CAUTIONARY STATEMENT

The following discussion and analysis should be read in conjunction with our unaudited consolidated financial statements and the related notes thereto contained elsewhere in this report. The information contained in this quarterly report on Form 10-Q is not a complete description of our business or the risks associated with an investment in our common stock. We urge you to carefully review and consider the various disclosures made by us in this report and in our other reports filed with the Securities and Exchange Commission, or SEC, including our annual report on Form 10-K for the year ended December 31, 2011, filed with the SEC on March 30, 2012 and subsequent reports on Form 8-K, which discuss our business in greater detail.

In this report we make, and from time to time we otherwise make, written and oral statements regarding our business and prospects, such as projections of future performance, statements of management's plans and objectives, forecasts of market trends, and other matters that are forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Statements containing the words or phrases "will likely result," "are expected to," "will continue," "is anticipated," "estimates," "projects," "believes," "expects," "anticipates," "intends," "target," "goal," "plans," "objective," "should" or similar expressions identify forward-looking statements, which may appear in documents, reports, filings with the Securities and Exchange Commission, news releases, written or oral presentations made by officers or other representatives made by us to analysts, stockholders, investors, news organizations and others, and discussions with management and other of our representatives. For such statements, we claim the protection of the safe harbor for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995.

Our future results, including results related to forward-looking statements, involve a number of risks and uncertainties. No assurance can be given that the results reflected in any forward-looking statements will be achieved. Any forward-looking statement speaks only as of the date on which such statement is made. Our forward-looking statements are based upon assumptions that are sometimes based upon estimates, data, communications and other information from suppliers, government agencies and other sources that may be subject to revision. Except as required by law, we do not undertake any obligation to update or keep current either (i) any forward-looking statement to reflect events or circumstances arising after the date of such statement, or (ii) the important factors that could cause our future results to differ materially from historical results or trends, results anticipated or planned by us, or which are reflected from time to time in any forward-looking statement.

In addition to other matters identified or described by us from time to time in filings with the SEC, there are several important factors that could cause our future results to differ materially from historical results or trends, results anticipated or planned by us, or results that are reflected from time to time in any forward-looking statement. Some of these important factors, but not necessarily all important factors, are included in the section "Risk Factors" in our annual report on Form 10-K for the year ended December 31, 2011 filed with the SEC on March 30, 2012.

We own or have rights to certain trademarks that we used in connection with our business or products, including, but not limited to, Dolphin™. Other than this trademark, this report also makes reference to trademarks and trade names of other companies.

On June 12, 2012, we effected a 1-for-4 reverse stock split of our common stock and corresponding decrease in the number of authorized shares of common stock. All historical share amounts and share information presented in the financial statements and notes have been proportionally adjusted to reflect the impact of this reverse stock split, including but not limited to basic and diluted weighted-average shares issued and outstanding. Certain reclassifications have been made to the prior periods' financial statements to conform to the current period's presentation.

Overview

Over the last several years we have successfully refocused our business model and streamlined our cost structure. This has provided us with a solid base from which to expand and grow our gaming operations in our target markets in Asia.

Our primary focus is our gaming operations, which entail our slot operations (previously referred to as participation operations) in Cambodia and the Philippines and the development and operation of regional style casinos and gaming venues under our Dreamworld brand in certain markets within Indo-China.

Given our casino operations are in their infancy, revenue from our gaming operations is presently principally comprised of our slot operations, which involve the leasing of electronic gaming machines (EGMs) on a revenue sharing basis to gaming establishments. We identify and secure venues for the placement of EGMs and casino management systems where warranted, which track game performance and provide statistics on each installed EGM owned and leased by us. We contract with the venue owners or operators for the placement of the EGMs on a revenue sharing basis. In addition, we acquire and install the EGMs and other gaming systems and peripherals at the relevant gaming venues.

As of June 30, 2012, our slot operations were located in two countries, Cambodia and the Philippines, and totaled 1,441 EGM seats in operation in seven venues. In Cambodia, we had a total of 818 EGM seats in operation in three venues. In the Philippines, we had a total of 623 EGM seats in operation in four venues. Due to our ongoing efforts to improve the returns for our slot operations, we have refined our operating machine base to focus on those venues with the greatest potential. As a result, during the second quarter of 2012 we opted not to renew one contract in the Philippines with 130 EGM seats. During the month of July 2012, we terminated two contracts, one in Cambodia and one in the Philippines, with a combined total of 102 EGM seats as these venues were not performing up to our expectations. There were minimal costs associated with the termination of these above mentioned contracts and it is expected the loss of these operations will not have a meaningful impact on future revenue. Approximately 84 of the EGM seats from the above mentioned terminated contracts have been redeployed to other higher potential venues. As a result, as of August 1, 2012, our slot operations totaled 1,407 EGM seats in five venues, of which 826 EGM seats were in Cambodia in two venues and 581 EGM seats were in the Philippines in three venues.

In Cambodia, our slot operations largely focus on operating a substantial portion of the gaming machine area in prime casino floor locations at NagaWorld, a wholly-owned subsidiary of Hong Kong listed NagaCorp Ltd. (HKSE: 3918). NagaWorld is a premier luxury destination gaming resort and the only licensed full service casino in a designated area around the capital city of Phnom Penh. Our slot operations at NagaWorld, which entail 670 EGM seats placed in prime locations in the casino hotel, have provided us with strong growth in slot revenue and cash flow.

In addition, we recently expanded our slot operations in Cambodia at Thansur Bokor Highland Resort, a new casino resort developed by leading Cambodian hotelier, Sokha Hotels and Resorts. Thansur Bokor Highland Resort is located in a tourist area of the Kampot Province. The official opening of the resort was in May 2012. However, portions of the initial phase including the VIP gaming areas and entertainment complex are not yet complete. Under the terms of the agreement, we have the ability to place up to 250 EGM seats and jointly manage these slot operations in the resort. This strategic project expands our gaming operations in the Indo-China region with a prominent new partner and is anticipated to be a meaningful contributor to earnings once the facility is fully operational and the owner has implemented its broader marketing programs.

In the Philippines, our slot operations continued to post solid revenue growth despite a reduction in the machine base. We attribute this to our strategic efforts to enhance our operating performance and improve net wins in this market. These efforts include: implementing, with the support of our venue owner partners, targeted marketing programs; the redeployment, when possible, of our gaming assets from lower to higher performing venues in the market; and greater overall revenue sharing in this market due to our acquisition of a higher revenue sharing interest in one of our most promising venues in October 2011.

With regard to our other products segment, over the last several years we have made a strategic shift in focus of this division towards the higher-margin gaming chips and plaques side of the operation. We posted solid improvement in sales of our gaming chips and plaques for the three-month period ended June 30, 2012 compared to the prior year period due to higher customer reorders in our core markets of Australia and Asia. Further, we have secured a sizeable new order in excess of $2.0 million from an existing customer, which we expect to deliver in the third quarter of 2012. We are focused on continuing to derive greater value from these operations which feature a wide range of product offerings with state of the art security features. With continued focus on marketing and investment in expanding our product offerings and production capacity, we believe we are better positioned to capitalize on the future growth opportunities for gaming chips and plaques in our target markets. While these efforts are expected to improve revenue and gross profit for these operations over the long-term, they are not anticipated to minimize the normal fluctuation in quarterly sales flow of this business segment.

We achieved solid revenue growth for the second quarter of 2012 compared to the prior year period. Our consolidated revenue for the three-month period ended June 30, 2012 was approximately $7.6 million, of which revenue from our gaming and other products operations comprised 68.3% and 31.7%, respectively, of consolidated revenue. This compares to consolidated revenue of approximately $6.7 million for the three-month period ended June 30, 2011, of which revenue from our gaming and other products operations comprised 67.8% and 32.2%, respectively, of consolidated revenue.

Revenue from our gaming operations for the three-month period ended June 30, 2012 was approximately $5.2 million compared to approximately $4.6 million in the prior year period. Revenues from gaming operations during the three-month period ended June 30, 2012 included approximately $213,000 of casino revenue from Dreamworld Casino (Pailin), our first casino development project which opened on May 9, 2012. Gross margin for our gaming operations declined to 46.0% in the three-month period ended June 30, 2012 compared to 54.1% in the prior year period. The decline was the result of higher costs associated with the start-up and general operating expenses for the new casino operations as it is early in the ramp up period.

Cash flow provided by operations was approximately $3.9 million for the three-month period ended June 30, 2012 compared to approximately $2.3 million in the prior year period. The increase was primarily related to better inventory and supplier management and increased customer deposits as a result of higher gaming sales orders. Adjusted EBITDA (as defined below) was approximately $2.8 million for the three-month period ended June 30, 2012 compared to approximately $3.3 million in the prior year period. The decline was principally due to the incremental costs associated with the new casino operations.

Our recurring cash flow from operations along with our established market presence provides us a solid foundation from which to expand our gaming operations to include the development and operation of casinos and gaming clubs under our "Dreamworld" brand in certain emerging gaming markets in Indo-China. We believe this expanded business model will allow us the potential for higher long-term incremental returns on our operations given the ability to collect a greater percentage of the gaming revenue compared to our existing slot contracts. In addition, it provides us greater long-term control over our operations.

We opened our first casino project, Dreamworld Casino (Pailin) located in the Pailin Province of Northwestern Cambodia near the Thailand border in May 2012. We have two other development projects in the pipeline, Dreamworld Club (Poipet), located in the Banteay MeancheyProvince of Northwestern Cambodia near the Thailand Border, and Dreamworld Casino (Kampot), located in the Kampot Province of Southwestern Cambodia near the Vietnam border.

Dreamworld Casino (Pailin)

On July 12, 2011, we formed a new company, of which we are the sole owner, to develop and operate Dreamworld Casino (Pailin). Dreamworld Casino (Pailin) is constructed on land leased from a local land owner (the "Pailin Land Owner") and in consideration the Pailin Land Owner is entitled to receive a fair monthly rental fee and 20% of the profit before depreciation (the total gross revenue of the casino less any payouts paid to customers, operating expenses, and gaming and non-gaming taxes on the casino's revenue). The initial lease term is 20 years, which commenced in September 2011 and is subject to renewal by the parties in writing.

The initial phase of Dreamworld Casino (Pailin) measures approximately 16,000 square feet (1,448 square meters) and includes 30 table games and 50 EGMs. The Pailin Land Owner also owns property adjacent to Dreamworld Casino (Pailin) measuring nearly 250,000 square feet (23,160 square meters). We have an option to lease this adjacent property at a future date and use it to develop additional phases of the Dreamworld Casino (Pailin). Such additional phases are intended to include expanded casino operations and complementary facilities such as hotel rooms, a spa and other entertainment amenities.

Total capital expenditures for the initial phase of Dreamworld Casino (Pailin) were approximately $2.5 million, which was paid solely by us from our internal cash resources.

Dreamworld Casino (Pailin) is still in its infancy. We expedited the opening date in the second quarter of 2012 to fast-track the operation of the casino's mass market floor and establish our presence in the local market. Our VIP rooms are not yet open. We are early in the ramp up period for mass market floor operations and results are not yet normalized. We are working on a number of initiatives to ramp up the operations including more focused marketing to attract quality players in the surrounding areas and evaluating opportunities to partner with local gaming promoters to open our VIP rooms. By utilizing gaming promoters, we expect to improve high net worth player traffic in the VIP rooms while minimizing the downside risk and volatility as the promoters typically share in wins and losses and assume the credit risk.

Dreamworld Club (Poipet)

On April 2, 2012, we entered into a machines operation and participation agreement (the "Poipet Agreement") with a Cambodian company, which owns and operates an existing casino in Poipet, Cambodia near the Thailand border, and a Cambodian individual, who controls the casino operating company and owns land on which the casino is located (collectively the "Poipet Local Partner"), to develop a slot venue. The slot venue will be developed as an extension of the existing casino and utilize its gaming license and will be operated under the Dreamworld name ("Dreamworld Club (Poipet)").

Under the terms of the Poipet Agreement, the Poipet Local Partner will allocate part of its land with an area of approximately 16,000 square feet (1,500 square meters) to us to develop and construct, at our own design, budget and cost, of a slot venue capable of placing and operating approximately 300 EGMs. Upon completion of Dreamworld Club (Poipet), which is expected by December 31, 2012, we will have the exclusive rights to operate and manage the venue and EGMs. We and the Poipet Local Partner will split the win per unit per day from all the EGMs placed by us at Dreamworld Club (Poipet) and certain operating costs related to marketing and floor staff on a respective basis of 40%/60%. The initial project term is five years beginning from the commercial launch of the slot hall with an option to renew for an additional five years subject to the achievement of certain financial milestones during the initial five-year period.

Total capital expenditures for Dreamworld Club (Poipet), which principally include the development and construction of the facility and gaming equipment, are projected to be approximately $7.5 million, including an estimated $5.0 million to source top of the line EGMs. We expect to provide the required EGMs through the purchase of new and used machines as well as those from our inventory. We are responsible for all capital expenditures for Dreamworld Club (Poipet), which we intend to fund through our internal cash resources.

Based on the current timeline, we expect to open Dreamworld Club (Poipet) in the first quarter of 2013.

Dreamworld Casino (Kampot)

On March 4, 2011, we formed a new company (the "Kampot New Company") with a local partner (the "Kampot Local Partner") to develop, own and operate a casino in the Southern Cambodia province of Kampot near the Vietnam border ("Dreamworld Casino (Kampot)").

The Kampot Local Partner owns a parcel of land in Kampot measuring approximately 91,000 square feet (8,500 square meters) where we will construct Dreamworld Casino (Kampot). The initial phase of Dreamworld Casino (Kampot) is expected to include up to 14 table games, such as baccarat, roulette and dice games, and 25 EGMs. Depending on demand and the availability of capital, we may add at a future date additional casino floor space and equipment as well as complementary facilities such as hotel rooms, a spa and other entertainment amenities.

The Kampot Local Partner will lease to the Kampot New Company the land for a period of 25 years for an annual fee of $1. We will provide funding for all development, construction and pre-opening costs for the Dreamworld Casino (Kampot), all necessary EGMs and gaming tables and paid the Kampot Local Partner a lump sum of $260,000 as the balance consideration for his contributions. We and the Kampot Local Partner will split the Kampot New Company's net revenue (the total gross revenue of the casino less any payouts paid to customers, operating expenses, and gaming and non-gaming taxes on the Kampot New Company's revenue) on a respective basis of 60%/40%. The initial lease term is 25 years, which commenced in March 2011 and is subject to renewal by the parties in writing.

Total capital expenditures for the initial phase of Dreamworld Casino (Kampot) are projected to be approximately $1.2 million as the EGMs will be sourced from our existing inventory.

We presently intend to open Dreamworld Casino (Kampot) in 2013.

In addition to the above mentioned projects, we continue to selectively pursue additional casino and gaming development projects with a focus on the Indo-China region. However, there is no guarantee we will be successful in signing new projects. In addition, we own a parcel of land with total area of approximately seven acres (30,000 square meters) in the Takeo Province of Cambodia near the Vietnam border and were granted in-principle approval to build and open a casino-hotel in the Takeo Province by the Cambodian government. At the present time, we do not expect to commit significant capital to a hotel-casino project on this land in order to divert our available capital to the development of Dreamworld Club (Poipet) and other ongoing projects, which we believe will offer greater short- and medium-term return potential. Our future development plans for this land will be dependent on our available capital and local market conditions at that time.

Results of Operations for the Three-Month and Six-Month Periods Ended June 30, 2012 and 2011

The following is a schedule summarizing operating results on a consolidated basis and separately by each of our two operating segments, namely, gaming operations and other products, for the three-month and six-month periods ended June 30, 2012 and 2011.

                                                    Three-Month Periods Ended June 30,            Six-Month Periods Ended June 30,
(amounts in thousands, except per share data)         2012                      2011                 2012                  2011
Total:
Revenues                                        $           7,605         $           6,718     $        14,687       $        12,953
Gross profit                                    $           2,544         $           2,729     $         5,309       $         5,110
Gross margin percentage                                        33 %                      41 %                36 %                  39 %
Adjusted EBITDA(1)                              $           2,849         $           3,339     $         6,034       $         6,352
Operating income                                $             421         $             447     $         1,217       $         1,295
Net income                                      $             484         $             307     $         1,456       $           999

Earnings per share:
Basic                                           $            0.02         $            0.01     $          0.05       $          0.03
Diluted                                         $            0.02         $            0.01     $          0.05       $          0.03

Weighted average shares outstanding
Basic                                                      29,918                    29,517              29,909                29,284
Diluted                                                    31,329                    30,097              30,717                29,935

Gaming:
Revenues                                        $           5,198         $           4,553     $        10,154       $         8,718
Gross profit                                    $           2,390         $           2,462     $         5,035       $         4,537
Gross margin percentage                                        46 %                      54 %                50 %                  52 %

Other products:
Revenues                                        $           2,407         $           2,165     $         4,533       $         4,235
Gross profit                                    $             154         $             267     $           274       $           573
Gross margin percentage                                         6 %                      12 %                 6 %                  14 %

(1) "Adjusted EBITDA" is earnings before interest, taxes, depreciation, amortization, stock-based compensation, and other non-cash operating income and expenses. Adjusted EBITDA is presented exclusively as a supplemental disclosure because our management believes that it is widely used to measure the performance, and as a basis for valuation, of gaming companies. Our management uses Adjusted EBITDA as a measure of the operating performance of its segments and to compare the operating performance of its operations with those of its competitors. We also present Adjusted EBITDA because it is used by some investors as a way to measure a company's ability to incur and service debt, make capital expenditures and meet working capital requirements. Gaming companies have historically reported EBITDA as a supplement to financial measures in accordance with generally accepted accounting principles in the United States ("GAAP"). Adjusted EBITDA should not be considered as an alternative to operating income as an indicator of our performance, as an alternative to cash flows from operating activities as a measure of liquidity, or as an alternative to any other measure determined in accordance with GAAP. Unlike net income/(loss), Adjusted EBITDA does not include depreciation or interest expense and, therefore, does not reflect current or future capital expenditures or the cost of capital. We compensate for these limitations by using Adjusted EBITDA as only one of several comparative tools, together with GAAP measurements, to assist in the evaluation of operating performance. Such GAAP measurements include operating income, net income, cash flows from operations and cash flow data. We have significant uses of cash flows, including capital expenditures, interest payments, debt principal repayments, taxes and other non-recurring charges, which are not reflected in Adjusted EBITDA. Our calculation of Adjusted EBITDA may be different from the calculation methods used by other companies and, therefore, comparability may be limited.

A reconciliation of EBITDA, as adjusted, to the net income is provided below.

                                                       Three-Month Periods Ended June 30,              Six-Month Periods Ended June 30,
(amounts in thousands)                                   2012                      2011                  2012                     2011
Net income - GAAP                                  $             484         $             307     $          1,456         $            999
Interest expense and finance fees                                 36                       106                   89                      200
Interest income                                                  (14 )                     (18 )                (26 )                    (41 )
Income tax expenses                                               35                       102                   89                      240
Depreciation and amortization                                  1,967                     1,891                3,832                    3,780
Stock-based compensation expenses                                287                       799                  552                    1,022
Impairment of assets                                              71                         -                   71                        -
(Gain)/Loss on dispositions                                      (17 )                     152                  (29 )                    152
EBITDA, as adjusted                                $           2,849         $           3,339     $          6,034         $          6,352

Total revenues increased approximately $887,000 to $7.6 million for the three-month period ended June 30, 2012 compared to approximately $6.7 million in the same period of the prior year due to revenue increases in both operating segments. Revenue from gaming increased primarily as a result of higher average net win per machine from our slot operations at NagaWorld and incremental revenue from Dreamworld Casino (Pailin), our first casino development project which opened on May 9, 2012. Revenue from other products increased as a result of increased orders from major customers for our gaming chips and plaques.

Gross profit decreased approximately $185,000 to $2.5 million for the three-month period ended June 30, 2012 compared to approximately $2.7 million in the same period of the prior year primarily as a result of higher total gaming expenses related to our new casino operations while there was a comparative lower increase in revenue from gaming operations compared to the prior year period. This decrease was also partially attributable to lower gross profit from our other products operations as a result of strategic pricing of gaming products to one of our customers and negative absorption of fixed production costs due to lower production volumes of non-gaming products.

Operating income decreased approximately $26,000 to $421,000 for the three-month period ended June 30, 2012 compared to approximately $447,000 in the same period of the prior year. The decrease in operating income was primarily the result of lower gross profit from gaming operations and other products sales and higher . . .