

Playing cards		6,481	31.9	%		5,852	36.0	%		629		10.7	%
Table accessories and other products		1,786	8.8	%		1,926	11.9	%		(140	)	(7.3	)%
RFID solutions		1,450	7.1	%		594	3.7	%		856		144.1	%
Table layouts		1,351	6.6	%		1,430	8.8	%		(79	)	(5.5	)%
Dice		791	3.9	%		736	4.5	%		55		7.5	%
Gaming furniture		629	3.1	%		376	2.3	%		253		67.3	%
Shipping		799	3.9	%		750	4.6	%		49		6.5	%
Total	$	20,344	100.0	%	$	16,249	100.0	%	$	4,095		25.2	%

	Six Months Ended
	June 30,								Period-to-Period
	2016				2015				Change

Casino currency without RFID	$	8,479	23.3	%	$	6,626	19.0	%	$	1,853		28.0	%
Casino currency with RFID		3,525	9.7	%		4,657	13.3	%		(1,132	)	(24.3	)%
Total casino currency		12,004	33.0	%		11,283	32.3	%		721		6.4	%

Playing cards		13,046	35.8	%		11,627	33.3	%		1,419		12.2	%
Table accessories and other products		3,153	8.6	%		3,568	10.2	%		(415	)	(11.6	)%
Table layouts		2,716	7.5	%		3,124	9.0	%		(408	)	(13.1	)%
RFID solutions		1,525	4.2	%		1,454	4.2	%		71		4.9	%
Dice		1,429	3.9	%		1,336	3.8	%		93		7.0	%
Gaming furniture		1,037	2.8	%		964	2.8	%		73		7.6	%
Shipping		1,527	4.2	%		1,549	4.4	%		(22	)	(1.4	)%
Total	$	36,437	100.0	%	$	34,905	100.0	%	$	1,532		4.4	%

Comparison of Operations for the Three and Six Months Ended June 30, 2016 and 2015

Revenues . For the three months ended June 30, 2016, our revenues were $20.3 million, an increase of $4.1 million, or 25.2%, compared to revenues of $16.2 million for the same period of 2015. The increase was primarily due to an increase in the Casino currency, RFID solutions and Playing cards product lines.

For the six months ended June 30, 2016, our revenues were $36.4 million, an increase of $1.5 million, or 4.4%, compared to revenues of $34.9 million for the same period of 2015. The increase in revenues was primarily attributable to an increase in revenue from both the Casino currency and Playing cards product lines, offset by a decrease in the Table accessories and the Table layouts product lines.

Cost of Revenues. For the three months ended June 30, 2016, cost of revenues was $13.0 million, an increase of $1.4 million, or 12.2%, compared to cost of revenues of $11.6 million for the same period in 2015. As a percentage of revenues, our cost of revenues decreased to 64.0% in 2016 compared to 71.5% in 2015. The decreased cost of revenues was driven by the same factors described under Revenues above and Gross Profit below.

For the six months ended June 30, 2016, cost of revenues was $25.2 million, an increase of $1.2 million, or 5.0%, compared to cost of revenues of $24.0 million for the same period in 2015. As a percentage of revenues, our cost of revenues increased to 69.0% in 2016 compared to 68.6% in 2015. The increased cost of revenues was driven by the same factors described under Revenues above and Gross Profit below.

Gross Profit. For the three months ended June 30, 2016, gross profit was $7.3 million, an increase of $2.7 million, or 57.9%, compared to gross profit of $4.6 million for the same period in 2015. As a percentage of revenues, our gross profit increased to 36.0% from 28.5%. The gross profit increase is primarily related to the sale of a higher volume of casino currencies in the United States and an increase in sales of RFID solutions in Asia.

For the six months ended June 30, 2016, gross profit was $11.3 million, an increase of $0.3 million, or 3.0%, compared to gross profit of $11.0 million for the same period in 2015. As a percentage of revenues, our gross profit decreased to 31.0% from 31.4%. The amount of the gross profit increase is primarily related to the sale of a higher volume of casino currencies in the United States and in Europe and Africa, offset partially by a decline in casino currency sales in the Asia Pacific region.

Selling, Administrative, and Research and Development Expenses . The following tables present the selling, administrative, and research and development expenses (dollars in thousands) and as a percentage of revenues:

	Three Months Ended
	June 30,								Period-to-Period
	2016				2015				Change
Marketing and sales	$	1,573	7.7	%	$	1,384	8.5	%	$	189	13.7	%
General and administrative		2,519	12.4	%		2,466	15.2	%		53	2.1	%
Research and development		352	1.7	%		311	1.9	%		41	13.2	%
Total selling, administrative, and research and development	$	4,444	21.8	%	$	4,161	25.6	%	$	283	6.8	%

For the three months ended June 30, 2016, selling, administrative, and research and development expenses were $4.4 million, an increase of $0.3 million, or 6.8%, compared to selling, administrative, and research and development expenses of $4.1 million during the same period in 2015. Selling, administrative, and research and development expenses decreased as a percentage of revenue to 21.8% in the second quarter of 2016 from 25.6% in the same period in 2015.

Marketing and sales expenses increased by $0.2 million during the three months ended June 30, 2016, compared to the same period in 2015, primarily due to an increase in compensation cost.

General and administrative expenses and research and development expenses remained relatively unchanged in the three months ended June 30, 2016, compared to the same period in 2015.

	Six Months Ended
	June 30,								Period-to-Period
	2016				2015				Change
Marketing and sales	$	3,098	8.5	%	$	3,184	9.1	%	$	(86	)	(2.7	)%
General and administrative		4,692	12.9	%		4,882	14.0	%		(190	)	(3.9	)%
Research and development		659	1.8	%		650	1.9	%		9		1.4	%
Total selling, administrative, and research and development	$	8,449	23.2	%	$	8,716	25.0	%	$	(267	)	(3.1	)%

For the six months ended June 30, 2016, selling, administrative, and research and development expenses were $8.4 million, a decrease of $0.3 million, or 3.1% compared to selling, administrative, and research and development expenses of $8.7 million during the same period in 2015. Selling, administrative, and research and development expenses decreased as a percentage of revenue to 23.2% in the first six months of 2016 from 25.0% in the same period in 2015 as revenues increased faster than expenses.

Marketing and sales expenses decreased by $0.1 million during the first six months of 2016, compared to the same period in 2015, primarily due to a decrease in compensation cost.

General and administrative expenses decreased by $0.2 million during the first six months of 2016, compared to the same period in 2015. This was primarily due to a decrease of $0.4 million in bad debt expense and $0.3 million in compensation and related cost, offset by an increase of $0.2 million in legal fees, $0.2 million in information technology license expense and $0.1 million in rent cost.

Research and development expenses remained relatively unchanged during the first six months of 2016 compared to the same period in 2015.

Other Income (Expense), net . The following tables present other income (expense), net items (dollars in thousands) and as a percentage of revenues:

	Three Months Ended
	June 30,										Period-to-Period
	2016					2015					Change
Interest income	$	3		0.0	%	$	8		0.0	%	$	(5	)	(62.5	)%
Interest expense		(61	)	(0.3	)%		(61	)	(0.4	)%		-		0.0	%
Gain (loss) on foreign currency transactions		68		0.3	%		(123	)	(0.8	)%		191		(155.3	)%
Other income		(3	)	(0.0	)%		73		0.4	%		(76	)	(104.1	)%
Total other income (expense), net	$	7		0.0	%	$	(103	)	(0.6	)%	$	110		(106.8	)%

	Six Months Ended
	June 30,										Period-to-Period
	2016					2015					Change
Interest income	$	7		0.0	%	$	13		0.0	%	$	(6	)	(46.2	)%
Interest expense		(123	)	(0.3	)%		(124	)	(0.4	)%		1		(0.8	)%
Gain (loss) on foreign currency transactions		40		0.1	%		(34	)	(0.1	)%		74		(217.6	)%
Other income		1		0.0	%		77		0.2	%		(76	)	(98.7	)%
Total other expense, net	$	(75	)	(0.2	)%	$	(68	)	(0.2	)%	$	(7	)	10.3	%

GPI SAS uses the euro as its functional currency. At June 30, 2016 and December 31, 2015, the U.S. dollar to euro exchange rates were $1.11 and $1.09, respectively, which represents a 1.8% weaker dollar compared to the euro. The average exchange rates for the six months ended June 30, 2016 and 2015 were stable at $1.12.

GPI Mexicana uses the U.S. dollar as its functional currency. At June 30, 2016 and December 31, 2015, the Mexican peso to U.S. dollar exchange rates were 18.50 pesos and 17.21 pesos, respectively, which represents a 7.5% stronger dollar compared to the Mexican peso. The peso to U.S. dollar average exchange rates for the six months ended June 30, 2016 and 2015 were 18.08 pesos and 15.13 pesos, respectively, which represents a 19.5% stronger dollar compared to the Mexican peso.

GPI Asia uses the U.S. dollar as its functional currency. At June 30, 2016 and December 31, 2015, the Macau pataca to U.S. dollar exchange rates were 8.16 patacas and 8.19 patacas, respectively, which represents a 0.4% weaker dollar compared to the Macau pataca. The Macau pataca to U.S. dollar average exchange rates for the six months ended June 30, 2016 and 2015 were 8.17 patacas and 8.15 patacas, respectively, which represents a 0.3% stronger dollar compared to the Macau pataca.

Income Taxes. Our effective income tax rate for the three months ended June 30, 2016 and 2015 was 27.9% and 138.6%, respectively. Our effective tax rate for the three months ended June 30, 2016 was favorably affected by the foreign rate differential on income from our Macau S.A.R. subsidiary, GPI Asia, and the benefit from a research credit from our French subsidiary, GPI SAS, partially offset by our Subpart F income adjustment. Our effective tax rate for the three months ended June 30, 2015 was unfavorably impacted by a discrete expense of approximately $0.4 million related to a deemed dividend from GPI Asia under Section 956 of the Internal Revenue Code.

Our effective income tax rate for the six months ended June 30, 2016 and 2015 was 27.7% and 16.5%, respectively. Our effective tax rate for the six months ended June 30, 2016 was favorably affected by the foreign rate differential on income from our Macau S.A.R. subsidiary, GPI Asia, and the benefit from a research credit from our French subsidiary, GPI SAS, partially offset by our Subpart F income adjustment. Our effective tax rate for the six months ended June 30, 2015 was favorably affected by the release of the valuation allowance related to foreign tax credits, the foreign rate differential on income from GPI Asia, and the benefit from a research credit from our French subsidiary, GPI SAS; partially offset by the current year tax impact of a deemed dividend from GPI Asia and our Subpart F income adjustment. Without the discrete release in the valuation allowance related to foreign tax credits, our effective tax rate for the three and six months ended June 30, 2015 would have been 24.7% and 23.9%, respectively.

We account for uncertain tax positions in accordance with applicable accounting guidance. At December 31, 2015, we reported unrecognized tax benefits related to the French Tax Administration’s examination of GPI SAS for tax years 2013 and 2012. As of June 30, 2016, there was no change to the unrecognized tax benefits reported at December 31, 2015.

Liquidity and Capital Resources

Sources of Liquidity and Capital Resources . Historically, our primary source of liquidity and capital resources has been cash from operations. On June 26, 2015, the Company entered into a Credit Agreement with Nevada State Bank for a combined $15.0 million credit facility, consisting of a $10.0 million seven-year Term Loan and a $5.0 million five-year Revolving Loan. The Company borrowed the full amount under the Term Loan which will mature on June 26, 2022, and has not drawn any funds under the Revolving Loan. Additional information can be found at Note 8 to the unaudited condensed consolidated financial statements included in Part I, Item 1, of this Quarterly Report on Form 10-Q

Other potential sources of capital include, but are not limited to, marketable securities and bank credit facilities both in the United States and abroad. We believe that the combination of these resources will satisfy our needs for working capital, capital expenditures, purchases of common stock under our stock repurchase program, litigation, dividends or acquisitions for our operations for a minimum of the next twelve months.

At June 30, 2016, the Company had $11.0 million in cash and cash equivalents and $1.7 million in marketable securities, totaling $12.7 million. Of this amount, $5.6 million is held by GPI Asia, $4.4 million is held by GPI SAS, $1.7 million is held by GPI USA and $1.0 million is held by GPI Mexicana. Of those amounts held in France by GPI SAS and in Mexico by GPI Mexicana, we would be subject to taxation in the United States if we were to repatriate those amounts, though foreign tax credits may be available to offset such taxes. All of the amounts currently held in Asia by GPI Asia could be repatriated tax free due to the deemed dividend from GPI Asia. Except for the amount of the deemed dividend, the Company continues to assert that earnings from GPI Asia will be permanently reinvested. We may repatriate amounts from GPI SAS and, accordingly, our unaudited condensed consolidated financial statements reflect the tax impacts that would result from repatriation.

Working Capital . The following table summarizes our cash and cash equivalents, marketable securities, and working capital (dollars in thousands), and our current ratio:

	June 30,		December 31,		Period-to-Period
	2016		2015		Change
Cash and cash equivalents	$	11,026	$	17,788	$	(6,762	)	(38.0	)%
Marketable securities		1,674		3,503		(1,829	)	(52.2	)%
Working capital	$	25,872	$	31,129	$	(5,257	)	(16.9	)%
Current ratio		2.5		3.0

At June 30, 2016, working capital totaled $25.8 million, a decrease of $5.3 million when compared to working capital of $31.1 million at December 31, 2015. The change in cash is mostly due to the Dolphin asset acquisition. See Note 2 to the unaudited condensed consolidated financial statements included in Part I, Item 1, of this Quarterly Report on Form 10-Q.

Cash Flows . The following table summarizes our cash flows (dollars in thousands):

	Six Months Ended
	June 30,						Period-to-Period
	2016			2015			Change

Operating activities	$	(1,514	)	$	9,164		$	(10,678	)	(116.5	)%
Investing activities		(4,665	)		(3,214	)		(1,451	)	(45.1	)%
Financing activities		(662	)		87			(749	)	(860.9	)%
Effect of exchange rates		79			(381	)		460		120.7	%
Net change	$	(6,762	)	$	5,656		$	(12,418	)	219.6	%

The increase in cash flows used by operating activities was primarily caused by an increase in assets, a decrease in accounts payable and accrued liabilities, partially offset by an increase in customer deposits and deferred revenue.

The increase in cash flows used by investing activities was primarily due to an increase in capital expenditures, partially offset by a net decrease in purchases of marketable securities.

The decrease in cash flows provided by financing activities was primarily due to an increase in principal payments on long-term debt.

C apital Expenditures . We currently intend to purchase approximately $4.5 million in property, plant, and equipment during the remainder of 2016. This is primarily related to the expansion of our Blue Springs, Missouri facility described below at “Contractual Obligations and Commercial Commitments.” In the first quarter of 2016, we purchased $9.0 million of property, plant, and equipment of which $6.6 million was paid at June 30, 2016.

Cash Dividend. Our Board of Directors has no current plans to pay a regular dividend on our common stock, but may evaluate the merit of paying a dividend in the future.

Backlog . At June 30, 2016, our backlog of signed orders for the following twelve months was $22.8 million, consisting of $13.1 million for GPI Asia, $9.6 million for GPI USA, and $0.1 million for GPI SAS. At June 30, 2015, our backlog of signed orders for 2015 was $15.7 million, consisting of $9.1 million for GPI Asia, $5.7 million for GPI USA, and $0.9 million for GPI SAS.

Contractual Obligations and Commercial Commitments

On May 11, 2016, the Company purchased certain assets dedicated to the design and manufacture of chips and plaques for gaming tables from EGT and Dolphin as described in Note 2 to the unaudited condensed consolidated financial statements included in Part I, Item 1, of this Quarterly Report on Form 10-Q. A copy of the Asset Purchase Agreement is attached as an exhibit to this Quarterly Report on Form 10-Q.

On February 24, 2016, the Company entered into a construction contract with Miller Staunch Construction Co., Inc. (Contractor) to expand its Blue Springs, Missouri manufacturing facility. The Blue Springs building expansion is expected to be completed before the end of the third quarter of 2016 at a fixed price of $2.2 million, subject to any additions or deductions agreed to by the Company and the Contractor. The Company currently expects to fully fund the construction of the Blue Springs expansion with available cash and cash flow from operations.

On December 30, 2015, the Company sold its building and land in Las Vegas, Nevada to an unrelated third party for $3.95 million in cash. In early 2016, the Company relocated its headquarters to 3945 West Cheyenne Avenue, North Las Vegas, Nevada. The lease term for the building (approximately 15,000 square feet) is seven years commencing on January 1, 2016 for approximately $16,000 per month.

On June 26, 2015, the Company entered into a Credit Agreement with Nevada State Bank for a combined $15.0 million, consisting of a $10.0 million seven-year term loan and a $5.0 million five-year revolving loan described in Note 8 to the unaudited condensed consolidated financial statements included in Part I, Item 1, of this Quarterly Report on Form 10-Q.

Forward-Looking Information Statements and Risk Factors

Throughout this Quarterly Report on Form 10-Q, we make some forward-looking statements which do not relate to historical or current facts, but are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These statements relate to analyses and other information based on forecasts of future results and estimates of amounts not yet determinable that, while considered reasonable by us, are inherently subject to significant business, economic, and competitive risks and uncertainties, many of which are beyond our control and are subject to change. The statements also relate to our future prospects and anticipated performance, development, and business strategies such as statements relating to anticipated future sales or the timing thereof, potential acquisitions, the long-term growth and prospects of our business or any jurisdiction, the duration or effects of unfavorable economic conditions which may reduce our product sales, and the long-term potential of the RFID gaming chips market and our ability to capitalize on any such growth opportunities. These statements are identified by their use of terms and phrases such as anticipate, believe, could, would, estimate, expect, intend, may, plan, predict, project, pursue, will, continue, feel, or the negative or other variations thereof, and other similar terms and phrases, including references to assumptions.

Although we believe that the expectations reflected in any of our forward-looking statements are reasonable, actual results could differ materially from those expressed or implied. Our future financial condition and results of operations, as well as any forward-looking statements, are subject to change and to inherent known and unknown risks and uncertainties such as those identified in Part I-Item 1A. “Risk Factors,” of our Annual Report on Form 10-K for the fiscal year ended December 31, 2015, filed with the SEC on March 24, 2016. We do not intend, and undertake no obligation, to update our forward-looking statements to reflect future events or circumstances.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Not applicable

ITEM 4. CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

Our management, including the Chief Executive Officer and Chief Financial Officer, has conducted an evaluation of the effectiveness of our disclosure controls and procedures pursuant to Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended ("Exchange Act") as of June 30, 2016. Based upon this evaluation, our Chief Executive Officer and our Chief Financial Officer have concluded that, as of June 30, 2016, the end of the period covered by this Quarterly Report on Form 10-Q, our disclosure controls and procedures were effective at a reasonable assurance level to ensure that information required to be disclosed by us in the reports we file or submit under the Exchange Act is (i) recorded, processed, summarized, and reported within the time periods specified in the SEC rules and forms, and (ii) is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer as appropriate to allow timely decisions regarding required disclosure.

Changes in Internal Control over Financial Reporting

Management has determined that there was no change in our internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) during the quarter ended June 30, 2016, that materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

PART II. OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

In December 2015, GPI SAS and the Company commenced legal action against former GPI SAS employee Paulo Da Silva. GPI SAS initiated proceedings in both the French Employment Tribunal and High Court, and the Company initiated proceedings in the High Court of Hong Kong. Also, in December 2015, in conjunction with the actions against Mr. Da Silva, the Company commenced legal action against Dolphin, a wholly owned subsidiary of EGT, in the High Court of Hong Kong in the Hong Kong Special Administrative Region.

In connection with the purchase of the Dolphin assets described in Note 2 to the unaudited condensed consolidated financial statements included in Part I, Item 1, of this Quarterly Report on Form 10-Q, the Company and EGT settled and released each other from all claims relating to the civil actions instituted by the Company against Dolphin, and the Company’s action against Dolphin was formally dismissed on May 17, 2016. Also, as part of the agreement with Dolphin and EGT, the Company and Mr. Da Silva settled and released each other from all claims relating to the civil actions instituted by the Company and GPI SAS against Mr. Da Silva. The Company terminated and discontinued its action against Mr. Da Silva in Hong Kong on May 17, 2016. GPI SAS terminated and discontinued its actions against Mr. Da Silva in the French Employment Tribunal on May 23, 2016, and in the French High Court on June 6, 2016.

ITEM 1A. RISK FACTORS

Not applicable.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

(a) Not applicable.

(b) Not applicable.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

Not applicable.

ITEM 4. MINE SAFETY DISCLOSURES

Not applicable.

ITEM 5. OTHER INFORMATION

(a) Not applicable.

(b) Not applicable.

ITEM 6. EXHIBITS

Exhibit
Number		Description

2.1*^		Asset Purchase Agreement dated May 11, 2016, among the Registrant, Entertainment Gaming Asia Inc. and Dolphin Products Limited

3.1		Registrant’s Amended and Restated Articles of Incorporation (incorporated by reference to Exhibit 3.01 to the Registrant’s Form 10-K filed with the SEC on March 24, 2016)

3.2		Registrant’s Amended and Restated Bylaws (incorporated by reference to Exhibit 3.02 to the Registrant’s Form 8-K filed with the SEC on December 28, 2007)

4.1		Specimen Stock Certificate for Registrant’s Common Stock (incorporated by reference to Exhibit 4.01 to the Registrant’s Form 10-K filed with the SEC on May 15, 2007)

31.1*		Certification of Principal Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

31.2*		Certification of Principal Financial and Accounting Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

32.1*		Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

101.INS		XBRL Instance*

101.SCH		XBRL Taxonomy Extension Schema*

101.CAL		XBRL Taxonomy Extension Calculation*

101.DEF		XBRL Taxonomy Extension Definition*

101.LAB		XBRL Taxonomy Extension Labels*

101.PRE		XBRL Taxonomy Extension Presentation*

*Filed with this Quarterly Report on Form 10-Q.

^ The schedules and exhibits to the Asset Purchase Agreement have been omitted from this filing pursuant to Item 601(b)(2) of Regulation S-K. Registrant will furnish copies of any annexes or schedules to the SEC upon request.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

	GAMING PARTNERS INTERNATIONAL CORPORATION

Date: August 11, 2016	By:	/s/ Gregory S. Gronau
		Gregory S. Gronau
		President and Chief Executive Officer

Date: August 11, 2016	By:	/s/ Alain Thieffry
		Alain Thieffry
		Chief Financial Officer, and Chairperson of the Board

EXHIBIT 2.1

Dated 11 May 2016

Asset purchase agreement

(1) Dolphin Products Limited

(2) Gaming Partners International Corporation

(3) Entertainment Gaming Asia Inc.

Contents

Clause
1.	Interpretation	1
2.	Agreement to Sell and Purchase	4
3.	Purchase Price	5
4.	Payment for Restrictive Covenants	7
5.	Earn Out Payments	7
6.	Condition and Pre-Closing Covenant	10
7.	Closing	11
8.	Warranties, Undertakings and Indemnities	13
9.	Limitations on Claims	14
10.	Employees	15
11.	Restrictions on the Seller	15
12.	Termination of Litigation	16
13.	Confidentiality and Announcements	18
14.	Assignment	19
15.	Entire agreement, Status of LOI and No Double Recovery	19
16.	Variation and Waiver	19
17.	Costs	20
18.	Notices	20
19.	Severance	21
20.	Governing Law and Jurisdiction	22

Schedule

Schedule 1 (a) Fixed Assets

Schedule 1 (b) Other Assets

Schedule 2 Types of Raw Materials

Schedule 3 Closing and Post Closing
1.	Closing
2.	Actions and Obligations After Closing

Schedule 4 Warranties

Schedule 5 Unfinished Orders

THIS AGREEMENT is dated 11 May 2016

Parties

(1)

Dolphin Products Limited , incorporated and registered in Hong Kong with its registered office at Unit C1, G/F., Koon Wah Building, No. 2 Yuen Shun Circuit, Yuen Chau Kok, Shatin, N.T., Hong Kong (“ Seller” ).

(2)

Gaming Partners International Corporation , incorporated and registered in Nevada, the United States of America, with its registered office at 3945 W. Cheyenne Ave, Suite 208, North Las Vegas, Nevada 89032 (“ Buyer” ).

(3)

Entertainment Gaming Asia Inc. , incorporated and registered in Nevada, the United States of America with its principal executive office at Unit C1, Ground Floor, Koon Wah Building, No. 2 Yuen Shun Circuit, Yuen Chau Kok, Shatin, New Territories, Hong Kong (“ EGT ”).

Background

On or about 21 April 2016, the Buyer and the Seller entered into a binding letter of intent relating to the Transaction (the “ LOI ”). It is a term of the LOI that the Parties shall enter into this agreement.

The Seller has agreed to sell and the Buyer has agreed to buy the Assets on the terms of this agreement.

Agreed terms

I nterpretation

1.1

The definitions and rules of interpretation in this clause apply in this agreement.

Affiliate: in relation to a body corporate, any subsidiary or holding company of such body corporate, and any subsidiary of any such holding company for the time being.

Assets: has the meaning given to it in clause 2.1.

Business: the business of designing, manufacturing and distributing gaming chips, plaques and layouts for gaming tables, carried on by the Seller at the Effective Time.

Business Day: a day other than a Saturday, Sunday or public holiday when banks in Hong Kong and Las Vegas, Nevada, are open for business.

Buyer Group: the Buyer and each of its Affiliates.

Buyer Releasing Persons: has the meaning given to it in clause 12.3.

Claim: a claim under the Warranties.

Closing: the closing of the sale and purchase of the Assets pursuant to and in accordance with this agreement.

Closing Date: has the meaning given to it in clause 7.1.

Crown Resorts Group: has the meaning given to it in clause 5.1.

Da Silva Proceedings: has the meaning given to it in clause 12.1(b).

Deed of Non-Competition: has the meaning given to it in clause 11.3.

Disclosed: fairly disclosed (with sufficient details to identify the nature and scope of the matter disclosed) in the Disclosure Letter.

Disclosure Letter: the letter from the Seller to the Buyer, in agreed form, with the same date as this agreement and described as the Disclosure Letter, delivered by the Seller to the Buyer prior to or in connection with the execution and delivery of this agreement.

Dolphin Proceedings: has the meaning given to it in clause 12.1(a).

Effective Time: 5:00 p.m. Hong Kong time on the Closing Date.

Encumbrance: any interest or equity of any person (including any right to acquire, option or right of pre-emption) or any mortgage, charge, pledge, lien, assignment, hypothecation, security interest, title retention or any other security agreement or arrangement.

Earn Out Payments: has the meaning given to it in clause 5.1.

Excluded Assets: has the meaning given to it in clause 2.2.

Excluded Liabilities: has the meaning given to it in clause 2.3.

GAAP: generally accepted accounting principles in the United States, consistently applied.

Intellectual Property: all patents, patent applications, docketed inventions, registered and unregistered trademarks, trademark applications, trade names, service marks, logos, copyrights, computer programs and other software and information technology rights for production, domain names, URLs, websites, trade secrets, confidential and proprietary business information, unpatented inventions, processes, know how, product formulae, engineering, drawings, plans and product specifications, trade dress, promotional displays and materials, price lists, bid and quote information, literature, catalogues, brochures, advertising material and the like and all customer, supplier and distributor lists, in each case, relating to the Business or its customers or suppliers, all product development and packaging development related to the Business, any licenses, license agreements and applications related to any of the foregoing, and readable copies of all business records relevant to the Business.

LOI: a binding letter of intent dated 21 April 2016 relating to the Transaction.

Material Adverse Change: has the meaning given to it in clause 7.5(b).

MCE: has the meaning given to it in clause 5.1.

Melco Crown: has the meaning given to it in clause 5.1.

MIDL: has the meaning given to it in clause 5.1.

Net Revenue: has the meaning given to it in clause 5.1.

Non-Related Party: has the meaning given to it in clause 5.1.

Parties: parties to this agreement, being the Seller, the Buyer and EGT, and each of them is a Party .

Period: has the meaning given to it in clause 4.1.

Purchase Price: has the meaning given to it in clause 3.1.

Related Party: has the meaning given to it in clause 5.1.

Released Persons: has the meaning given to it in clause 12.1.

Releasing Persons: has the meaning given to it in clause 12.1

SEC: has the meaning given to it in clause 13.1.

Seller Group: the Seller and each of its Affiliates.

Settled Claims: the actions, claims, demands, obligations and liabilities released and discharged pursuant to clause 12.

Settlement Deed: has the meaning given to it in clause 12.3.

Tax or Taxation: all forms of taxation and statutory, governmental, state, federal, provincial, local, government or municipal charges, duties, imposts, contributions, levies, withholdings or liabilities wherever chargeable and whether of Hong Kong or any other jurisdiction; and any penalty, fine, surcharge, interest, charges or costs relating thereto.

Third Party Consent: a consent, licence, approval, authorisation or waiver required from a third party for the conveyance, transfer, assignment or novation in favour of the Buyer of any of the Assets in terms acceptable to the Buyer.

Third Party Rights: the benefit of all rights and claims, warranties, choses in action, causes of action, rights of recovery and rights of set-off of any kind (other than rights and claims relating to Tax and claims under any insurance policies) of the Seller against any third party, arising on or before the Effective Time, in respect of the Assets.

Three Units: has the meaning given to it in clause 7.3(b).

Transaction: the transaction contemplated by this agreement or any part of that transaction.

Unfinished Orders: the unfinished orders of the Seller listed in Schedule 5 ( Unfinished Orders ).

Warranties: the warranties set out in clause 8 and Schedule 4 ( Warranties ).

1.2

References to clauses and Schedules are to the clauses of, and Schedules to, this agreement and references to paragraphs are to paragraphs of the relevant Schedule.

1.3

The Schedules form part of this agreement and shall have effect as if set out in full in the body of this agreement.

1.4

This agreement shall be binding on, and enure to the benefit of, the parties to this agreement and their respective personal representatives, successors and permitted assigns, and a reference to a party shall include that party's personal representatives, successors and permitted assigns.

1.5

References to a document in agreed form is to that document in the form agreed by the parties and initialled by them or on their behalf for identification.

A greement to S ell and P urchase

2.1

The Seller shall sell free from Encumbrances, and the Buyer shall purchase the following assets of the Seller (collectively, the “ Assets ”) free from all Encumbrances with effect from the Effective Time:

(a)

the fixed assets specified in Schedule 1(a);

(b)

raw materials of the types described in the line items specified in Schedule 2 owned by the Seller immediately prior to Closing;

(c)

all misc tools, spare parts and mold inventory used in the design, manufacture and testing of all products and fixed assets including but not limited to those described in Schedule 1(b);

(d)

the Intellectual Property owned by the Seller and used or held for use by the Seller in the Business and the Intellectual Property licensed to the Seller and used or held for use by the Seller in the Business, provided that the licensed Intellectual Property is sold by the Seller subject to the terms of the relevant licence and the rights of the relevant licensor;

(e)

computer and related hardware related to product design in the marketing department of the Seller, including all sales documentation for past orders and open quotes included but not limited to artwork, proposals, configuration information, security features, formula;

(f)

all research and development projects ongoing, finished and/or contemplated related to the Business and the Assets;

(g)

customers lists and customer contacts of the Seller in respect of the Business;

(h)

vendor lists, price lists and contacts of the Seller in respect of the Business;

(i)

permits and governmental authorizations in respect of the Business (if applicable), to the extent transferrable;

(j)

invention or copyright assignments (if any) and any restrictive covenant agreements for the benefit of the Seller related to the Business and the Assets; and

(k)

the Third Party Rights relating to the Assets (other than to the extent relating to any Excluded Assets or Excluded Liabilities or obligations of the Seller under this agreement).

2.2

Notwithstanding anything in clause 2.1 above to the contrary, the Assets shall not include, and the Buyer shall not be deemed to purchase or acquire, any assets of the Seller not included in clause 2.1 above, including but not limited to the following (the “ Excluded Assets ”):

(a)

all work in progress and finished goods of the Seller;

(b)

any cash on hand, bank accounts, cash equivalents or marketable securities of the Seller;

(c)

the corporate or company seal, minute books, stock books, blank share certificates, tax returns and other books and records relating to the corporate organization of the Seller;

(d)

the shares or equity interests of the Seller in its subsidiaries (if any);

(e)

the Seller’s original corporate and tax records (provided that the Buyer shall be entitled to have access to such records post-Closing as reasonably necessary in respect of the Assets and copies of the Seller’s business records relevant to the Business will be provided to the Buyer as part of the Intellectual Property to be sold to the Seller);

(f)

all claims, warranties, choses in action, causes of action, rights of recovery and rights of set-off of any kind against third parties to the extent relating to the Excluded Assets or Excluded Liabilities; and

(g)

any fixed assets are shown by the Buyer’s due diligence review conducted pursuant to the LOI not to be in working order, in respect of which the identified defects have not been cured to the satisfaction of the Buyer (acting reasonably) by the Business Day immediately preceding Closing.

2.3

The Buyer shall assume no liability whatsoever of the Seller, whether or not arising from or related to the ownership or operation of the Business or the Assets, and whenever accruing (the “ Excluded Liabilities ”), all of which will be retained by the Seller including but not limited to any amounts due to the shareholders and/or Affiliates of the Seller.

P urchase P rice

3.1

The “ Purchase Price ” for the Assets to be paid by the Buyer to the Seller pursuant to this agreement shall be determined as follows:

(a)

The net book value as at 31 March 2016 of the fixed assets to be purchased by the Buyer pursuant to this agreement. The agreed net book value of the fixed assets to be purchased is specified in Schedule 1. The fixed assets to be purchased by the Buyer shall be physically counted by the Buyer on the day falling 3 Business Days prior to Closing. The fixed assets to be purchased by the Buyer shall be those counted at the physical count and the price shall be the aggregate of the agreed net book values specified in Schedule 1 of the fixed assets physically counted.

PLUS

(b)

The amount payable in respect of raw materials (of the types described in the line items specified in Schedule 2), calculated in accordance with this clause 3.1(b). The quantity of raw materials to be purchased by the Buyer shall be physically counted by the Buyer on the day falling 3 Business Days prior to Closing. The raw materials to be purchased by the Buyer shall be the actual quantity counted at the physical count and the price shall be the quantity counted multiplied by the unit book value as at 31 March 2016 shown in the Seller’s quarterly financial statements.

PLUS

(c)

US$1,000,000

In determining the agreed book value of the fixed assets and raw materials as at 31 March 2016, the Seller’s historical accounting methods have been used. Further, it is agreed by the Buyer and the Seller that the US$1,000,000 referred to in clause 3.1(c) above reflects the market value of the equipment and machinery being purchased.

3.2

The Purchase Price shall be paid by the Buyer by wire transfer of immediately available US dollars in the following manner:

(a)

60% of the Purchase Price shall be paid upon Closing;

(b)

20% of the Purchase Price shall be paid not later than the first anniversary of Closing; and

(c)

20% of the Purchase Price shall be paid not later than the second anniversary of Closing.

3.3

The amount of the Purchase Price to be paid upon Closing shall be applied as follows:

(a)

first , to satisfy any indebtedness encumbering the Assets; and

(b)

second , to be paid to the Seller by wire transfer of immediately available funds to an account designated in writing by the Seller at least 3 Business Days prior to Closing.

3.4

The instalments of the Purchase Price to be paid pursuant to clauses 3.2(b) and 3.2(c) shall be paid by the Seller by wire transfer of immediately available US dollars to an account designated in writing by the Seller not later than 20 Business Days prior to the expiry of the relevant last day for payment of the relevant instalment specified in clause 3.2(b) or 3.2(c), as the case may be.

P ayment for R estrictive C ovenants

4.1

In addition to the Purchase Price, in consideration for the restrictive covenants given by the Seller in clause 11 and to be given by EGT and Mr. Chung in the Deed of Non-Competition, the Buyer shall pay:

The Earn Out Payments (as defined below) to account for the 5 year period immediately following the Closing Date (the “ Period ”); and

A total of US$530,000 upon Closing to the Seller by wire transfer of immediately available funds to an account designated in writing by the Seller at least 3 Business Days prior to Closing, to account for the 5 year period immediately following the end of the Period.

4.2

Without prejudice to any right of the Buyer to claim specific performance, in the event there is a material breach of the restrictive covenants given by the Seller in Clause 11 or by EGT under the Deed of Non-Competition, the following shall apply: a) if any such material breach shall occur during the Period, each of the Seller and EGT shall be jointly and severally liable to Buyer for an amount of US$530,000 plus any Earn Out Payments paid to said parties up through the material breach and b) if any such material breach shall occur during the 5 year period following the Period, each of the Seller and EGT shall be jointly and severally liable to Buyer for an amount of US$530,000 plus any Earn Out Payments paid to said parties up through the material breach. Each of 4.2(a) and 4.2 (b) shall be payment made as liquidated damages and shall be the Buyer’s sole and exclusive remedy in damages (without prejudice to any claim by the Buyer for specific performance). The Parties acknowledge such amount is a genuine pre-estimate of loss of the Buyer.

E arn O ut P ayments

5.1

In addition to the Purchase Price and the amount payable by the Buyer for restrictive covenants, referred to in clause 4, the Buyer shall pay the Seller the following “ Earn Out Payments ”:

(a)

Territorial Earn Out . For a period of five (5) years following Closing, three percent (3%) of Net Revenue from gaming chip and plaque sales made by the Buyer and its Affiliates and their agents to Non-Related Party casinos subject to a cap of a total of US$500,000,000 of Net Revenue, in the following countries:

(i)

In Macau , Star World, Louis the XIII and the MGM Macau properties;

(ii)

In the Philippines , the next Tiger Resort, Leisure and Entertainment opening, Resort World Bayshore, Solaire, Royce, Winford, Boracay, City of Dreams Manila, Tiger, Midori, Leisure & Entertainment;

(iii)

In Australia , the Star and all casinos within the Crown Resorts Group, including but not limited to Crown Melbourne, Crown Perth and the planned Crown Sydney property;

(iv)

In Cambodia , all casinos, except NAGA World and any of its affiliated properties; and

(v)

In Korea , Laos , Nepal , Thailand and Myanmar , all casinos; and

(b)

Malaysia Earn Out . The Buyer shall pay the Seller three percent (3%) of the revenue actually received by the Buyer and/or its Affiliates in relation to sales of 312,000 wheelchecks sets to Genting Highlands Resort, Malaysia, the product order in respect of which was received by the Seller and referred to the Buyer after the signing of the LOI, minus (i) all taxes paid in respect of such product order (VAT, usage rights, duties, etc.) excluding corporation or profits tax, (ii) all credits or discounts given in respect of such order for whatever reason, (iii) all products sales commissions paid in respect of such product order to sales executives employed by the Buyer and (iv) all freight, transportation, installation and packaging expenses specifically invoiced to the customer in respect of the delivery and installation of such product order; and

(c)

Melco Crown Earn Out . The following percentages of Net Revenue from gaming chip and plaque sales made by the Buyer and its Affiliates to any and all Related Parties and their agents:

(i)

For the first US$10,000,000 of Net Revenue at any time after Closing (without any time limit), fifteen percent (15%); and

(ii)

For five (5) years after Closing, and in addition to the payment under (i) above, three percent (3%), capped at a total of US$30,000,000 of Net Revenue.

Notwithstanding the above calculation, no Earn Out Payments are payable to the Seller until the aggregate amount of Earn Out Payments under Section 5.1(a), (b) & (c) above exceeds US$900,000, and the Seller shall only be entitled to the Earn Out Payments which are above the said US$900,000.

For the purposes of this clause 5.1:

“ Net Revenue ” means revenue actually received by the Buyer and/or its Affiliates during the year minus (a) all taxes paid during the year (VAT, usage rights, duties, etc.) excluding corporation or profits tax, (b) all credits or discounts given during the year for whatever reason, (c) all products sales commissions paid during the year to sales executives employed by the Buyer and (d) all freight, transportation, installation and packaging expenses specifically invoiced to customers during the year in respect of the delivery and installation of the customers’ respective product orders.

“ Crown Resorts Group ” means Crown Resorts Limited and its Affiliates.

A “ Related Party ” is any and all of Melco Crown Entertainment Limited (“ MCE ”), Melco International Development Limited (“ MIDL ”), Crown Resorts Limited, each entity directly or indirectly, now or in the future, majority owned by any of the foregoing, City of Dreams, Manila (which is a 50:50 indirectly owned joint venture of MCE) and casinos in Vietnam, Cyprus, Spain and Russia in which MIDL or MCE has, now or in the future, a direct or indirect equity investment (regardless of percentage ownership) (collectively “ Melco Crown ”).

“ Non-Related Party ” means a person which is not a Related Party.

5.2

Within 2 months after the end of each financial year of the Buyer following Closing, the Buyer shall provide the Seller with:

(a)

copies of the annual audited consolidated financial statements of the Buyer Group (only if at the relevant time the Buyer is no longer listed on the NASDAQ Stock Exchange) and/or copies of the annual audited financial statements of any of its relevant Affiliates whose accounts have not been consolidated into those of the Buyer Group;

(b)

a calculation worksheet and, if requested by the Seller, the related invoices and supporting documents for the Earn Out Payments; and

(c)

upon the request of the Seller and at the Seller’s expense, a certificate signed by the auditors of the Buyer confirming that the amount of the Earn Out Payments payable to the Seller has been accurately calculated in accordance with the terms of this agreement.

5.3

The Seller hereby directs that the Earn Out Payments be paid by the Buyer by wire transfer of immediately available US dollars to a bank account of designated in writing by the Seller not later than 20 Business Days prior to the relevant last day for payment of the relevant Earn Out Payment. The Buyer shall pay to the bank account the relevant amount of the Earn Out Payments as shown in the calculation worksheet referred to in clause 5.2(b) above within 10 calendar days after the same is delivered to the Seller.

5.4

If the Seller intends to dispute the amount of the Earn Out Payments payable to the Seller as stated in the calculation worksheet referred to in clause 5.2(b), the Seller shall give the Buyer a written notice within 30 calendar days after the announcement and release of the relevant annual audited consolidated financial statements of the Buyer Group. If such amount is not agreed within 60 calendar days after the serving of the written notice, either the Seller or the Buyer may refer the matter for determination in accordance with the procedure detailed in clause 5.5. Payment of the amount agreed, or determined pursuant to clause 5.5, shall be made within 10 calendar days after such agreement or determination.

5.5

If the Buyer and the Seller have failed to reach agreement on the matters set out in clause 5.4, within the 60 calendar days period referred to in clause 5.4, either of them may refer the matter to an independent firm of accountants (“ Expert ”) for resolution as follows:

(a)

the Expert shall be jointly agreed by the parties or, if no agreement is reached within 14 calendar days after either one of them notifies the other that it wishes to appoint an Expert, shall be nominated at the request of either the Buyer or the Seller by the President for the time being of the Hong Kong Institute of Certified Public Accountants and the Buyer and the Seller shall co-operate and use their reasonable endeavours to agree the terms of appointment with the Expert as soon as reasonably possible (and if terms cannot be agreed within 14 calendar days from the date of nomination, then either the Buyer or the Seller may request the President for the time being of the Hong Kong Institute of Certified Public Accountants to nominate another Expert and the Buyer and the Seller shall cooperate and use their reasonable endeavours to agree terms with that Expert);

(b)

neither the Buyer nor the Seller shall unreasonably withhold agreement to the proposed terms of appointment of the Expert;

(c)

the Expert shall be requested to resolve the matter in dispute applying the terms of this agreement;

(d)

the determination of the Expert shall be final and binding on both the Buyer and the Seller in the absence of manifest error;

(e)

the fees of the Expert shall be shared by Buyer and the Seller equally;

(f)

the Expert shall present its findings in writing to the Buyer and the Seller within 30 calendar days of its appointment and the Buyer and the Seller shall give it all reasonable assistance, together with access to all personnel and documents it requests; and

(g)

the Buyer and the Seller shall use their best endeavours to appoint an Expert who is based in the United States of America. If an Expert who is not based in the United States of America is nominated by the President for the time being of the Hong Kong Institute of Certified Public Accountants or by the Seller, subject to the Buyer’s agreement to the appointment of such Expert, the Seller shall be liable for the travelling expenses of such Expert arising from the performance by the Expert of its duty in accordance with the terms of its appointment.

C ondition and P re -C losing C ovenant

6.1

Closing is conditional upon:

(a)

the Warranties given by the Seller under this agreement remaining true and accurate in all material respects and not misleading in any material respect at Closing and the Parties’ compliance with their respective obligations under this agreement required to be complied with prior to Closing; and

(b)

the Seller delivering to the Buyer the duly executed Deed of Non-Competition.

6.2

The Seller shall not take any action to harm or injure the rights or business relationship of any other person as a result of this agreement or the purchase of the Assets by the Buyer pursuant to this agreement prior to Closing.

C losing

7.1

Subject to clause 6.1 above, Closing shall take place on 11 May 2016 at 3:00pm Hong Kong time at the Three Units or at any other place and/or on any other date and/or at any other time (as the case may be) as may be agreed in writing by the Parties (the “ Closing Date ”).

7.2

At Closing, the Seller shall comply with its obligations set out in paragraph 1 of Schedule 3.

7.3

At Closing, and subject to the Seller having complied with clause 7.2, the Buyer shall:

(a)

pay the Closing payments referred to in clauses 3.2(a) and 4 above within 48 hours after Closing to the Seller by wire transfer of immediately available funds to an account designated in writing by the Seller at least 3 Business Days prior to Closing.

(b)

pay to the Seller within 48 hours after Closing:

(i)

an amount equal to two (2) months’ of rent payable (excluding taxes, management fees, electricity and water) under the three (3) lease agreements for the three (3) units comprising the Seller’s factory premises, capped at US$130,000; and

(ii)

an additional amount equal to two (2) months’ rent (excluding taxes, management fees, electricity and water) payable under the three (3) lease agreements for the three (3) units comprising the Seller’s factory premises, as compensation for the termination of the three (3) lease agreements, such additional amount capped at US$130,000.

Subject to the foregoing, all costs of terminating the three (3) leases shall be for the Seller’s account. The three (3) units comprising the Seller’s factory premises are Units C1 and C2 on the Ground Floor of, and Unit 303 on the 3rd Floor of, Koon Wah Building, 2 Yuen Shun Circuit, Yuen Chau Kok, Shatin, New Territories, Hong Kong (the “ Three Units ”).

(c)

deliver to the Seller:

(i)

duly executed counterparts of the licences, agreements, assignments and other documents referred to in paragraph 1(g) of Schedule 3;

(ii)

a certified copy of the resolution of the board of directors of the Buyer authorising the execution and delivery by the officers specified in the resolution of this agreement, and any other documents referred to in this agreement as being required to be delivered by it.

(iii)

a signed acknowledgement of the Disclosure Letter;

(iv)

duly executed counterpart of the Deed of Non-Competition; and

(v)

duly executed counterpart of the Settlement Deed duly executed by the Buyer and Mr. Da Silva.

7.4

If the Seller does not comply with its obligations set out in paragraph 1 of Schedule 3 in any material respect, or if any of the termination events referred to in clause 7.5 below occurs, the Buyer may, without prejudice to any other rights or remedies it has (including the right to claim damages for breach of this agreement):

(a)

so far as is practicable, proceed to Closing; or

(b)

by written notice to the Seller, defer Closing to a date no more than 28 calendar days after the date on which Closing would otherwise have taken place; or

(c)

by written notice to the Seller, terminate this agreement (and if so terminated, this agreement shall terminate and cease to have effect save for the provisions referred to in clause 7.6 and any rights, remedies and obligations or liabilities of the Parties that have accrued up to the termination.

7.5

The termination events referred to in clause 7.4 above are:

(a)

any material inaccuracy in the documents provided by the Seller to the Buyer as a result of the Buyer’s due diligence requests made pursuant to section 4 of the LOI, which material inaccuracy materially adversely affects the value of the Assets as a whole;

(b)

the occurrence of any action, event, condition or circumstance that, individually or in the aggregate, has had or could reasonably be expected to have a material adverse effect on the value of the Assets as a whole (“ Material Adverse Change ”), provided, however, that when determining whether there has been a Material Adverse Change, any adverse effect attributable to any of the following shall be disregarded: (a) general economic, business, industry or financial market conditions (whether in the United States, Asia or otherwise), but that do not disproportionately affect the Seller; (b) the taking of any action required by this agreement; (c) the announcement of the Transaction; (d) the breach of this agreement by the Buyer; (e) any changes in applicable laws, regulations or accounting rules, including GAAP; (g) any existing event, occurrence or circumstance set forth in the Disclosure Letter; or (h) any adverse change in or effect on the Assets that is cured by or on behalf of the Seller to the reasonable satisfaction of the Buyer before the termination of this agreement; and

(c)

any material misrepresentation or breach of any covenant herein required to be fulfilled prior to Closing by the Seller which taken individually or in the aggregate with other such misrepresentations or breaches, materially adversely affects the value of the Assets as a whole.

7.6

On termination of this agreement in accordance with clause 7.4(c), the following clauses shall remain in force: clause 1 and clause 13 to clause 20 inclusive.

7.7

Following Closing, the Buyer and the Seller shall each comply with their respective obligations set out in paragraph 2 of Schedule 3.

W arranties , U ndertakings and I ndemnities

8.1

The Parties acknowledge that the Assets are to be sold and purchased under this agreement on an “as is” basis and fit for the purpose for which they are currently used by the Seller, the representations, warranties and other covenants given by the Seller shall be limited accordingly.

8.2

The Seller represents and warrants that, except as Disclosed, each Warranty is true, accurate and not misleading on the date of this agreement and on Closing.

8.3

Each of the Warranties is separate and, unless otherwise specifically provided, is not limited by reference to any other Warranty or any other provision in this agreement.

8.4

Except for the matters Disclosed, the due diligence investigation conducted by the Buyer, referred to in section 4 of the LOI, shall not limit or affect the representations, warranties, covenants or indemnities of the Seller made in this agreement.

8.5

The Buyer represents and warrants to the Seller that each of the following statements is true, accurate and not misleading on the date of this agreement and on Closing:

(a)

The Buyer has all requisite power and authority, and has taken all necessary corporate action, to enable it to enter into and perform this agreement and all agreements and documents entered into, or to be entered into, pursuant to the terms of this agreement.

(b)

All necessary licences, consents, permits, agreements, arrangements and authorities (public and private) have been obtained to enable the Buyer to manufacture and sell gaming chips and plaques in all necessitated jurisdictions, and all such licences, consents, permits, agreements, arrangements and authorities are valid and subsisting.

8.6

The Seller undertakes not to dispose of any raw materials following the Buyer’s pre-Closing physical count referred to in clause 3.1(b) and up to Closing.

8.7

Subject to the limitations on Claims contained in clause 9 below, the Seller agrees to defend, indemnify and hold harmless the Buyer, its Affiliates and their respective agents, employees, officers, directors, successors and assigns, from and against any and all liabilities and claims for demands, suits, actions, liabilities, losses, damages, injuries judgments, costs and expenses, directly or indirectly arising from any untruth, inaccuracy or breach of any representation, covenant or agreement made by the Seller in this agreement, any Excluded Asset or Excluded Liability, including claims from the Seller’s employees, agents, customers, vendors, landlords or the shareholders of EGT relating to an event which occurred prior to Closing.

8.8

The Buyer agrees to defend, indemnify and hold harmless the Seller, its Affiliates and their respective agents, employees, officers, directors, consultants, successors and assigns, from and against any and all liabilities and claims, including, without limitation, future liabilities and claims by third parties, for demands, suits, actions, liabilities, losses, damages, injuries, judgments, costs and expenses (including reasonable attorney’s fees and costs), directly or indirectly arising from any untruth, inaccuracy or breach of any representations, covenants or agreements made by the Buyer in this agreement and from use of the Assets post-Closing, except that the foregoing indemnity shall not apply in respect of any matter arising out of: (a) a breach of any representation, warranty or covenant of the Seller in this agreement; (b) any of the Excluded Liabilities retained by the Seller or (c) any pre-Closing act or omission by the Seller or any of its representatives.

L imitations on C laims

9.1

The aggregate liability of the Seller for all Claims shall not exceed US$5,900,000.

9.2

The Seller shall not be liable for a Claim unless notice in writing of the Claim, summarising the nature of the Claim (in so far as it is known to the Buyer) and, as far as is reasonably practicable, the amount claimed, has been given by or on behalf of the Buyer to the Seller on or before the date which falls twelve months after Closing.

9.3

No liability shall attach to the Seller unless the aggregate amount of all Claims for which it is be liable shall exceed US$10,000 and in such event the Seller shall be liable for the whole of such amount and not merely the excess.

9.4

The Seller shall not be liable for a Claim in respect of any matter which has been Disclosed.

9.5

Nothing in this clause 9 applies to exclude or limit the liability of the Seller to the extent that a Claim arises or is delayed as a result of dishonesty, fraud, wilful misconduct or wilful concealment by the Seller, its agents or advisers.

10.

E mployees

10.1

The Seller shall be responsible for the termination of its existing employees and/or agents as a result of the Transaction. The Buyer agrees to pay to the Seller a fixed sum of US$520,000 within 60 calendar days after Closing for paying all legally necessitated costs stemming from the termination of employment and/or appointment of the Seller’s employees and agents (including payments made in lieu of notice, severance and long service payments, any other contractual and/or legal entitlements of the employees and agents and related Taxes).

10.2

Prior to the Seller’s provision of notice to its employees, the Buyer shall notify the Seller of any and all key employees and/or agents it wishes to become the Buyer’s employees; the said employees shall sign new employment agreements with the Buyer (as necessary) prior to being rewarded employment. The Seller shall remain responsible for any and all liability stemming from the layoff and/or termination of the Seller’s employees and/or agents, and agrees that the Buyer’s liability will be strictly limited to the payout of US$520,000 referred to in clause 10.1.

11.

R estrictions on the S eller

11.1

The Seller undertakes to the Buyer that, save in relation to the Unfinished Orders (in respect of which the Buyer hereby gives its consent for the Seller to complete after Closing), following Closing, the Seller shall not (and the Seller shall procure that EGT and its subsidiaries shall not) do any of the following in any capacity, whether on its own behalf, or on behalf of, or jointly with, any other person:

(a)

at any time during the period of 10 years from Closing own, operate, control or participate in any way in a company that manufactures gaming chips, plaques, jetons, playing cards or layouts for gaming tables in competition with the Buyer;

(b)

at any time during the period of 10 years from Closing employ or engage, or offer to employ as an employee or engage as a consultant, or solicit or otherwise entice or attempt to entice away from the Buyer or any member of the Buyer Group, any key employee or agent who becomes the Buyer’s employee or consultant in the business of supplies of gaming chips, plaques and layouts for gaming tables pursuant to clause 10.2;

(c)

at any time during the period of 10 years from Closing canvass, solicit or approach or cause to be canvassed, solicited or approached any person who shall at any time within 2 (two) years preceding Closing have been a client, customer, representative or agent of the Seller in relation to the Business for the purpose of offering to that person chips, plaques and layouts for gaming tables supplied by the Seller in relation to the Business at Closing; or

(d)

use in the course of any business any trade or service mark, business or domain name, design or logo which, at Closing, was or had been used by the Seller in respect of the Business, or anything which is, in the reasonable opinion of the Buyer, capable of confusion with such mark, name, design or logo.

11.2

Each undertaking in clause 11.1 is a separate undertaking of the Seller and shall be enforceable separately and independently by the Buyer. In the event of any such restriction being determined to be unenforceable in whole or in part for any reason, that unenforceability shall not affect the enforceability of the remaining restrictions in this agreement or (in the case of restrictions unenforceable in part) the remainder of that restriction.

11.3

While the restrictions contained in clause 11 are considered fair and reasonable by the Buyer and the Seller in order to assure the Buyer the full benefit of the Assets, it is recognized that restrictions of the nature in question may fail for technical reasons and accordingly it is hereby agreed and declared that if any of such restrictions shall be adjudged to be void as going beyond what is reasonable in all the circumstances for the protection of the interests of the Buyer but would be valid if part of the wording thereof were deleted or the periods thereof reduced or the range of activities or area dealt with thereby reduced in scope, the said restriction shall apply with such modifications as may be necessary to make it valid and effective.

11.4

The Seller shall ensure that, on or prior to Closing, EGT and Mr. Chung shall enter into an agreement of non-competition in the agreed form, in favour of the Buyer, containing equivalent restrictions to those set forth in clause 11.1 (the “ Deed of Non-Competition ”). The Seller shall procure that EGT and Mr. Chung comply with the terms of the Deed of Non-Competition.

12.

T ermination of L itigation

12.1

With effect from Closing, each of the Buyer and the Seller (for itself and on behalf of its respective Affiliates and its and their respective directors, officers and employees) (collectively, the “ Releasing Persons ”) irrevocably releases and forever discharges the other Party and its respective Affiliates and the respective directors, officers and employees of the other Party and/or its Affiliates (collectively, the “ Released Persons ”) from all and any actions, claims, demands, obligations and liabilities, whether in Hong Kong or any other jurisdiction, whether actual or contingent, whether or not presently known to the Releasing Persons (or any of them) or to the law, whether in law or equity and whether past, present or future, including claims for legal costs and expenses, that the Releasing Persons or any of them ever had, may have or hereafter can, shall or may have against any of the Released Persons arising out of under or in connection with the events and matters giving rise to:

(a)

the two legal proceedings before the High Court of Hong Kong, namely High Court Action No. 3038 of 2015 and High Court Miscellaneous Proceedings No. 3354 of 2015 (collectively, the “ Dolphin Proceedings ”); and

(b)

all proceedings (whether in Hong Kong or France or any other jurisdiction) against Mr. Paulo Da Silva (collectively, the “ Da Silva Proceedings ”).

For clarification purposes, each of the Buyer and the Seller hereby agrees that each will be responsible for its own legal fees and costs stemming from the Settled Claims.

12.2

Promptly following Closing, the Buyer shall irrevocably withdraw, terminate and discontinue the Dolphin Proceedings in accordance with the appropriate court procedures. The Buyer and the Seller agree that there will be no order as to costs in relation to either the Dolphin Proceedings or the Da Silva Proceedings. In respect of the Dolphin Proceedings, the Buyer and the Seller shall instruct their respective legal counsel to execute a Consent Order (pursuant to O. 42, r. 5A of the Rules of the High Court) and shall take all steps necessary to have such a Consent Order made, ordering that:

(a)

the sum of HK$498,700 (four hundred ninety-eight thousand and seven hundred Hong Kong dollars) paid into Court by the Buyer on 23 February 2016, along with interest accrued, if any, be released to the Buyer; and

(b)

the Dolphin Proceedings be dismissed.

12.3

Subject to Mr. Da Silva entering into a settlement deed with the Buyer in which Mr. Da Silva agrees (1) to return to the Buyer any and all confidential information of the Buyer in his possession, (2) not to use any confidential information of the Buyer for any purpose and (3) not to be employed in a casino currency manufacturing business which competes with the Buyer (the “ Settlement Deed ”), the Buyer agrees (for itself and on behalf of its respective Affiliates and its and their respective directors, officers and employees) (collectively, the “ Buyer Releasing Persons ”) to irrevocably release and forever discharge Mr. Da Silva from all and any actions, claims, demands, obligations and liabilities, whether or not presently known to the Buyer Releasing Persons or to the law, whether in law or equity and whether past, present or future, that the Buyer Releasing Persons or any of them ever had, may have or hereafter can, shall or may have against Mr. Da Silva arising out of under or in connection with the events and matters giving rise to the Da Silva Proceedings.

12.4

Subject to Mr. Da Silva entering into the Settlement Deed, the Buyer agrees, promptly following the execution of the Settlement Deed by Mr. Da Silva, to irrevocably withdraw and terminate the Da Silva Proceedings in accordance with the appropriate court procedures.

12.5

Each party, including Mr. Da Silva, will be responsible for their own legal costs and all other costs related to those proceedings from the beginning to the end. This clause is intended to apply to and supersede any outstanding costs orders to the contrary (including any unpaid costs orders).

12.6

Each of the Buyer and the Seller agrees to indemnify and keep indemnified the other Party and its respective Affiliates and the respective directors, officers and employees of the other Party and/or its Affiliates against all losses, costs, expenses and damages incurred by the other Party, its Affiliates and/or such directors, officers and employees (including the entire legal expenses incurred) in connection with any actions, claims, demands, suits or proceedings which the first Party, its Affiliates or the respective directors, officers or employees of such Party and/or its Affiliates may bring against the other Party or any of its respective Affiliates or the respective directors, officers or employees of the other Party and/or its Affiliates after Closing which are stated in clause 12.1 to be released and discharged (excluding, for the avoidance of doubt, the performance and enforcement of this agreement).

12.7

The Parties expressly agree that nothing contained in this agreement shall prevent any Party from making a claim or demand against the other Parties in relation to the performance, enforcement or any breach of any of the terms of this agreement.

12.8

This agreement is entered into in connection with the compromise of the Settled Claims. The Buyer and the Seller acknowledge that this agreement is not and shall not be represented or construed by either of them as an admission of liability or wrongdoing on the part of any Party to this agreement or any other person or entity.

13.

C onfidentiality and A nnouncements

13.1

The Buyer and the Seller’s parent entity, EGT, will each be required to make a public announcement (which public announcement shall include an appropriate filing with the Securities and Exchange Commission (“ SEC ”)) of the entering into of this agreement. The Buyer and the Seller shall provide drafts of their respective public announcements (in the Seller’s case, to be made by EGT) to the other Party and shall provide the other Party a reasonable opportunity to provide input on their respective public announcements as they relate to any information or statements regarding the other Party. Each Party acknowledges that the Buyer and EGT will be required to file a Form 8-K and/or press release regarding this agreement in accordance with applicable securities laws and SEC requirements. All of GPI’s and EGT’s SEC filing(s) regarding this agreement or the Transaction shall be subject to the prior approval of, and co-ordinated with, both the Buyer and the Seller, provided that this requirement shall not prevent the Buyer or EGT complying with the legal, regulatory or stock exchange requirements applicable to it in the circumstances.

13.2

In addition to the public announcements required by applicable law or securities regulations, the Buyer and EGT may issue a joint press release in relation to this agreement (the form of which joint press release would require agreement between the Buyer and EGT).

13.3

Except as provided in clauses 13.1 and 13.2 above, neither Party nor any of their Affiliates or their respective officers, directors, stockholders, employees or agents shall make any public or private announcement or issue any press release or other publicity in respect of this agreement orthe Transaction without the prior written consent of the other Parties (except for such disclosures as are required in applications or by applicable securities or gaming laws or stock market rules).

14.

A ssignment

14.1

Subject to clause 14.2 below, neither Party shall assign, transfer, mortgage, charge, declare a trust of, or deal in any other manner with any of its rights and obligations under this agreement without the prior written consent of the other Parties.

14.2

Either Party may assign its rights under this agreement to any of its Affiliates, without the prior written consent of the other Parties.

15.

E ntire agreement, S tatus of LOI and N o D ouble R ecovery

15.1

This agreement (together with the documents referred to in it) and the LOI constitute the entire agreement between the Parties relating to their subject matter and supersede and extinguish all previous discussions, correspondence, negotiations, drafts, agreements, promises, assurances, warranties, representations and understandings between them, whether written or oral, relating to their subject matter.

15.2

The Buyer and the Seller are parties to the LOI. The provisions of this agreement implement the terms provided in the LOI. To the extent that the provisions of this agreement and the terms in the LOI cover the same matters, this agreement supersedes the LOI. Otherwise, the provisions of the LOI shall survive in accordance with their respective terms.

15.3

No Party shall be entitled to recover damages or obtain payment, reimbursement, restitution or indemnity more than once under the LOI, the Settlement Deed and this agreement for loss arising out of the same circumstances.

16.

V ariation and W aiver

16.1

No variation of this agreement shall be effective unless it is in writing and signed by the Parties (or their authorised representatives).

16.2

No failure or delay by a Party to exercise any right or remedy provided under this agreement or by law shall constitute a waiver of that or any other right or remedy, nor shall it prevent or restrict the further exercise of that or any other right or remedy. No single or partial exercise of such right or remedy shall prevent or restrict the further exercise of that or any other right or remedy. A waiver of any right or remedy under this agreement or by law is only effective if it is in writing.

16.3

Except as expressly provided in this agreement, the rights and remedies provided under this agreement are in addition to, and not exclusive of, any rights or remedies provided by law.

16.4

Except for the Affiliates of the Seller and the Buyer and the respective directors, officers and employees of the Seller, the Buyer and their respective Affiliates, which shall have the right to enforce the provisions in clause 12 ( Termination of Litigation ) of this agreement, a person who is not a party to this agreement shall not have any rights under the Contracts (Rights of Third Parties) Ordinance (Cap. 623) to enforce any term of this agreement.

17.

C osts

Except as expressly provided in this agreement, each Party shall pay its own costs and expenses incurred in connection with the negotiation, preparation and execution of this agreement (and any documents referred to in it).

18.

N otices

18.1

All communications and notices under this agreement shall be in writing in the English language and shall be personally delivered or transmitted via electronic mail or facsimile transmission or recognized international courier service, addressed to the relevant Party at the relevant address set forth below or such other address, contact details or contact persons as shall be designated by a Party in a written notice to the other Parties:

Seller

Unit 15-16, 19/F, Delta House, 3 On Yiu Street, Shatin, New Territories, Hong Kong

Attention:		Mr. Yuk Man Chung, Clarence
		Chairman & CEO
Telephone No.	:	+852 3151-3763
Facsimile No.	:	+852 2153-9111
Email Address	:	ClarenceChung@egt-group.com

Buyer

3945 W. Cheyenne Avenue, #208, North Las Vegas, NV 89032

Attention:		Mr. Greg Gronau
		President & CEO

		Mr. Matthew Hagerty, ESQ.
		Corporate Counsel

Telephone No.	:	702-598-2401

Facsimile No.	:	702-598-2494
Email Address	:	ggronau@gpigaming.com & mhagerty@gpigaming.com

EGT

Unit 15-16, 19/F, Delta House, 3 On Yiu Street, Shatin, New Territories, Hong Kong

Attention:		Mr. Yuk Man Chung, Clarence
		Chairman & CEO
Telephone No.	:	+852 3151-3763
Facsimile No.	:	+852 2153-9111
Email Address	:	ClarenceChung@egt-group.com

18.2

All notices shall be deemed duly given (i) on the date of receipt, if personally delivered, (ii) ten (10) Business Days after delivery to the recognized international courier service, if by recognized international courier service, or (iii) upon receipt of the written confirmation of the electronic mail or facsimile, if by electronic mail or facsimile transmission.

18.3

The Buyer hereby irrevocably appoints Susan Kendall, c/o Baker McKenzie, 14th Floor, Hutchinson House, 10 Harcourt Road, Hong Kong SAR as its agent (the “ Buyer Process Agent ”) to accept service of process in Hong Kong in any legal action or proceedings arising out of this agreement, service upon whom shall be deemed completed whether or not forwarded to or received by the Buyer.

18.4

If such Buyer Process Agent ceases to be able to act as such or to have an address in Hong Kong, the Buyer irrevocably agrees to appoint a new process agent in Hong Kong acceptable to the Seller and to deliver to the Seller within 10 calendar days a copy of a written acceptance of appointment by the process agent accepted by the Seller. For the avoidance of doubt, until such time as the Seller receives a copy of such written acceptance, service of process on the agent specified in clause 18.3 will constitute valid service under this agreement.

18.5

Notwithstanding the foregoing provisions of this clause 18, each Party irrevocably consents to any process in any legal action or proceedings arising out of or in connection with this agreement being served on it in accordance with the provisions of this agreement relating to service of notices. Nothing contained in this agreement shall affect the right to serve process in any other manner permitted by law.

19.

S everance

If any provision or part-provision of this agreement is or becomes invalid, illegal or unenforceable, it shall be deemed modified to the minimum extent necessary to make it valid, legal and enforceable. If such modification is not possible, the relevant provision or part-provision shall be deemed deleted. Any modification to or deletion of a provision or part-provision under this clause shall not affect the validity and enforceability of the rest of this agreement.

20.

G overning L aw and J urisdiction

20.1

This agreement and any dispute or claim arising out of or in connection with it or its subject matter or formation (including non-contractual disputes or claims) shall be governed by and construed in accordance with the law of Hong Kong.

20.2

Each Party irrevocably agrees that the courts of Hong Kong shall have exclusive jurisdiction to settle any dispute or claim arising out of or in connection with this agreement or its subject matter or formation (including non-contractual disputes or claims).

This agreement has been entered into on the date stated at the beginning of it.

SIGNED by	)
	)
for and on behalf of	)
Dolphin Products Limited	)
	)
in the presence of:	)

SIGNED by	)
	)
for and on behalf of	)
Gaming Partners International	)
Corporation	)
in the presence of:	)

SIGNED by	)
	)
for and on behalf of	)
Entertainment Gaming Asia Inc.	)
in the presence of:	)

EXHIBIT 31.1

CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER

Section 302 Certification

I, Gregory S. Gronau, certify that:

1. I have reviewed this Quarterly Report on Form 10-Q of Gaming Partners International Corporation;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements and other financial information included in this report fairly present, in all material respects, the financial condition, results of operations, and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize, and report financial information; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: August 11, 2016	By:	/s/ Gregory S. Gronau
		Gregory S. Gronau President and Chief Executive Officer

EXHIBIT 31.2

CERTIFICATION OF PRINCIPAL FINANCIAL AND ACCOUNTING OFFICER

Section 302 Certification

I, Alain Thieffry, certify that:

1. I have reviewed this Quarterly Report on Form 10-Q of Gaming Partners International Corporation;

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: August 11, 2016	By:	/s/ Alain Thieffry
		Alain Thieffry Chief Financial Officer, and Chairperson of the Board

Exhibit 32.1

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report on Form 10-Q of Gaming Partners International Corporation (the Company), for the quarter ended June 30, 2016, as filed with the Securities and Exchange Commission (SEC) on the date hereof (the Report), Gregory S. Gronau, as Chief Executive Officer of the Company, and Alain Thieffry, as Chief Financial Officer of the Company, each hereby certifies, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that, to the best of his knowledge:

The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

	GAMING PARTNERS INTERNATIONAL CORPORATION

Date: August 11, 2016	By:	/s/ Gregory S. Gronau
		Gregory S. Gronau
		President and Chief Executive Officer

Date: August 11, 2016	By:	/s/ Alain Thieffry
		Alain Thieffry
		Chief Financial Officer, and Chairperson of the Board

Exhibit 32.1 is furnished to accompany this report on Form 10-Q but shall not be deemed “filed” for the purposes of Section 18 of the Securities Exchange Act of 1934 or otherwise and shall not be deemed incorporated by reference into any filing under the Securities Act of 1933, as amended, or the Exchange Act..