he agreement increases the total maximum number of machines which the company is permitted to place and operate at NagaWorld from the original 640 seats to 670 seats. Elixir Gaming’s operations within NagaWorld currently consist of approximately 590 gaming machine seats, which achieved average win per unit per day (WUD) of over us$ 180 for the past six months on a growing installed machine base. NagaWorld is a luxury casino resort in Cambodia and is the only licensed full service casino in and around the capital city of Phnom Penh.
Under the terms of the Agreement, Elixir Gaming will place 30 additional electronic gaming machine seats on NagaWorld’s casino lobby floor, which will serve to complement and expand its VIP slot area established under the company’s December 2009 contract. Elixir Gaming anticipates the Additional Machines to be in operation in July 2010 following the floor space renovation by NagaWorld. The Additional Machines will be sourced from the company’s existing inventory and the purchase of new machines.
All the terms regarding operations and revenue sharing under the December 2009 Machine Operation Participation Consolidation Agreement with NagaWorld will apply to the Additional Machines. For example, Elixir Gaming and NagaWorld will have joint control over the operation of all the Additional Machines, including floor staff and respective audit rights. Elixir Gaming and NagaWorld will share the revenue and certain operating costs, such as marketing and floor staff, at a 25% / 75% split, respectively, and Elixir Gaming will receive on a daily basis its portion of the daily win in cash. The contract duration is six years and expires on February 28, 2016.
In consideration for the agreement, Elixir Gaming shall pay to NagaWorld an upfront commitment fee of us$ 1 million for the Additional Machines. The commitment fee will be paid in mid June 2010.
Given the Additional Machines serve as an extension to the floor area designated by the December 2009 contract under which Elixir Gaming was entitled to place 200 machines for a commitment fee of us$ 4.1 million, Elixir Gaming will be entitled to 100% of the WUD from both the Additional Machines and the 200 machines under the December 2009 contract until it has received the accumulated total of us$ 6.8 million.
This represents the aggregate of the us$ 1 million commitment fee from the Additional Machines, the us$ 4.1 million commitment fee from the machines under the December 2009 contract, and Elixir Gaming’s 25% share of the WUD for the total 230 machine seats. While Elixir Gaming collects 100% of the cash gross net win from the machines subject to the commitment fee arrangement until such time as the firm recuperates the commitment fee plus its share of the WUD of these machines, only the company’s share of 25% is recorded as net revenue.
Clarence Chung, Chairman and CEO of Elixir Gaming, commented, “We are pleased to work with our partner NagaWorld to continue to expand our jointly operated slot floor operations. With the addition of these 30 seats plus the remaining 50 seats under our December 2009 contract, Elixir Gaming’s installed machine base at NagaWorld is expected to reach 670 seats during July of 2010 covering most of the currently available prime ground floor slot space at NagaWorld. Given these 30 additional gaming machine seat placements are intended to expand our existing and well-performing VIP slot area, we anticipate they will provide us attractive growth in participation revenue and cash flow and enable a relatively rapid payback period on our commitment fee.”