UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549

FORM 10-K

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

For the fiscal year ended December 31, 2009

o		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 of incorporation)		(I.R.S. Employer Identification No.)

1700 Industrial Road, Las Vegas, Nevada 89102

(Address of principal executive offices)

Registrant's telephone number, including area code: (702) 384-2425

Registrant's website: www.gpigaming.com

Securities registered pursuant to Section 12(b) of the Act: None

Securities registered pursuant to Section 12(g) of the Act: Common Stock

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes o No x

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15 (d) of the Act. Yes o No x

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Sections 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 o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, 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 the registrant was required to submit and post such files). Yes o No o

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of the registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. (check one):

Large accelerated filer o  Accelerated filer o  Non-accelerated filer o Smaller reporting company x

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

The aggregate market value of voting and non-voting stock held by non-affiliates of the registrant as of June 30, 2009, based on the closing price as reported on the NASDAQ National Market of $5.10 per share: $16,218,000.

The number of shares outstanding of each of the registrant's classes of common stock, as of March 19, 2010 was 8,199,016 shares of Common Stock.

Documents Incorporated by Reference:

Portions of our Proxy Statement relating to the 2010 annual stockholders’ meeting are incorporated herein by reference in Part III. Such Proxy Statement will be filed with the Securities and Exchange Commission no later than 120 days after conclusion of the registrant’s year ended December 31, 2009.

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PART I.				1
		Item 1. Business.		1
		Item 1A. Risk Factors.		7
		Item 1B. Unresolved Staff Comments.		10
		Item 2. Properties.		10
		Item 3. Legal Proceedings.		10
		Item 4. Reserved.		10
PART II				11
		Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities		11
		Item 6. Selected Financial Data.		12
		Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.		13
		Item 7A. Quantitative and Qualitative Disclosures About Market Risk.		23
		Item 8. Financial Statements and Supplementary Data.		24
		Report Of Independent Registered Public Accounting Firm		26
		Consolidated Balance Sheets		27
		Consolidated Statements Of Income		28
		Consolidated Statements Of Stockholders’ Equity And Other Comprehensive Income		29
		Consolidated Statements Of Cash Flows		25
		Notes To Consolidated Financial Statements		31
		Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.		51
		Item 9A. Controls and Procedures.		51
		Item 9B. Other Information.		52
PART III				52
		Item 10. Directors, Executive Officers and Corporate Governance.		52
		Item 11. Executive Compensation.		52
		Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.		52
		Item 13. Certain Relationships and Related Transactions and Director Independence.		52
		Item 14. Principal Accountant Fees and Services.		52
PART IV				53
		Item 15. Exhibits, Financial Statement Schedules		53

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PART I

Item 1. Business.

The following Business section contains forward-looking statements, which involve risks and uncertainties. Our actual results could differ materially from those anticipated in these forward-looking statements as a result of certain factors. See Item 1A, “Risk Factors.”

Company Overview

Gaming Partners International Corporation (GPIC or the Company) has two operating subsidiaries, Gaming Partners International USA, Inc. (GPI USA) and Gaming Partners International SAS (GPI SAS). In addition, GPI USA owns GPI Mexicana S.A. de C.V. (GPI Mexicana), a manufacturing subsidiary. GPI USA was founded in 1963 as Paul-son Gaming Supplies by Paul S. Endy, Jr., and initially manufactured and sold dice to casinos in Las Vegas. GPI SAS was founded in 1923 as Bourgogne et Grasset by Etienne Bourgogne and Claudius Grasset in Beaune, France to produce and sell counterfeit-resistant chips to casinos in Monaco. GPIC was formed in 2002 through a reverse merger between Paul-Son Gaming Corporation and Bourgogne et Grasset initiated by Francois Carrette, whose firm, Holding Wilson, SA, remains GPIC’s controlling shareholder. The Company has established brand names such as Paulson®, Bourgogne et Grasset® (“B&G”), and Bud Jones®. GPIC and each of its subsidiaries are sometimes collectively referred to herein as the “Company,” “us,” “we” or “our.”

The Company is headquartered in Las Vegas, Nevada and has manufacturing facilities in Las Vegas, Nevada; San Luis Rio Colorado, Mexico; and Beaune, France. GPI USA has sales offices in Las Vegas, Nevada; Atlantic City, New Jersey; and Gulfport, Mississippi and sells our casino products to licensed casinos primarily in the United States and Canada. GPI SAS has a sales office in Beaune, France and sells our casino products internationally to licensed casinos. Most of our products are sold directly to end-users, however, in some regions of the world we sell through distributors.

GPIC is one of the leading manufacturers and suppliers of casino table game equipment in the world. We custom manufacture and supply gaming chips, table layouts, playing cards, gaming furniture and table accessories, dice, radio frequency identification device (RFID) readers and software, and roulette wheels, all of which are used with casino table games such as blackjack, poker, baccarat, craps and roulette. Our products fall into two categories – non-consumable and consumable. Non-consumable products consist of gaming chips, gaming furniture, and table accessories. These products have a useful life of several years or longer. Sales of non-consumables are based on casino openings, expansions and rebrandings, as well as replacement in the normal course of business. Consumable products consist of table layouts, cards, and dice and due to their use represent recurring revenue for the Company. These products have a useful life that ranges from several hours for playing cards and dice to several months for layouts.

The majority of our products are specifically designed and produced to meet our customer’s requirements, whether they are related to branding, aesthetic appeal, or security. Our ability to produce products with a variety of styles and features, in combination with years of reliable delivery, enhances our competitive position. When a new casino opens, we strive to supply all the products in our line to operate the casino’s table games. Through this strategy, revenues are generated both from the initial sale to the new casino and on a continuing basis as the new casino becomes part of our customer base.

Product Segments

We operate in one operating segment—casino game equipment products in multi-geographic areas. (See Part II—Item 8. Financial Statements and Supplementary Data—Notes to Consolidated Financial Statements—Note 12.)

Products

Gaming Chips

Gaming chips act as the currency of the casinos for traditional table games. The breadth of our gaming chip product line allows us to offer the most complete array of configurable options within the industry. This broad range enables us to meet all of our customer preferences and specifications, including, and most importantly, security and anti-counterfeiting features. Because gaming chips, like real currency, are subject to

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counterfeiting, we incorporate a variety of custom security and anti-counterfeit features, such as UV pigments, laser pigments, and holograms. Our most sophisticated anti-counterfeiting feature is a radio frequency identification device (RFID), which is a microchip that can be embedded in our gaming chips making them extremely counterfeit resistant.

Most often a casino will order all of its gaming chips, including replacement chips, from a single supplier. Accordingly, we strive to become the original chip supplier to a casino upon its opening, thereby enhancing our position to receive additional sales when the casino places replacement orders. A new casino order will typically include at least five to seven distinct chip denominations, colors and styles, ranging in denominations from $0.50 to in excess of $1 million. Our selling price is variable, based on the customization, quantities, design and security features. Gaming chips can be divided into two basic styles: American-style casino chips and European-style casino chips, known as jetons and plaques. We hold the leading worldwide market share in gaming chips, which account for 66% of our total revenues in 2009.

American-style Casino Chips

American-style casino chips are used worldwide. Originally, casino chips in the United States were made of clay and called “clay chips.” Clay was replaced many years ago by other materials. There are currently three main manufacturing technologies used to produce these types of chips: injection molding, sublimation, and thermo-compression molding. We produce casino chips using all three of these methods. We sell American-style casino chips under the Paulson®, Bud Jones®, and Bourgogne et Grasset® (B&G) brand names. American-style casino chip prices range between $0.75 and $5.00 for casino-quality chips. Casino chips with RFID as a feature sell for a $1.20 to $2.00 premium per chip.

European-style Casino Chips

Jetons and plaques are European-style casino chips. Jetons are circular with standard diameters in 13 different sizes. Plaques are rectangular, square, oval, or custom-shaped. Jetons and plaques are used mainly for traditional European games. Jetons and plaques are made of laminated cellulose acetate with a very large range of colors, shapes and security and anti-counterfeit components, such as, UV pigment, number serialization, laser pigment, gold lace material and RFID technology. GPI SAS created its original product line in 1925 and has held a leading position in this market since that time. Jeton prices range between $3.00 and $5.00. Plaque prices range between $6.00 and $20.00.

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RFID Technology

Since 1996, GPIC has been at the forefront of development of RFID technology for gaming chips. RFID in gaming started with low frequency (125 KHz) RFID as a method of providing anti-counterfeiting security and chip tracking. In addition to low frequency RFID, the Company developed and introduced a high-frequency (13.56 MHz) line of RFID microchips which can offer a casino a higher level of chip tracking and provides the casino with additional levels of sophistication through bet recognition and player tracking.

We offer a full line of RFID casino chips and readers in low and high frequency. Our products, such as the cashier’s cage authenticator, table authenticator, chip tray reader, and vault reader are connected to provide authentication and chip tracking for our customers. When utilized, RFID-embedded gaming chips are read, either one at a time or in large quantities, with the same efficiency and accuracy, whether in stacks, boxes, trays, cabinets or on the tables.

Since the inception of this technology, we have sold several million RFID gaming chips and hundreds of readers for chip authentication providing an increased level of security and accuracy to casinos all over the world. We hold several international patents related to the embedding process of an RFID microchip into a gaming chip, a jeton or a plaque. We also hold an exclusive license on two patents owned by IGT. These patents allow us to manufacture and sell RFID gaming chips and readers in the United States. These licensed patents expire in 2015. Our patents and exclusive license apply to all RFID frequencies.

Table Layouts

The Company manufactures table layouts for the North American market. All live gaming tables are covered with a layout printed with artwork particular to each specific game and casino preference. We have developed a comprehensive range of layout fabric and printing processes using wool, polyester, and our proprietary Paul-Son FX® material, to give our customer maximum flexibility when developing their design preferences. Our printing processes include screen printing, custom hand painting, full graphic sublimation, or digital direct printing. All graphic designs are developed by our art department in concert with our casino customer to ensure complete satisfaction.

We install layouts on new gaming tables prior to delivery to our customer. As a consumable product, table layouts are replaced by casinos on a regular basis. Layouts sell in a price range of $90 to $350, depending on the type of table, type of fabric, and printing process. Table layouts account for 9% of our total revenues for 2009.

Playing Cards

GPIC manufactures and sells two lines of paper casino playing cards under the Paulson® brand. In 2009, we added the second line of cards based on a different paper stock and also introduced pre-shuffled and multi-deck card packages. A deck of cards typically sells within a price range between $0.70 and $1.50. Based on casino controls and practices, cards, which are consumable products, are generally replaced at least every 24 hours. A casino typically enters into a one or two year purchase commitment with a supplier to supply its cards at regular intervals, generally monthly. Our cards are compatible with all card shufflers. Playing cards account for 9% of our total revenues for 2009.

Gaming Furniture

We sell a variety of casino gaming furniture. In 2009, we have expanded our product offerings to include pit and other casino podiums. The Company produces hand-crafted gaming tables that are custom-designed to integrate seamlessly with our casino customer’s interior or branded design. We offer a variety of base, finish and accessory options, while having the ability to incorporate any third party casino equipment, such as card shufflers, card readers, monitors, bill validators, and IT products, including RFID systems, as well as our proprietary accessories. Tables range in price between $2,000 and $8,000, depending degree of customization and table type, such as blackjack, roulette, baccarat, and craps. Gaming furniture is typically sold in combination with table accessories and accounts for 6% of our total revenues for 2009.

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Table Accessories and Other Products

The Company offers our customers a full line of casino table game accessories. These table accessories include roulette reader boards, foot rails, chip trays, and drop boxes. These products are generally sold in conjunction with the sale of gaming tables and tend to have long useful lives. Consumable table accessories include shoes, cut cards, dice sticks, lammers, markers, buttons and our patented air ventilation device designed specifically for gaming tables called the Air Rail System ®, which creates an air flow at the gaming table to push odors away from the dealer. We have aligned ourselves with key casino accessory vendors to provide many of these products. We are a licensed manufacturer of roulette wheels and sell these worldwide. Table accessories and other products account for 5% of our total revenues for 2009.

Dice

Our brands of dice are manufactured in conformity with the strictest standards of gaming regulations. We offer a variety of options, such as size, finish type, customer logo, color, serialization, and security features, such as laser pigment. The typical sales price of casino dice ranges between $2.50 and $3.70 per pair. In a busy casino, a stick of dice (two and one-half pair) does not generally remain in play for more than eight hours. Dice account for 3% of our total revenues for 2009.

Themed Products

The Company has marketed casino-specific themed products in certain gaming jurisdictions for many years. In 2009, we expanded our efforts geographically and by product to now include not only gaming chips, but also table layouts, cards, and dice. These themed products promote certain types of special events such as sporting events, conventions, holidays, casino anniversaries, and premier entertainment events through our casino customers.

In 2009 we introduced our Paulson promotional plaque, which incorporates digital printing, laminated cellulose acetate, and injection molding to provide the customer with a customizable themed plaque.

Backlog

At December 31, 2009, our backlog of signed orders, which is expected to be filled in 2010, was $11.8 million, consisting of $2.9 million for GPI USA and $8.9 million for GPI SAS. At December 31, 2008, our backlog of signed orders for 2009 was $13.0 million, consisting of $3.4 million for GPI USA and $9.6 million for GPI SAS.

Sales, Advertising, and Promotion

GPIC maintains global sales representation in all gaming jurisdictions that have table game operations and sells its products to casinos worldwide. We generally sell our products in the Americas through our US-based sales force, which operates out of regional offices throughout the United States. In the Asian and European markets we generally sell and service our customers through our Beaune, France-based sales force..

Our reputation for quality, reliability and security features are key factors upon which we successfully compete in the market place. We have long-standing customer relationships, which have been developed over the years by our individual sales representatives. When direct selling is not feasible because of local conditions, we may enter into agreements with carefully selected local sales representatives. Even in this case, we always maintain direct contact with the end customers.

GPC actively promotes its product lines, service capabilities, and product quality in a variety of ways. We place advertising in trade publications and participate in major casino industry trade shows. We display our products at the Global Gaming Expo (G2E) in Las Vegas, Nevada and the International Gaming Exhibition (IGE) show in London and various other regional trade shows worldwide throughout the year.

Competition

The Company competes against a variety of table game equipment suppliers across all our product lines. We believe our competitive advantages include our reputation, manufacturing capability, experience of our sales staff, distribution channels, regulatory and jurisdictional licenses, financial strength, and our ability to provide a complete line of products which allows customers the ease of dealing with a single company.

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Gaming Chips  Our major competitors are Gemaco Inc. and The United States Playing Card Company, both based in the United States, Abbiati Casino Equipment Snc. based in Italy, Dolphin Products Pty Ltd. based in Australia, and Matsui Gaming Machine Co., Ltd. based in Japan. We believe our key competitive factors for gaming chip sales are reputation, quality, widespread jurisdictional licensing, emphasis on and the range of security features and configurable design options, understanding of players’ and dealers’ preferences, and value.

Table Layouts  Our primary competitors for casino table layouts are Midwest Game Supply Co. and Gemaco Inc., both based in the United States, and TCS/John Huxley based in the United Kingdom. In addition, there are multiple small, regional competitors in virtually all markets. We believe our key competitive factors for table layout sales are fabric quality and durability, lead times, printing processes, and value.

Gaming Furniture  Our principal competitors for casino gaming furniture are TCS/John Huxley, Abbiati Casino Equipment, and smaller regional wood shops. We believe our primary competitive factors are our ability to design and produce customized furniture, a wide range of table types and configurations, production lead times, craftsmanship, and value.

Table Accessories and Other Products  Our principal competitors for distributing table accessories and other products, which include drop boxes, dealing shoes, chip trays , chip bank covers, and foot rails are small local distributors. We believe that our key competitive factors for these products are our ability to be a single source supplier, service, and product quality.

Playing Cards  Our major competitors worldwide are The United States Playing Card Company and Gemaco Inc. We believe our competitive factors for playing cards are intrinsic card characteristics (snap memory, finish, weight of paper, etc.), jurisdictional licensing, security, manufacturing quality control, delivery reliability, and value.

Dice  Our principal competitors for casino dice sales are Midwest Game Supply Co. and United States Playing Card Company. We believe our primary competitive factors for dice sales are product quality, service, and value.

Materials and Supplies

Where possible, the Company diversifies its supplier base to avoid a disruption of supply. However, some key raw materials for our principal products have unique suppliers. In most other cases, our raw materials are staple goods, such as paper, plastic, wood, felt, and synthetic fabric, which are readily available from several suppliers. We believe the availability of materials is adequate to meet our ongoing manufacturing needs.

Manufacturing

The Company produces most of the products we sell on a build-to-order basis, due to the customized nature of the customer’s orders. Our two main manufacturing facilities are in Beaune, France and in San Luis Rio Colorado, Mexico, with some specialized production taking place in Las Vegas. The major products produced in France are our Bourgogne et Grasset brand of American-style casino chips, as well as plaques and jetons. In Mexico, we produce Paulson and Bud Jones brands of American-style casino chips, as well as layouts, gaming furniture, table accessories, cards, and dice.

We have the facility, equipment, and personnel necessary to meet expected customer demand and the flexibility to adjust our production capacity to meet ongoing fluctuations in our business and allow us to be responsive to our customers’ requirements.

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Intellectual Property

The Company owns a portfolio of trademarks, copyrights, trade secrets and patents. We own United States trademark registrations (®) for the following marks:

Air Rail		GPI
BG		GPI logo
Bourgogne et Grasset		Paulson
Bud Jones		Paul-Son FX
Chipsoft		SafeChip by Bourgogne et Grasset
Gaming Partners International		SmartChip
We Make the Money the World Plays With		T-K
ECS

We own common law rights in these trademarks (^TM):

WheelCheck Plus
RFID Poker
PSV Series
eReady logo
Casino Currency Control

Many of our trademarks have international protections.

We own numerous United States and international patents. We also retain an exclusive license to manufacture and sell gaming chips with embedded RFID microchips and RFID readers for chip tracking and accounting in the United States until 2015. We believe that our trademarks, logos and patent rights are valuable to the operation of our Company and are important to our marketing strategy. Our policy is to actively pursue and maintain registration of our trademarks and logos where our business strategy requires us to do so and to oppose vigorously any infringement or dilution of our trademarks, logos or patent rights.

Environmental Matters

We believe we are in compliance with international, federal, state and local laws and regulations that have been enacted or adopted relating to the protection of the environment. Any liability for environmental remediation or costs will be accrued by us if it is considered probable and the costs can be reasonably estimated.

Employees

At December 31, 2009, we employed 645 people. Of these employees, 374 were located at our Mexico facilities, 200 employees (including 62 temporary contract workers) were located in our Beaune, France facility with the remaining 71 located primarily in Las Vegas, Nevada and Atlantic City, New Jersey. None of our employees are covered by collective bargaining agreements and we believe that our relations with our employees are good.

Regulation and Licensing

The gaming operations of each of our subsidiaries, as well as the operations of casinos, are subject to extensive regulation by 175 local, federal and international agencies, with the majority of oversight by individual state gaming control boards and tribal gaming agencies.

While the regulatory requirements vary from jurisdiction to jurisdiction, most require licenses, permits, findings of suitability, documentation of qualification including evidence of financial stability and/or other required approvals for companies who manufacture and distribute gaming equipment, as well as the individual suitability of officers, directors, major stockholders and key employees. Under the various gaming regulations, key personnel generally include the current and/or proposed corporate officers and directors of a corporation and its subsidiaries. Laws of the various gaming regulatory agencies are generally intended to protect the public and ensure that gaming-related activity is conducted honestly and competitively and is free of corruption.

Various gaming regulatory agencies have issued licenses allowing our wholly-owned subsidiaries to manufacture and/or distribute our products. Our subsidiaries and their key personnel, as applicable, have

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obtained or applied for all government licenses, permits, registrations, findings of suitability and approvals necessary allowing for the manufacture and distribution of gaming supplies and equipment in the jurisdictions where it is required. We have never been denied a gaming related license, nor have any licenses been suspended or revoked.

Certain regulators not only govern the activities within their jurisdiction, but also oversee activities that occur in other jurisdictions to ensure that we comply with local standards on a worldwide basis. As a Nevada corporation, state regulatory authorities require us to maintain Nevada gaming standards for all operations worldwide. Violations of laws in one jurisdiction could result in disciplinary action in other jurisdictions. A more detailed description of the regulations to which we are subject is provided in Exhibit 99.10 of this Annual Report on Form 10-K, incorporated herein by reference.

Financial Information about Geographic Areas

See Part II—Item 8. Financial Statements and Supplementary Data—Notes to Consolidated Financial Statements—Note 12 for certain financial information by geographic area.

Available Information

Our website is www.gpigaming.com. There we make available, free of charge, our Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, and, if applicable, any amendments to those reports filed or furnished pursuant to the Exchange Act as soon as reasonably practicable after we electronically file such material with, or furnish it to the SEC. The information found on our website is not part of this or any other report we file or furnish to the SEC. You may also submit written information requests by mail to: Attn: Investor Relations, Gaming Partners International Corporation, 1700 Industrial Road, Las Vegas, Nevada 89102.

Item 1A. Risk Factors.

Throughout this Annual Report on Form 10-K, 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. 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. We do not intend, and undertake no obligation, to update our forward-looking statements to reflect future events or circumstances.

We urge you to carefully review the following discussion of the specific risks and uncertainties that affect our business and, any of which, could have an adverse effect on our financial condition and results of operation. These include, but are not limited to, the following:

Demand for our products could be adversely affected by:

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Our success in the gaming industry depends in part on our ability to develop innovative products and could be adversely affected by:

Our intellectual property rights are subject to risks, including:

Our business is vulnerable to changing economic conditions, including:

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Our outstanding debt obligations subject us to certain additional risks, including:

We operate in a highly regulated industry and our ability to sell our products in certain jurisdictions could be adversely affected by:

We are subject to risk related to litigation and claims asserted against us, including:

We have a stockholder with effective control of the Company which means:

Our business operations are subject to other risks, including:

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Item 1B. Unresolved Staff Comments.

None.

Item 2. Properties.

Our headquarters are in a company-owned facility in Las Vegas, Nevada. We manufacture our primary products at facilities in Las Vegas, Nevada, San Luis Rio Colorado, Mexico and Beaune, France. We also lease sales offices in Atlantic City, New Jersey and Gulfport, Mississippi.

Las Vegas, Nevada.  In May 1997, we purchased our corporate headquarters, an approximately 60,000 square-foot building. This facility houses the Las Vegas corporate and sales offices, as well as a centralized warehouse, some manufacturing departments, and a graphics art department.

San Luis Rio Colorado, Mexico.  We manufacture casino chips, playing cards, dice, plastic products, layouts and tables at three facilities in San Luis Rio Colorado, Mexico. These facilities include a 34,000 square-foot leased facility, a 46,000 square-foot leased facility, and an approximately 66,000 square-foot facility, which we own. The leased facilities are leased through December 2013 at the monthly rent amount of $0.35 per square foot or approximately $28,000. The 80,000 square feet of leased facilities represents an increase of 14,000 square feet effective April 2008 to accommodate the relocation of our Las Vegas-based chip manufacturing operation to Mexico. (See Part II—Item 8. Financial Statements and Supplementary Data—Notes to Consolidated Financial Statements Note 18—Related Party Transactions.)

Beaune, France  In Beaune, we own an approximately 34,000 square-foot manufacturing facility in which we produce European- and American-style casino chips, and a 15,000 square-foot administrative and sales building located nearby, which we purchased in July 2006. This manufacturing facility secures a mortgage under a loan transaction with a French bank (See Part II – Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations – Liquidity and Capital Resources).

Facility Capacity  With the total of approximately 255,000 square feet of manufacturing and administrative facilities as of December 31, 2009, we believe that we will have sufficient production capacity to meet anticipated future demand for all of our products in the United States and abroad.

Item 3. Legal Proceedings.

See Part II—Item 8. Financial Statements and Supplementary Data—Notes to Consolidated Financial Statements Note 10 for information regarding legal proceedings and contingencies.

Item 4. Reserved.

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PART II

Market Information

The following table sets forth the quarterly high and low closing prices of our common stock as reported by NASDAQ during the periods indicated. All stock prices reflect a fiscal year ending December 31. On March 23, 2010, the closing price was $6.10 per share.

		Fiscal Year 2009								Fiscal Year 2008
		High				Low				High				Low
First Quarter		$	7.00			$	5.01			$	8.28			$	6.33
Second Quarter			6.56				5.09				7.13				3.88
Third Quarter			7.60				5.05				6.00				3.20
Fourth Quarter			6.00				4.51				7.00				3.86

Holders

There were 81 holders of record of our common stock as of March 23, 2010

Dividend Policy

Our Board of Directors has no current plans to pay a regular dividend on our common stock, but will continuously evaluate the merit of paying a dividend. We paid a $1.0 million dividend, or $0.125 per share, in December 2009. We did not declare any cash dividend on our common stock in 2008.

Transfer Agent

Our stock transfer agent and registrar is American Stock Transfer & Trust Co., located at 6201 15^th Avenue, Brooklyn, New York 11219. Its telephone number is (718) 921-8200 or (800) 937-5449.

Purchases of Equity Securities by the Issuer

The Company made no purchases of GPIC equity securities during the fourth quarter of 2009.

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The selected consolidated financial data included in the following tables should be read in conjunction with our Consolidated Financial Statements and related notes, and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” appearing elsewhere herein. The selected consolidated financial data for the years ended December 31, 2009 and 2008 have been derived from our audited consolidated financial statements included elsewhere herein. The selected consolidated financial data for the years ended December 31, 2007, 2006 and 2005 have been derived from our audited consolidated financial statements not included herein.

		Years Ended December 31,
		2009				2008				2007				2006				2005
		(in thousands, except per share amounts)
STATEMENT OF INCOME DATA:
Revenues		$	49,527			$	60,546			$	58,821			$	73,954			$	57,121
Cost of revenues			33,631				40,671				41,355				50,229				36,683
Gross profit			15,896				19,875				17,466				23,725				20,438
Selling, general and administrative expenses			13,109				14,535				16,604				15,244				14,599
Impairment of goodwill			1,572				—				—				—				—
Operating income			1,215				5,340				862				8,481				5,839
Other income and (expense)			289				486				195				31				245
Income before income taxes			1,504				5,826				1,057				8,512				6,084
Income tax expense			457				1,339				817				3,383				1,756
Net income		$	1,047			$	4,487			$	240			$	5,129			$	4,328
Earnings per share:
Basic		$	0.13			$	0.55			$	0.03			$	0.64			$	0.55
Diluted		$	0.13			$	0.55			$	0.03			$	0.62			$	0.53
Weighted-average shares of common stock outstanding:
Basic			8,107				8,103				8,101				7,974				7,829
Diluted			8,189				8,184				8,242				8,226				8,179
BALANCE SHEET DATA:
Cash and cash equivalents		$	3,238			$	5,547			$	4,627			$	5,888			$	4,573
Marketable securities			15,600				7,561				4,730				4,710				9,075
Working capital			22,694				21,931				16,881				14,787				9,563
Property and equipment, net			13,454				14,158				15,596				14,567				11,212
Total assets			53,278				49,549				49,309				46,969				48,716
Current liabilities			12,806				8,405				11,219				11,454				20,825
Long-term debt, less current maturities			314				1,743				2,273				2,749				1,892
Total stockholders' equity(1)			39,490				38,816				35,153				32,584				25,999

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The following discussion is intended to assist in the understanding of our results of operations and our present financial condition. The 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.”

For a Company Overview and information on our products, as well as general information, see Part I — Item 1. Business.

Overview of our Business

GPIC manufactures and supplies casino chips, under the brand names of Paulson®, Bourgogne et Grasset®, and Bud Jones®, (including low and high frequency RFID casino chips), low and high frequency RFID readers, table layouts, playing cards, dice, gaming furniture, roulette wheels, table accessories, and other products that are used with casino table games such as blackjack, poker, baccarat, craps and roulette. GPIC is headquartered in Las Vegas, Nevada, with offices in Beaune, France; San Luis Rio Colorado, Mexico; Atlantic City, New Jersey; and Gulfport, Mississippi. GPIC maintains global sales representation in all gaming jurisdictions that have table game operations and sell our products to licensed casinos worldwide. We operate in one segment and have two operating subsidiaries: GPI USA and GPI SAS, a French subsidiary. Our subsidiaries have the following distribution and product focus:

Historically, we have experienced significant fluctuations in our quarterly operating results and expect such fluctuations to continue. Our operating results fluctuate due to a number of factors, but primarily reflect the opening of new casinos, the expansion of existing casinos, and large replacement orders for casino chips — our primary product line, which typically represents over 60% of the Company’s revenues. The nature of these events is difficult to forecast and largely beyond our ability to influence, which creates variability in revenue and earnings. While most large projects are pursued years in advance, both large and small sales opportunities arise with little prior notice. An indicator of future sales is found in our backlog report, which reflects signed orders that we expect to ship in 2010.

Backlog

GPI USA

GPI SAS

Total

December 31, 2009

$

2.9 million

$

8.9 million

$

11.8 million

December 31, 2008

$

3.4 million

$

9.6 million

$

13.0 million

Overview of our Industry

In the United States, the general slow down in the economy and in the gaming industry has negatively impacted our casino customers and therefore our sales. Casinos are working to reduce their costs, including slowing down the typical replacement cycle on consumable products, such as cards, layouts, and dice. In addition, financial strains on casino owners have reduced the near-term likelihood of new casino openings, the expansion of existing casinos, and large replacement orders, upon which our casino chip sales are heavily dependent. To the extent these conditions continue, we anticipate our revenues in future quarters will be adversely affected. Local casino markets in the United States have not been as adversely affected by the economic downturn as in the gaming destination markets of Las Vegas and Atlantic City.

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Several jurisdictions in the United States have recently legalized table games. Of particular interest is the state of Pennsylvania, which has issued licenses for table games which are expected to begin operations by the third quarter of 2010. Delaware also recently authorized table games for its three licensees, which are also expected to begin table game operations starting in the third quarter of 2010.

Internationally, Macau continues to be the dominant gaming market. After a drop in its gaming revenues early in 2009, Macau posted record gaming revenues later in the year. Several projects in Macau that were delayed appear to be moving forward. Other parts of Asia are also becoming significant gaming destinations. Newport City in Manila opened in July 2009 and two large casinos, Marina Bay Sands and Sentosa, are expected to open in Singapore in the first half of 2010.

Financial and Operational Highlights

For the fourth quarter of 2009, our revenues were $15.8 million, an increase of $0.1 million, or 1%, compared to revenues of $15.7 million for the same period of 2008. Additionally, for the fourth quarter of 2009, we had net income of $1.7 million compared to net income of $1.8 million for the fourth quarter of 2008.

Our net income for 2009 was $1.0 million, compared to $4.5 million for 2008. Our revenues for 2009 were $49.5 million, a decrease of $11.0 million, or 18%, compared to revenues of $60.5 million for 2008. The decrease in net income in 2009 compared to 2008 is due primarily to lower sales, as well as a one-time, non-cash impairment of goodwill charge of $1.6 million ($1.5 million after tax). This charge negatively affected our reported financial results and is a reflection of the slowdown in the domestic gaming market, which we believe can be attributed to the economic environment in the United States. If not for this one-time charge, our adjusted operating income for 2009 would have been $2.8 million, a decline of 48%, rather than 77%, from the $5.3 million of operating income for 2008. Adjusted operating income is a non-generally accepted accounting principle measure which management believes facilitates a better understanding of the results of operations for the year.

GPI SAS uses the euro as its functional currency. As of December 31, 2009 and December 31, 2008 the US dollar to euro exchange rates were $1.4406 to one euro and $1.3917 to one euro, respectively, which represents a 3.5% weaker dollar compared to the euro. The average exchange rates for the years ended December 31, 2009 and 2008 were 1.3942 and 1.4706, which represents a 5.2% stronger dollar compared to the euro. GPI Mexicana uses the US Dollar as its functional currency. The average exchange rates for the years ended December 31, 2009 and 2008 were 13.39 pesos to the US dollar and 11.14 pesos to the US dollar, respectively, which represents a 20.2% stronger dollar compared to the Mexican peso. The stronger dollar compared with the Mexican peso had a favorable impact of $0.8 million for the year as our manufacturing costs were reduced.

In the fourth quarter of 2009, we assigned a salesperson at GPI USA to be exclusively devoted to the South American market in order to expand our presence in the market and sell our full product line. Previously, our sales to South America were gaming chips sold by GPI SAS.

Looking Forward

We believe 2010 will get off to a strong start in the first quarter. However, due to the uncertainty in the gaming industry, we are unable to anticipate with reasonable certainty what our revenue or income prospects will be for 2010.

Domestically, we plan to compete for the table game business of the casinos that are expected to open in Delaware and Pennsylvania in the second half of the year. Internationally, we expect Asia to be a significant market for us again in 2010 and are looking to expand our market share across all product lines in South America in 2010.

In addition we are actively pursuing the development of new products, new programs, and new markets to enhance our revenues, while we continue to look for ways to improve operations through cost reduction and improved efficiency. We are positioning ourselves to take full advantage of any positive turn in the world economy. We are also considering strategic acquisitions and other business opportunities that are complementary to our current product offerings.

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Other Matters

GPIC exhibited at Global Gaming Expo (G2E) in Las Vegas in November 2009 and at International Gaming Expo in London in January 2010. We highlighted our expanded RFID table line, extended playing card offerings, and the most durable graphic layouts available.

Gregory Gronau was appointed by the Board of Directors as our President and Chief Executive Officer, succeeding Gerard Charlier upon Mr. Charlier’s retirement in September 2009. Mr. Gronau was previously the Company’s Executive Vice President and Chief Operating Officer.

Results of Operations

The following table summarizes selected items from the Company’s Consolidated Statements of Income (in thousands) and as a percentage of revenues for the years ended December 31:

		2009								2008								Year to Year Change
Revenues		$	49,527				100.0	%		$	60,546				100.0	%		$	(11,019	)			(18.2	)%
Cost of revenues			33,631				67.9	%			40,671				67.2	%			(7,040	)			(17.3	)%
Gross profit			15,896				32.1	%			19,875				32.8	%			(3,979	)			(20.0	)%
Selling, general and administrative			13,109				26.5	%			14,535				24.0	%			(1,426	)			(9.8	)%
Impairment of goodwill			1,572				3.2	%			—				—				1,572				—
Operating income			1,215				2.4	%			5,340				8.8	%			(4,125	)			(77.2	)%
Other income and (expense)			289				0.6	%			486				0.8	%			(197	)			(40.5	)%
Income before income taxes			1,504				3.0	%			5,826				9.6	%			(4,322	)			(74.2	)%
Income tax expense			457				0.9	%			1,339				2.2	%			(882	)			(65.9	)%
Net income		$	1,047				2.1	%		$	4,487				7.4	%		$	(3,440	)			(76.7	)%

The following table presents certain data by geographic (in thousands) and as a percentage of revenues for the years ended December 31:

		2009								2008								Year to Year Change
Revenues
United States		$	22,664				45.8	%		$	36,710				60.6	%		$	(14,046	)			(38.3	)%
Asia(1)			20,488				41.4	%			13,549				22.4	%			6,939				51.2	%
Europe (includes Russia)			3,042				6.1	%			5,704				9.4	%			(2,662	)			(46.7	)%
Other(2)			3,333				6.7	%			4,583				7.6	%			(1,250	)			(27.3	)%
Total		$	49,527				100.0	%		$	60,546				100.0	%		$	(11,019	)			(18.2	)%

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The following table details the Company’s revenues by product line (in thousands) and as a percentage of revenues for the years ended December 31:

		2009								2008								Year to Year Change
Casino chips:
American-style casino chips		$	21,783				44.1	%		$	30,182				49.9	%		$	(8,399	)			(27.8	)%
European-style casino chips			10,803				21.8	%			8,245				13.6	%			2,558				31.0	%
Total casino chips			32,586				65.9	%			38,427				63.5	%			(5,841	)			(15.2	)%
Table layouts			4,383				8.8	%			5,154				8.5	%			(771	)			(15.0	)%
Playing cards			4,287				8.7	%			4,149				6.9	%			138				3.3	%
Table accessories and other products			2,770				5.6	%			5,226				8.6	%			(2,456	)			(47.0	)%
Gaming furniture			2,248				4.5	%			3,580				5.9	%			(1,332	)			(37.2	)%
Dice			1,842				3.7	%			1,901				3.1	%			(59	)			(3.1	)%
Shipping			1,411				2.8	%			2,109				3.5	%			(698	)			(33.1	)%
Total		$	49,527				100.0	%		$	60,546				100.0	%		$	(11,019	)			(18.2	)%

Comparison of Operations for the Years Ended December 31, 2009 and 2008

Revenues  For the year ended December 31, 2009, revenues were $49.5 million, a decrease of $11.0 million, or 18%, compared to revenues of $60.5 million in 2008. This decrease was due primarily to fewer casino openings in the United States, which resulted in lower United States sales of American-style casino chips, gaming furniture, and table accessories. Another contributing factor was the slow down in the gaming industry which resulted in lower sales to existing customers. This decline in US sales was partially offset by increased sales of European-style and American-style chips to new casinos in Singapore and the Philippines.

Cost of Revenues  For the year ended December 31, 2009, cost of revenues was $33.6 million, a decrease of $7.1 million, or 17%, compared to cost of revenues of $40.7 million for 2008. As a percentage of revenues, our cost of revenues increased to 67.9% in 2009 compared to 67.2% in 2008.

Gross Profit  For the year ended December 31, 2009, gross profit was $15.9 million, a decrease of $4.0 million, or 20%, compared to gross profit of $19.9 million for 2008. As a percentage of revenues, our gross margin decreased from 32.8% to 32.1%. The gross margin percentage decrease was primarily driven by substantially lower sales, which caused fixed manufacturing costs to be allocated over lower production volumes and unexpected production problems that increased our manufacturing costs by $0.4 million in the second quarter. Partially offsetting these factors was the decline in the relative value of the Mexican peso, which reduced our manufacturing costs $0.8 million for the year ended December 31, 2009, compared to 2008.

Selling, General and Administrative Expenses  The following table details the selling, general, and administrative expenses (in thousands) and as a percentage of revenues for the years ended December 31:

		2009								2008								Year to Year Change
Product development		$	362				0.7	%		$	201				0.3	%		$	161				80.1	%
Marketing and sales			4,363				8.8	%			4,263				7.1	%			100				2.3	%
General and administrative			8,384				16.9	%			10,071				16.6	%			(1,687	)			(16.8	)%
Total selling, general and administrative expenses		$	13,109				26.4	%		$	14,535				24.0	%		$	(1,426	)			(9.8	)%

For the year ended December 31, 2009, selling, general and administrative expenses were $13.1 million, a decrease of $1.4 million, or 9.8%, compared to selling, general and administrative expenses of $14.5 million in 2008. Selling, general and administrative expenses increased as a percent of revenue to 26.4% in 2009 from 24.0% in 2008. General and administrative expenses decreased by $1.7 million. The key components of this

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decrease were $0.5 million in compensation expense and $0.5 million of costs during 2008 related to lead in Paulson gaming chips that did not recur in 2009. The remaining decrease in general and administrative expenses was due to a variety of factors, including the effect of the dollar strengthening against the euro.

Impairment of Goodwill  During 2009, we recorded a one-time, non-cash impairment of goodwill charge of $1.6 million ($1.5 million after tax), which is more fully explained in Note 7 in our Notes to Consolidated Financial Statements.

Other Income and (Expense)  The following table details other income and (expense) items (in thousands) and as a percentage of revenues for the years ended December 31:

		2009								2008								Year to Year Change
Interest income		$	273				0.6	%		$	252				0.4	%			21				8.3	%
Interest expense			(102	)			(0.2	)%			(137	)			(0.2	)%			35				(25.5	)%
Gain on foreign currency transactions			65				0.1	%			268				0.4	%		$	(203	)			(75.7	)%
Other income, net			53				0.1	%			103				0.2	%			(50	)			(48.5	)%
Total other income and (expense)		$	289				0.6	%		$	486				0.8	%		$	(197	)			(40.5	)%

For the year ended December 31, 2009, other income and (expense) decreased by $0.2 million compared to the prior year. This was primarily due to the decrease in the value of the euro compared to the US dollar in 2008, which resulted in a gain on foreign currency transactions during 2008.

Income Taxes  During the year ended December 31, 2009, our effective tax rate was 30.3%, compared to 23.0% for the year ended December 31, 2008. Our effective tax rate for the year ended December 31, 2009 differed from the statutory rate primarily because of our goodwill impairment being non-deductible for income tax purposes at GPI SAS, offset by a French research credit, a decrease in our valuation allowance, and changes in estimates related to certain deductions and foreign tax credits. Our effective tax rate for the year ended December 31, 2008 differed from the statutory rate as a result of a French research credit, reversal of the prior year liability for uncertain tax positions, and a decrease in our valuation allowance related to foreign tax credits.

Pre-tax income (loss) by taxing jurisdictions for the years ended December 31, (in thousands):

		2009				2008
France (GPI SAS)		$	2,216			$	2,218
United States (GPI USA and Corporate)			(712	)			3,608
Total pre-tax income		$	1,504			$	5,826

Our corporate tax rate is calculated on a consolidated basis. Our corporate costs are not allocated to our French subsidiary, GPI SAS. Our corporate costs include such items as regulatory fees, board of director expenses, investor relations expenses, auditing and review fees, and corporate legal expenses. In 2009 and 2008, corporate costs totaled $2.0 million and $1.9 million, respectively.

Liquidity and Capital Resources

Sources of Liquidity and Capital Resources  Historically, our primary source of liquidity and capital resources has been cash from operations. 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, debt service, and other cash requirements, such as dividends or acquisitions, for our operations for a minimum of the next 12 months.

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As of December 31, 2009, we had $3.2 million in cash and cash equivalents and $15.6 million in marketable securities, totaling $18.8 million. Of this amount, $14.9 million is held by GPI SAS and $3.9 million is held by GPI USA. Our ability to permanently transfer cash from GPI SAS, our French subsidiary, to the United States is restricted due to unfavorable tax consequences and profit retention requirements under French law.

Working Capital (See Consolidated Balance Sheets)  The following summarizes our cash and cash equivalents, working capital (in thousands), and current ratio for the years ended December 31:

		2009				2008				Year to Year Change
Cash and cash equivalents		$	3,238			$	5,547			$	(2,309	)			(41.6	)%
Working capital			22,694				21,931				763				3.5	%
Current ratio			2.8				3.6

As of December 31, 2009, working capital totaled $22.7 million, an increase of $0.8 million, or 3.5%, compared to working capital of $21.9 million at December 31, 2008. This increase is due to an increase in current assets of $5.2 million, offset by an increase in current liabilities of $4.4 million. The increase in current assets was due primarily to an increase in marketable securities and cash and cash equivalents of $5.7 million and an increase in accounts receivable of $1.6 million, offset primarily by a decrease in current inventories of $2.7 million. The increase in accounts receivable in 2009 compared to 2008 is due to shipments made late in the fourth quarter of 2009. Inventories decreased in 2009 compared to 2008 due to the recognition of $1.7 million of non-current inventory, normal inventory fluctuations, and improved inventory management. The increase in current liabilities was due primarily to increases in customer deposits of $3.3 million and accrued liabilities of $0.5 million. The increase in customer deposits is primarily attributable to the timing of the receipt of deposits for upcoming shipments.

Cash Flows (See Consolidated Statements of Cash Flow)  The following summarizes our cash flow (in thousands) for the years ended December 31:

		2009				2008				Year to Year Change
Operating Activities		$	7,786			$	6,178			$	1,608				26.0	%
Investing Activities			(7,497	)			(4,468	)			(3,029	)			67.8	%
Financing Activities			(2,653	)			(693	)			(1,960	)			282.8	%
Effect of exchange rates			55				(97	)			152				—
Net change		$	(2,309	)		$	920			$	(3,229	)			—

Net cash provided by operations was $7.8 million during 2009, an increase of $1.6 million, compared to $6.2 million for 2008. In 2009, $5.0 million of cash was provided by net income-related activities; $3.9 million was provided by an increase in current liabilities, primarily the increase in customer deposits; and $1.1 million was used by an increase in operating assets (excluding cash). In 2008, $7.4 million of cash was provided by net income-related activities and $1.0 million was provided by a decrease in operating assets (excluding cash), offset by a decrease in current liabilities of $2.2 million.

Our investing activities resulted in net cash used of $7.5 million during 2009, an increase of $3.0 million compared to net cash used by investing activities of $4.5 million in 2008. This increase in cash used in investing activities is primarily attributable to an increase in net purchases of marketable securities of $3.6 million during 2009 compared to 2008, offset by decrease in cash spent on acquisitions of property and equipment of $0.6 million.

Net cash used in financing activities was $2.7 million during 2009, an increase of $2.0 million compared to net cash used in financing activities of $0.7 million during 2008. This increase in cash used in financing activities was primarily due to a $1.4 million reduction in long-term debt and the payment of dividends of $1.0 million in December 2009. The reduction of long-term debt includes the early payoff a $0.9 million loan balance.

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Long-Term Debt

In February 2001, GPI SAS borrowed 2.6 million euros (approximately $2.4 million in February 2001) from a French bank. Principal and interest payments were made quarterly until February 2008, at which time the loan was paid off.

In March 2002, GPI USA entered into a $995,000 loan transaction secured by a deed of trust on its Las Vegas building at an interest rate equal to the greater of (i) 8% per annum, or (ii) 362.5 basis points over the average of the London Interbank Offered Rates (LIBOR) for six-month dollar deposits in the London market based on quotations of major banks, but may not exceed 12% per annum. This loan was paid off early, in September 2009, rather than through equal monthly installments through March 2012, at which time the entire remaining principal balance would have been due. There was no prepayment penalty.

In May 2004, GPI SAS borrowed 350,000 euro (approximately $423,000 in May 2004) from a French bank. The loan has a fixed interest rate of 3.6% per annum, is due in May 2011, and is secured by a mortgage on the manufacturing facility in France. There is a prepayment penalty. As of December 31, 2009, the remaining balance was 78,000 euros ($113,000).

In June 2006, GPI SAS borrowed 1.5 million euro (approximately $1.9 million in June 2006) from a French bank. The loan has a five-year term at a fixed rate of 3.4% per annum. The loan is repayable in fixed quarterly installments of principal and interest. The loan was secured by a minimum of 500,000 euros of GPI SAS’ marketable securities on deposit at the bank until November 2009, when this requirement was eliminated. There is no prepayment penalty. As of December 31, 2009, the remaining balance was 477,000 euros ($687,000).

Seasonality  Seasonality is difficult to determine due to the significant revenue fluctuations we experience on a quarterly basis. History indicates that the first quarter is typically one of the lowest revenue quarters for the year, but the first quarter of 2010 will likely be an exception. Also, our operations may be adversely affected in the third quarter of each year as GPI SAS is closed for a substantial part of the month of August due to the traditional French holiday period.

Las Vegas, Nevada Facilities  In May 1997, we purchased our corporate headquarters, an approximately 60,000 square-foot building. This facility houses the Las Vegas corporate and sales offices, as well as a centralized warehouse, some manufacturing departments, and a graphics art department.

San Luis Rio Colorado, Mexico Facilities  We manufacture casino chips, playing cards, dice, plastic products, layouts and tables at three facilities in San Luis Rio Colorado, Mexico. These facilities include a 34,000-square-foot leased facility, a 46,000 square-foot leased facility, and an approximately 66,000 square-foot facility, which we own. The leased facilities are leased through December 2013 at the monthly rental amount of $0.35 per square foot, or approximately $28,000. The 80,000 square feet of leased facilities represents an increase of 14,000 square feet effective April 2008 to accommodate the relocation of our Las Vegas-based chip manufacturing operation to Mexico. (See Part II—Item 8. Financial Statements and Supplementary Data—Notes to Consolidated Financial Statements Note 18—Related Party Transactions.)

Beaune, France Facilities  In Beaune, we own an approximately 34,000 square-foot manufacturing facility and a 15,000 square-foot administrative and sales building located nearby which we purchased in July 2006.

Capital Expenditures  We plan to purchase approximately $0.8 million in property, plant and equipment in 2010. In 2009, we purchased $1.2 million of property, plant and equipment. Of that amount, $1.1 million was used to purchase machinery and equipment.

Cash Dividend  Our Board of Directors has no current plans to pay a regular dividend on our common stock, but will continuously evaluate the merit of paying a dividend. We paid a $1.0 million dividend, or $0.125 per share, in December 2009. We did not declare any cash dividend on our common stock in 2008

Backlog   At December 31, 2009, our backlog of signed orders, which is expected to be filled in 2010, was $11.8 million, consisting of $2.9 million for GPI USA and $8.9 million for GPI SAS. At December 31, 2008, our backlog of signed orders for 2009 was $13.0 million, consisting of $3.4 million for GPI USA and $9.6 million for GPI SAS.

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Selected Quarterly Financial Information

		Years Ended December 31, 2009
		First				Second				Third				Fourth				Total
		(in thousands, except per share data)
Revenues		$	8,943			$	11,312			$	13,425			$	15,847			$	49,527
Cost of revenues			6,530				8,191				8,743				10,167				33,631
Gross profit			2,413				3,121				4,682				5,680				15,896
Selling, general and administrative expenses			3,306				3,049				3,154				3,600				13,109
Impairment of goodwill			—				—				1,572				—				1,572
Operating (loss) income			(893	)			72				(44	)			2,080				1,215
Other income and (expense)			131				(21	)			89				90				289
(Loss) income before income taxes			(762	)			51				45				2,170				1,504
Income tax (benefit) expense			(263	)			(119	)			373				466				457
Net (loss) income		$	(499	)		$	170			$	(328	)		$	1,704			$	1,047
Net (loss) income per share:
Basic		$	(0.06	)		$	0.02			$	(0.04	)		$	0.21			$	0.13
Diluted		$	(0.06	)		$	0.02			$	(0.04	)		$	0.21			$	0.13

		Years Ended December 31, 2008
		First				Second				Third				Fourth				Total
		(in thousands, except per share data)
Revenues		$	12,125			$	18,856			$	13,820			$	15,745			$	60,546
Cost of revenues			8,467				12,523				9,400				10,282				40,671
Gross profit			3,658				6,333				4,420				5,463				19,875
Selling, general and administrative expenses			4,054				3,926				3,102				3,452				14,535
Operating (loss) income			(396	)			2,407				1,318				2,011				5,340
Other income and (expense)			(238	)			62				338				324				486
(Loss) income before income taxes			(634	)			2,469				1,656				2,335				5,826
Income tax (benefit) expense			(222	)			619				409				533				1,339
Net (loss) income		$	(412	)		$	1,850			$	1,247			$	1,802			$	4,487
Net (loss) income per share:
Basic		$	(0.05	)		$	0.23			$	0.15			$	0.22			$	0.55
Diluted		$	(0.05	)		$	0.23			$	0.15			$	0.22			$	0.55

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Obligations and Commercial Commitments

The following table presents the impact that our contractual obligations and commercial commitments at December 31, 2009 are anticipated to have on our liquidity and cash flow in future periods. We have no other significant contractual obligations or commercial commitments either on or off balance sheet as of December 31, 2009. Operating leases and contracts that are on a month-to-month basis are not included. (See Part II—Item 8. Financial Statements and Supplementary Data—Notes to Consolidated Financial Statements—Note 10.)

		Payments Due by Period (in thousands)
Contractual Obligations		Total				0 – 1 years				2 – 3 years				4 – 5 years				Beyond
Long term debt(1)		$	800			$	533			$	267			$	—			$	—
Capital lease obligations			60				13				32				15				—
Purchase and other commitment obligations(2)			2,005				1,505				250				250				—
Interest			47				24				20				3				—
Operating leases			1,708				462				836				410				—
Total contractual cash obligations		$	4,620			$	2,537			$	1,405			$	678			$	—

Critical Accounting Estimates

Our consolidated financial statements are prepared in conformity with accounting principles generally accepted in the United States. Certain of our accounting estimates, including write-downs of obsolete, excess or slow moving inventories; the depreciable lives of our fixed assets; the valuation of goodwill and other intangible assets; and the recoverability of deferred tax assets; require that we apply significant subjective judgment in defining the appropriate assumptions for calculating financial estimates. By their nature, these judgments are subject to an inherent degree of uncertainty. Our judgments are based on our historical experience, our observance of industry trends, information provided by or gathered from our customers and information available from other outside sources, as appropriate. There can be no assurance that actual results will not differ from our estimates. The estimates discussed below are considered by management to be those in which our estimates and judgments have a significant impact on issues that are inherently uncertain. To provide a further understanding of the methodology we apply, our significant accounting estimates are discussed below and in the notes to our consolidated financial statements.

Inventories

Inventories are stated at the lower of cost or market. Market value is determined by comparing inventory item carrying values to estimates of net realizable value. The analysis of net realizable value includes reviewing overall inventory levels, historical and projected sales or usage of these items, the projected markets for our products, and selling costs. Inventory that we estimate will not be used within the next year is considered non-current inventory. A change in our inventory estimates could have a material adverse effect on our consolidated results of operations.

Property and Equipment

We have significant capital invested in our property and equipment, which represented approximately 26% and 29% of our total assets at December 31, 2009 and 2008, respectively. Judgments are made in determining the estimated useful lives of assets, salvage value to be assigned to the assets and if or when an asset has been impaired. These estimates affect the amount of depreciation expense recognized in the financial results and whether we have a gain or a loss on the disposal of the asset. We assign lives to our assets based on our standard policy, which is established by management as representative of the useful life of the asset. The carrying value of property and equipment is reviewed whenever events and circumstances indicate that

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the carrying value of an asset may not be recoverable from the estimated future cash flows expected to result from its use and eventual disposition. The factors considered by management in performing this assessment include: current operating results, trends and prospects, historical data, useful life changes, as well as the effect of obsolescence, market price changes, demand, competition and other economic factors. Our estimates have been within our expectations of the useful life and depreciation amounts established. However, a change in our estimates may result in an adjustment to depreciation expense or to the gain or loss realized on the disposal of assets, which could have a material adverse effect on our consolidated results of operations.

Goodwill and Other Intangible Assets

Intangible assets, such as patents, with definite lives, are amortized, using the straight-line method over their estimated economic useful lives. We evaluate these intangible assets with definite lives for potential impairment annually and whenever events or changes in circumstances indicate the carrying value may not be recoverable.

Goodwill and other intangible assets with indefinite useful lives are not amortized but are reviewed for impairment, annually (as of December 31), and whenever events or changes in circumstances indicate that the carrying value of an asset may not be recoverable.

We record an impairment loss when the carrying amount of the intangible asset is not recoverable and the carrying amount exceeds the estimated fair value. These assessments require management judgment. In particular, the goodwill impairment test requires that we estimate the fair value of the reporting unit by using forward looking information. Any changes in key assumptions about the business and its prospects, changes in market conditions, or changes in other external conditions, could result in significant changes to the fair value estimate. That could necessitate an impairment charge and such charge could have a material adverse effect on our consolidated results of operations.

Deferred Taxes

We record a valuation allowance to reduce our deferred tax assets to the amount that is more likely than not to be realized. We have considered estimated future taxable income and ongoing tax planning strategies in assessing the amount needed for the valuation allowance. Additionally, we look to the future reversal of existing taxable temporary differences, taxable income in prior carry back years, the feasibility of tax planning strategies, and estimated future taxable income. The valuation allowance can be affected by changes to tax laws (both foreign and domestic), changes to statutory tax rates, and changes to future taxable income estimates.

The amount of income taxes we pay is subject to audits by federal, state, and foreign tax authorities, which may result in tax assessments. Our estimate for the potential outcome for any uncertain tax issue may be highly subjective and judgmental. We believe we have adequately provided for any reasonably foreseeable outcome related to these tax issues. However, our future results may include favorable or unfavorable adjustments to our estimated tax liabilities due to closure of income tax audits, new regulatory or judicial pronouncements, or other relevant events. As a result, our effective tax rate may fluctuate significantly on a quarterly basis.

We review all of our uncertain tax positions and make a determination as to whether our position is more likely than not to be sustained upon audit by taxing authorities. If a tax position meets this more likely than not standard, then the related tax benefit is measured based on a cumulative probability analysis of the amount that is more likely than not to be realized upon ultimate settlement or disposition of the underlying tax issue.

If actual results differ unfavorably from estimates used, we may not be able to realize all or part of our net deferred tax assets and additional valuation allowances may be required. Deferred tax assets and liabilities are determined based on temporary differences between the financial reporting and tax bases of assets and liabilities, applying enacted tax rates expected to be in effect for the year in which the differences are expected to reverse. We periodically assess the likelihood that we will be able to recover our deferred tax assets and reflect any changes in our estimates in the valuation allowance, with a corresponding adjustment to earnings or equity, as appropriate.

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Recently Issued Accounting Standards

In January 2010, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2010-06, Improving Disclosures about Fair Value Measurements (Topic 820) — Fair Value Measurements and Disclosures. ASU No. 2010-06 provides for more robust disclosures abut the assets and liabilities measured at fair value, the valuation techniques used and disclosure regarding transfers between levels 1, 2 and 3. ASU No. 2010-06 is effective for fiscal years beginning after December 15, 2010 and for interim periods within that fiscal year. Management is currently evaluating the requirements of ASU No. 2010-06 and has not yet determined the impact, if any, on our condensed consolidated financial statements.

In October 2009, the FASB issued ASU No. 2009-13, Revenue Recognition (Topic 605) — Multiple-Deliverable Revenue Arrangements. ASU No. 2009-13 addresses the accounting for multiple-deliverable arrangements to enable companies to account for products or services (deliverables) separately rather than as a combined unit since companies often provide multiple products or services to their customers. This guidance establishes a selling price hierarchy for determining the selling price of a deliverable. ASU No. 2009-13 is effective prospectively for revenue arrangements entered into or materially modified in fiscal years beginning on or after June 15, 2010 and early adoption is permitted. Management is currently evaluating the requirements of ASU No. 2009-13 and has not yet determined the impact, if any, on our consolidated financial statements.

In July 2009, the FASB issued Accounting Standards Codification (ASC) 105, Generally Accepted Accounting Principles (SFAS 168, The FASB Accounting Standards Codification and the Hierarchy of Generally Accepted Accounting Principles, a replacement of FASB Statement No. 162 , The Hierarchy of Generally Accepted Accounting Principles). This statement establishes the ASC as the sole source of authoritative generally accepted accounting principles (GAAP). Pursuant to the provisions of ASC 105, we have updated references to GAAP in our financial statements. The adoption of ASC 105 did not impact our financial position or results of operations.

In May 2009, the FASB issued ASC 855, Subsequent Events (SFAS 165, Subsequent Events) to provide guidance for and disclosure of events that occur after the balance sheet date but before financial statements are issued or are available to be issued. This statement is effective for interim and annual financial periods ending after June 15, 2009. Adoption of ASC 855 has no material impact on impact on our financial statements.

Market risk refers to the potential losses arising from changes in interest rates, foreign currency fluctuations and exchange rates, equity prices, and commodity prices including the correlation among these factors and their volatility. We are primarily exposed to foreign currency exchange risk and interest rate risk.

Foreign Currency Risk  There are two types of foreign currency exchange risks that we may be subject to—transaction and translation gains and losses. Foreign exchange transaction gains or losses are distinguished from translation gains or losses as follows: (i) transaction gains or losses are based on actual transactions that occur in a currency other than the functional currency of that entity, whereas, (ii) translation adjustments do not involve the movement of cash, they are accounting conversion calculations of an existing functional currency to a reporting currency.

We are subject to foreign currency exchange risk relating to the translation of GPI SAS’ assets, liabilities, and income and expense accounts. GPI SAS uses the euro as its functional currency. The translation adjustment for assets and liabilities is reflected in the accumulated other comprehensive income (loss) caption included in the stockholders’ equity section on our consolidated balance sheets.

The assets and liabilities of GPI SAS were translated into US dollars at the rate of exchange at December 31, 2009 and December 31, 2008. The income and expense accounts were translated using the average rate of exchange during the period. GPI SAS typically incurs gains or losses of specified foreign currency transactions and these amounts are occasionally material. These gains and losses are reflected in our statements of income. As of December 31, 2009 and December 31, 2008 the US dollar to euro exchange rates were $1.4406 to one euro and $1.3917 to one euro, respectively, which represents a 3.5% weaker dollar compared to the euro. The average exchange rates for the years ended December 31, 2009 and 2008 were 1.3942 and 1.4706, which represents a 5.2% stronger dollar compared to the euro.

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For GPI Mexicana, the US dollar is the functional currency. Non-monetary assets and liabilities are translated at historical exchange rates, and monetary assets and liabilities are translated at current exchange rates. Exchange gains and losses arising from translation are included in gain (loss) on foreign currency transactions.

Transaction gains and losses that arise from exchange rate fluctuations on transactions with third parties denominated in a currency other than the functional currency are included in the results of operations as incurred. From time-to-time we may enter into derivative currency contracts in order to hedge currency exposure.

Interest Rate Risk  Changes in interest rates may result in changes in the fair market value of our financial instruments, interest income and interest expense. As of December 31, 2009, we had total interest bearing debt and capital lease obligations of $860,000, all with fixed rates of interest. We believe that the fair value of these agreements approximate reported amounts.

Report of Independent Registered Public Accounting Firm

Consolidated Balance Sheets at December 31, 2009 and 2008

Consolidated Statements of Income for the Years Ended December 31, 2009 and 2008

Consolidated Statements of Stockholders’ Equity and Other Comprehensive Income for the Years Ended December 31, 2009 and 2008

Consolidated Statements of Cash Flows for the Years Ended December 31, 2009 and 2008

Notes to Consolidated Financial Statements

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GAMING PARTNERS INTERNATIONAL CORPORATION
AND SUBSIDIARIES
  
CONSOLIDATED FINANCIAL STATEMENTS

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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Stockholders of
Gaming Partners International Corporation and Subsidiaries
Las Vegas, Nevada

We have audited the accompanying consolidated balance sheets of Gaming Partners International Corporation and Subsidiaries (the “Company”) as of December 31, 2009 and 2008, and the related consolidated statements of income, stockholders’ equity and other comprehensive income, and cash flows for the years then ended. These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the consolidated financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, such consolidated financial statements present fairly, in all material respects, the financial position of Gaming Partners International Corporation and Subsidiaries as of December 31, 2009 and 2008, and the results of their operations and their cash flows for the years then ended, in conformity with accounting principles generally accepted in the United States of America.

/s/ Moss Adams LLP

San Diego, California
March 30, 2010

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GAMING PARTNERS INTERNATIONAL CORPORATION AND SUBSIDIARIES
  
CONSOLIDATED BALANCE SHEETS
December 31,
(in thousands, except share amounts)

		2009				2008
ASSETS
Current Assets:
Cash and cash equivalents		$	3,238			$	5,547
Marketable securities			15,600				7,561
Accounts receivable, less allowance for doubtful accounts of $220 and $342, respectively			7,035				5,422
Inventories			7,173				9,894
Prepaid expenses			506				431
Deferred income tax asset			707				691
Other current assets			1,241				790
Total current assets			35,500				30,336
Property and equipment, net			13,454				14,158
Goodwill			—				1,599
Other intangibles, net			676				783
Deferred income tax asset			1,657				1,666
Long-term marketable securities			—				696
Inventories, non-current			1,686				—
Other assets, net			305				311
Total assets		$	53,278			$	49,549
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Current maturities of long-term debt		$	546			$	523
Accounts payable			2,828				2,613
Accrued liabilities			3,516				3,066
Customer deposits			4,698				1,432
Income taxes payable			569				312
Other current liabilities			649				459
Total current liabilities			12,806				8,405
Long-term debt, less current maturities			314				1,743
Deferred income tax liability			623				585
Other liabilities			45				—
Total liabilities			13,788				10,733
Commitments and contingencies – see Note 10
Stockholders' Equity:
Preferred stock, authorized 10,000,000 shares, $.01 par value, none issued and outstanding			—				—
Common stock, authorized 30,000,000 shares, $.01 par value, 8,199,016 and 8,103,401, respectively, issued and outstanding			82				81
Additional paid-in capital			18,985				19,033
Treasury stock, at cost; 8,061 shares			(196	)			(196	)
Retained earnings			17,346				17,312
Accumulated other comprehensive income			3,273				2,586
Total stockholders' equity			39,490				38,816
Total liabilities and stockholders' equity		$	53,278			$	49,549

 
 
See Notes to Consolidated Financial Statements

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GAMING PARTNERS INTERNATIONAL CORPORATION AND SUBSIDIARIES
  
CONSOLIDATED STATEMENTS OF INCOME
Years Ended December 31,
(in thousands, except earnings per share)

		2009				2008
Revenues		$	49,527			$	60,546
Cost of revenues			33,631				40,671
Gross profit			15,896				19,875
Product development			362				201
Marketing and sales			4,363				4,263
General and administrative			8,384				10,071
Impairment of goodwill			1,572				—
Operating income			1,215				5,340
Other income and (expense)			289				486
Income before income taxes			1,504				5,826
Income tax expense			457				1,339
Net income		$	1,047			$	4,487
Earnings per share:
Basic		$	0.13			$	0.55
Diluted		$	0.13			$	0.55
Weighted-average shares of common stock outstanding:
Basic			8,107				8,103
Diluted			8,189				8,184

 
 
See Notes to Consolidated Financial Statements

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GAMING PARTNERS INTERNATIONAL CORPORATION AND SUBSIDIARIES
  
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY AND OTHER COMPREHENSIVE INCOME
Years Ended December 31, 2009 and 2008
(in thousands, except share amounts)

		Comprehensive Income				Common Stock								Additional Paid-In Capital				Treasury Stock				Retained Earnings				Accumulated Other Comprehensive Income				Total
						Shares				Amount
Balance, December 31, 2007							8,103,401			$	81			$	18,766			$	(196	)		$	12,825			$	3,677			$	35,153
Net income		$	4,487				—				—				—				—				4,487				—				4,487
Stock compensation expense			—				—				—				290				—				—				—				290
Forfeiture of stock options			—				—				—				(23	)			—				—				—				(23	)
Amortization of pension transition asset, net of tax			(13	)			—				—				—				—				—				(13	)			(13	)
Foreign currency translation adjustment			(1,078	)			—				—				—				—				—				(1,078	)			(1,078	)
Total comprehensive income		$	3,396
Balance, December 31, 2008							8,103,401				81				19,033				(196	)			17,312				2,586				38,816
Net income		$	1,047				—				—				—				—				1,047								1,047
Stock options exercised (see Note 14)			—				95,615				1				(207	)			—				—				—				(206	)
Tax benefit of stock options exercised			—				—				—				(32	)			—				—				—				(32	)
Stock compensation expense			—				—				—				190				—				—				—				190
Dividends paid			—				—				—				—				—				(1,013	)			—				(1,013	)
Amortization of pension transition asset, net of tax			(13	)			—				—				—				—				—				(13	)			(13	)
Foreign currency translation adjustment			700				—				—				—				—				—				700				700
Total comprehensive income		$	1,734
Balance, December 31, 2009							8,199,016			$	82			$	18,985			$	(196	)		$	17,346			$	3,273			$	39,490

 
 
See Notes to Consolidated Financial Statements

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GAMING PARTNERS INTERNATIONAL CORPORATION AND SUBSIDIARIES
  
CONSOLIDATED STATEMENTS OF CASH FLOWS
Years Ended December 31,
(in thousands)

		2009				2008
Cash Flows from Operating Activities
Net income		$	1,047			$	4,487
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
Depreciation			2,055				2,307
Amortization			28				128
Provision for bad debt			81				141
Deferred income taxes			30				(145	)
Share-based compensation expense			190				290
Loss on sale/disposal of property and equipment			15				133
(Gain) on sale of marketable securities			(45	)			(90	)
Impairment of goodwill and intangibles			1,651				118
Tax effect on net-settled stock option exercise			(32	)			—
Change in operating assets and liabilities:
Accounts receivable			(1,812	)			(238	)
Inventories			1,212				(63	)
Prepaid expenses and other current assets			(503	)			946
Non-current other assets			11				319
Accounts payable			(87	)			130
Customer deposits			3,127				(1,247	)
Accrued liabilities			375				(1,265	)
Income taxes payable			239				425
Other current liabilities			204				(198	)
Net cash provided by (used in) operating activities			7,786				6,178
Cash Flows from Investing Activities
Purchase of marketable securities			(30,647	)			(37,766	)
Proceeds from sale of marketable securities			23,817				34,591
Capital Expenditures			(721	)			(1,323	)
Proceeds from sale of property and equipment			54				30
Net cash provided by (used in) investing activities			(7,497	)			(4,468	)
Cash Flows from Financing Activities
Repayment of long-term debt obligations			(1,434	)			(693	)
Dividends paid			(1,013	)			—
Payment on net-settled stock option exercise			(206	)			—
Net cash provided by (used in) financing activities			(2,653	)			(693	)
Effect of exchange rate changes on cash			55				(97	)
Net increase (decrease) in cash and cash equivalents			(2,309	)			920
Cash and cash equivalents, beginning of period			5,547				4,627
Cash and cash equivalents, end of period		$	3,238			$	5,547
Supplemental disclosures of cash flow information:
Cash paid for interest		$	103			$	135
Cash paid for income taxes, net of refunds		$	445			$	680
Supplemental disclosures of non-cash investing and financing activities
Property and equipment acquired through accounts payable		$	470			$	42
Property and equipment acquired by capital lease		$	—			$	70

 
 
See Notes to Consolidated Financial Statements

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GAMING PARTNERS INTERNATIONAL CORPORATION AND SUBSIDIARIES
 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 1. Nature of Business and Significant Accounting Policies

Organization and Nature of Business

Gaming Partners International Corporation (GPIC or the Company) has two operating subsidiaries, Gaming Partners International USA, Inc. (GPI USA) and Gaming Partners International SAS (GPI SAS). In addition, GPI USA owns GPI Mexicana S.A. de C.V. (GPI Mexicana), a manufacturing subsidiary. GPI USA was founded in 1963 as Paul-son Gaming Supplies by Paul S. Endy, Jr., and initially manufactured and sold dice to casinos in Las Vegas. GPI SAS was founded in 1923 as Bourgogne et Grasset by Etienne Bourgogne and Claudius Grasset in Beaune, France to produce and sell counterfeit-resistant chips to casinos in Monaco. GPIC was formed in 2002 through a reverse merger between Paul-Son Gaming Corporation and Bourgogne et Grasset initiated by Francois Carrette, whose firm, Holding Wilson, SA, remains GPIC’s controlling shareholder. The Company has established brand names such as Paulson®, Bourgogne et Grasset® (“B&G”), and Bud Jones®. GPIC and each of its subsidiaries are sometimes collectively referred to herein as the “Company,” “us,” “we” or “our.”

The Company is headquartered in Las Vegas, Nevada and has manufacturing facilities in Las Vegas, Nevada; San Luis Rio Colorado, Mexico; and Beaune, France. GPI USA has sales offices in Las Vegas, Nevada; Atlantic City, New Jersey; and Gulfport, Mississippi and sells our casino products to licensed casinos primarily in the United States and Canada. GPI SAS has a sales office in Beaune, France and sells our casino products internationally to licensed casinos. Most of our products are sold directly to end-users, however, in some regions of the world we sell through distributors.

Our business activities include the manufacture and supply of gaming chips, table layouts, playing cards, gaming furniture, table accessories, and dice, all of which are used in conjunction with casino table games such as blackjack, poker, baccarat, craps and roulette.

Significant Accounting Policies

Basis of Consolidation. The consolidated financial statements include the accounts of GPIC and its wholly-owned subsidiaries GPI SAS, GPI USA and GPI Mexicana. All material intercompany balances and transactions have been eliminated in consolidation. The consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States.

Cash and Cash Equivalents. We consider all highly liquid investments with maturities of three months or less at the date of purchase to be cash and cash equivalents. The Company maintains cash and cash equivalents in various United States banks. One operating account is in excess of the federally insured limit of $250,000. The Company also maintains cash and cash equivalents in foreign banks that are not insured.

Fair Value of Financial Instruments. The fair value of cash and cash equivalents, marketable securities, accounts receivable, and accounts payable approximates the carrying amount of these financial instruments due to their short-term nature. The fair value of long-term debt, which approximates its carrying value, is based on current rates at which we could borrow funds with similar remaining maturities.

Effective January 1, 2008, we adopted new fair value accounting guidance for financial assets and liabilities which defines fair value, establishes a framework for measuring fair value, and expands disclosures about fair value measurements. The adoption of this guidance did not have a material impact on our consolidated financial statements. The guidance does not require any new fair value measurements, but identifies a hierarchy of valuation techniques based on whether the inputs to those techniques are observable or unobservable. Observable inputs reflect market data obtained from independent sources, while unobservable inputs reflect our own market assumptions. The following summarizes this fair value hierarchy:

Level 1: Quoted prices in active markets for identical instruments.

Level 2: Quoted market prices for similar instruments, using observable market-based inputs or unobservable inputs corroborated by market data.

Level 3: Unobservable inputs using our own assumptions when observable inputs are not available.

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GAMING PARTNERS INTERNATIONAL CORPORATION AND SUBSIDIARIES
 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 1. Nature of Business and Significant Accounting Policies  – (continued)

Accounts Receivables and Customer Deposits. We perform ongoing credit evaluations of our customers and generally require a deposit. These customer deposits are classified as a current liability on the consolidated balance sheets. We also maintain an allowance for doubtful accounts to state trade receivables at their estimated realizable value. This allowance applies to all customers and is estimated based on a variety of factors, including the length of time the receivables are past due, economic conditions and trends, significant one-time events and historical experience. Additional amounts are recorded to the allowance based on our awareness of a particular customer’s potential inability to meet its financial obligations. Receivables are written-off when management determines that collectability is remote.

As of December 31, 2009, we had three customers that individually accounted for 28%, 17% and 16% of our accounts receivable balance. As of December 31, 2008, we had two customers that individually accounted for 14% and 10% of our accounts receivable balance.

Marketable Securities. We account for our investments in marketable securities as available-for-sale and, as such, they are recorded on our consolidated balance sheets at estimated fair value and unrealized holding gains and losses are excluded from earnings and, instead, reported within accumulated other comprehensive income.

Inventories. Inventories are stated at the lower of cost or market. Cost is determined using a weighted-average method at GPI SAS and a first-in, first-out method at GPI USA. Market value is determined by comparing inventory item carrying values to estimates of net realizable value. The analysis of net realizable value includes reviewing overall inventory levels, historical and projected sales or usage of these items, the projected markets for our products, and selling costs. Inventory that we estimate will not be used within the next business cycle is considered non-current inventory.

Property and Equipment. Property and equipment are stated at cost, net of accumulated depreciation. We include capitalized lease equipment in our property and equipment for financial reporting purposes. Depreciation is computed on the straight-line method for financial reporting purposes over the following estimated useful lives:

		Years
Buildings and Improvements			5 – 40
Furniture and Equipment			2 – 15
Vehicles			5 – 7

Long Lived Assets, Goodwill, and Other Intangible Assets. The Company evaluates the carrying value of long-lived assets (including property and equipment, goodwill, and other intangible assets) for possible impairment when events or change in circumstances indicate that the carrying value of an asset may not be recoverable. Goodwill and other intangible assets are tested for impairment annually (as of December 31). In general, we will recognize an impairment loss when the sum of discounted expected cash flows from the asset is less than the carrying amount of such asset. Goodwill and other intangible assets with indefinite lives are not amortized. Other intangible assets, such as patents and trademarks, are amortized using the straight-line method over their economic lives. See Note 7.

Capitalized Leases. We include obligations from capitalized leases in our long and short-term debt captions for financial statement purposes.

Revenue Recognition. We recognize revenue when the following criteria are met: persuasive evidence of an arrangement between our customer and us exists, shipment has occurred, the sales price is fixed or determinable, and collectability is reasonably assured. Generally, this means we recognize revenue when our products are shipped to our customers and title to the products and risk of loss are transferred according to the shipping terms, at which time the products are deemed delivered. We generally require a deposit and typically sell our products with payment terms of net 30 days.

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GAMING PARTNERS INTERNATIONAL CORPORATION AND SUBSIDIARIES
 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 1. Nature of Business and Significant Accounting Policies  – (continued)

Shipping costs billed to our customers have the related expense included in cost of revenues. Revenues do not include sales tax, as we consider ourselves a pass-through conduit for collecting and remitting sales taxes.

Income Taxes. We recognize a current tax liability or asset for estimated taxes payable or refundable on tax returns for the current year and a deferred tax liability or asset for estimated future tax effects, attributable to temporary differences and carry forwards.

GPIC and its subsidiaries file separate income tax returns in their respective jurisdictions. Income taxes are provided for the tax effects of transactions reported in the consolidated financial statements and consist of taxes currently due plus deferred taxes related primarily to differences between the basis of assets and liabilities acquired for financial and income tax reporting. The deferred tax assets and liabilities represent the future tax consequences of those differences, which will either be taxable or deductible when the assets and liabilities are recovered or settled. Deferred taxes also are recognized for operating losses that are available to offset future income taxes.

The Company reviews all of its tax positions and makes a determination as to whether its position is more likely than not to be sustained upon examination by tax authorities. If a tax position meets the more likely than not standard, then the related tax benefit is measured based on the cumulative probability that the amount that is more likely than not to be realized upon ultimate settlement or disposition of the underlying issue.

Foreign Currency Transactions. The financial statements of GPI SAS are measured using the euro as the functional currency. Assets and liabilities of GPI SAS are translated into the US dollar at exchange rates as of the balance sheet date. Revenues and expenses are translated into the US dollar at average rates of exchange in effect during the year. The resulting cumulative translation adjustments are recorded within accumulated other comprehensive income.

For GPI Mexicana, the US dollar is the functional currency. Non-monetary assets and liabilities are translated at historical exchange rates, and monetary assets and liabilities are translated at current exchange rates. Exchange gains and losses arising from translation are included in other income and expense in the Consolidated Statements of Income.

Transaction gains and losses that arise from exchange rate fluctuations on transactions with third parties denominated in a currency other than the functional currency are included in the results of operations as incurred. From time-to-time, we may enter into derivative currency contracts in order to hedge currency exposure. We did not have any forwards, options, or other derivative contracts in place as of December 31, 2009 or December 31, 2008 and no such contracts were entered into during 2009 or 2008.

Comprehensive Income. Comprehensive income includes net income, unrealized gains and losses on available-for-sale securities recorded net of tax, pension related costs, and foreign currency translation adjustments.

Estimates. The preparation of consolidated financial statements in conformity with generally accepted accounting principles generally requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Estimates and assumptions have been made in determining the allowance for doubtful accounts receivable; write-downs of slow moving, excess and obsolete inventories; the depreciable lives of fixed assets; estimates for the recoverability of long-lived assets including intangible assets and goodwill; the recoverability of deferred tax assets; and potential exposures relating to litigation, claims and assessments. Actual results could differ from those estimates and assumptions.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 1. Nature of Business and Significant Accounting Policies  – (continued)

Recently Issued Accounting Standards. In January 2010, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2010-06, Improving Disclosures about Fair Value Measurements (Topic 820) — Fair Value Measurements and Disclosures. ASU No. 2010-06 provides for more robust disclosures abut the assets and liabilities measured at fair value, the valuation techniques used and disclosure regarding transfers between levels 1, 2 and 3. ASU No. 2010-06 is effective for fiscal years beginning after December 15, 2010 and for interim periods within that fiscal year. Management is currently evaluating the requirements of ASU No. 2010-06 and has not yet determined the impact, if any, on our condensed consolidated financial statements.

In October 2009, the FASB issued ASU No. 2009-13, Revenue Recognition (Topic 605) — Multiple-Deliverable Revenue Arrangements. ASU No. 2009-13 addresses the accounting for multiple-deliverable arrangements to enable companies to account for products or services (deliverables) separately rather than as a combined unit since companies often provide multiple products or services to their customers. This guidance establishes a selling price hierarchy for determining the selling price of a deliverable. ASU No. 2009-13 is effective prospectively for revenue arrangements entered into or materially modified in fiscal years beginning on or after June 15, 2010 and early adoption is permitted. Management is currently evaluating the requirements of ASU No. 2009-13 and has not yet determined the impact, if any, on our consolidated financial statements.

In July 2009, the FASB issued Accounting Standards Codification (ASC) 105, Generally Accepted Accounting Principles (SFAS 168, The FASB Accounting Standards Codification and the Hierarchy of Generally Accepted Accounting Principles, a replacement of FASB Statement No. 162 , The Hierarchy of Generally Accepted Accounting Principles). This statement establishes the ASC as the sole source of authoritative generally accepted accounting principles (GAAP). Pursuant to the provisions of ASC 105, the Company has updated references to GAAP in its financial statements. The adoption of ASC 105 did not impact the Company’s financial position or results of operations.

In May 2009, the FASB issued ASC 855, Subsequent Events (SFAS 165, Subsequent Events) to provide guidance for and disclosure of events that occur after the balance sheet date but before financial statements are issued or are available to be issued. This statement is effective for interim and annual financial periods ending after June 15, 2009. Adoption of this has no material impact on our financial statements.

In December 2008, the FASB issued ASC 715-20, Compensation-Retirement Benefits (Staff Position No. 132(R)-1, Employer’s Disclosures about Postretirement Benefit Plan Assets (FSP FAS 132(R)-1) which amended SFAS 132R, Employers’ Disclosures about Pensions and Other Postretirement Benefits), to provide guidance on an employer’s disclosures about plan assets of a defined benefit pension or other postretirement plan. We have adopted ASC 715-20 and have included disclosure in Note 13.

In April 2008, the FASB issued ASC 350, Intangibles — Goodwill and Other (Staff Position No. FAS 142-3, Determination of the Useful Life of Intangible Assets which amended SFAS 142, Goodwill and Other Intangible Assets). This guidance amends the factors that should be considered in developing renewal or extension assumptions used to determine the useful life of a recognized intangible asset. The intent is to improve the consistency between the useful life of a recognized intangible asset under ASC 350, and the period of expected cash flows used to measure the fair value of the asset under ASC 805, Business Combinations (SFAS 141 (revised 2007), Business Combinations), and other US generally accepted accounting principles. In addition, there are additional disclosure requirements for recognized intangible assets that enable users of the consolidated financial statements to assess the extent to which expected future cash flows associated with the asset are affected by the entity’s intent and/or the ability to renew or extend the arrangement. This guidance was effective for financial statements issued for fiscal years beginning after December 15, 2008, and interim periods within those fiscal years. Adoption of this statement did not have a material impact on the Company.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 1. Nature of Business and Significant Accounting Policies  – (continued)

In February 2008, the FASB issued ASC 820-10, Fair Value Measurements and Disclosures (Staff Position No. FAS 157-2, Effective Date of FASB Statement No. 157 an amendment to SFAS 157, Fair Value Measurements). The amendment applies to non-financial assets and liabilities, except those that are recognized or disclosed at fair value in the consolidated financial statements on a recurring basis. For items within its scope, this deferred the effective date until fiscal years beginning after November 15, 2008. ASC 820 defines fair value, establishes a framework for measuring fair value and expands disclosures about fair value measurement. The Company has adopted ASC 820, evaluated its impact, and concluded that the impact is immaterial at this time.

Note 2. Marketable Securities

Available for sale marketable securities consist of the following investment categories issued by French and US banks as of December 31 (in thousands):

		2009												2008
		Cost				Unrealized Gain				Fair Value				Cost				Unrealized Gain				Fair Value
Certificates of deposit		$	11,614			$	—			$	11,614			$	3,480			$	—			$	3,480
Bond mutual fund			1,597				—				1,597				3,029				—				3,029
Term notes			1,369				—				1,369				487				—				487
Term bonds			1,020				—				1,020				565				—				565
Total current marketable securities		$	15,600			$	—			$	15,600			$	7,561			$	—			$	7,561
Bond mutual fund		$	—			$	—			$	—			$	696			$	—			$	696
Total long-term marketable securities		$	—			$	—			$	—			$	696			$	—			$	696

Long-term marketable securities include 500,000 euros ($696,000) as of December 31, 2008, which had to be maintained as a minimum balance as security for a loan obtained in June 2006. See Note 9.

Fair Value Measurement

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. The Company has determined that all of its marketable securities fall into the Level 1 category, which values assets at the quoted prices in active markets for identical assets. For the year ended December 31, 2009, the fair value recognized on our marketable securities was $15.6 million, while at the year ended December 31, 2008, the fair value was $8.3 million. There were no assets or liabilities where Level 2 and 3 valuation techniques were used.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 3. Allowance for Doubtful Accounts

A summary of the provision for estimated bad debts write-offs related to the allowance for doubtful accounts are as follows (in thousands):

Years Ended December 31,		Balance at Beginning of Year				Provision				Write-offs, Net of Recoveries				Exchange Rate Effect				Balance at End of Year
2009		$	342			$	81			$	(218	)		$	15			$	220
2008		$	327			$	37			$	(10	)		$	(12	)		$	342

Note 4. Inventories

Inventories consist of the following at December 31 (in thousands):

		2009				2008
Raw materials		$	4,748			$	6,550
Work in progress			2,761				1,475
Finished goods			1,350				1,869
Inventories		$	8,859			$	9,894

As of December 31, 2009, $1,686,000 of our inventories is classified as non-current, as we do not expect that amount to be used in our normal inventory cycle.

Note 5. Other Current Assets

Other current assets consist of the following at December 31 (in thousands):

		2009				2008
Refundable value-added tax		$	321			$	336
Income tax-related assets(1)			625				237
Deposits			113				157
Other assets			182				60
Other current assets		$	1,241			$	790

Note 6. Property and Equipment

Property and equipment consists of the following at December 31 (in thousands):

		2009				2008
Land		$	1,806			$	1,795
Buildings and improvements			8,894				8,567
Furniture and equipment			18,891				17,633
Vehicles			563				693
			30,154				28,688
Less accumulated depreciation			(16,700	)			(14,530	)
Property and equipment, net		$	13,454			$	14,158

Depreciation expense for the years ended December 31, 2009 and 2008 was $2,055,000 and $2,307,000 respectively.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 7. Goodwill and Other Intangible Assets

As of December 31, 2008, goodwill totaled $1,599,000 and was associated with GPI USA. Of this amount, $1,399,000 was recorded on the books of GPI SAS and included $225,000 related to the net effect of foreign currency adjustments.

We assess the potential impairment of goodwill on an annual basis in conjunction with our year-end financial statements, and more frequently if events or changes in circumstances indicate that goodwill may be impaired following the guidance of ASC 350, Intangibles — Goodwill and Other. During the third quarter of 2009, we assessed goodwill for impairment. Performance at GPI USA was significantly below projected operating results for 2009 and projected operating results for subsequent years had been significantly reduced due to negative industry and economic trends. Step one of the impairment tests involved comparing the estimated fair value of GPI USA, measured using a discounted cash flow model, to its net book value including goodwill. The discounted cash flow approach requires estimates such as, expected revenue, gross margin, and operating expenses, to project future cash flows. We used an estimated weighted-average cost of capital to discount cash flows. The resulting comparison revealed that goodwill was impaired. Therefore, we performed step two of the goodwill impairment test to determine the extent to which goodwill was impaired. The extent by which the calculated fair value exceeds the net estimated fair value of assets and liabilities (excluding goodwill) is the value of the goodwill. The results of this step of the impairment test indicated that there would be no remaining implied value attributable to goodwill. Accordingly, we wrote off the entire goodwill balance. A charge of $1,572,000 was made to impairment of goodwill in our Consolidated Statements of Income.

Other intangible assets consisted of the following at December 31 (in thousands):

		2009												2008
		Gross Carrying Amount				Accumulated Amortization				Net Carrying Amount				Gross Carrying Amount				Accumulated Amortization				Net Carrying Amount				Estimated Useful Life (Years)
Patents(1)		$	1,242			$	(1,141	)		$	101			$	1,242			$	(1,042	)		$	200				8 – 18
Trademark(2)		$	620			$	(45	)		$	575			$	620			$	(37	)		$	583				12
Total other intangibles		$	1,862			$	(1,186	)		$	676			$	1,862			$	(1,079	)		$	783

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 7. Goodwill and Other Intangible Assets  – (continued)

Amortization expense for the years ended December 31, 2009 and 2008 was $28,000 and $122,000, respectively. The following table provides estimated amortization expenses for the years ending December 31 (in thousands):

Year		Amortization Expense
2010		$	62
2011			62
2012			62
2013			62
2014			60
Thereafter			368
Total		$	676

Note 8. Accrued Liabilities

Accrued liabilities consist of the following at December 31 (in thousands):

		2009				2008
Accrued bonuses and commissions		$	1,226			$	838
Accrued vacation			848				716
Accrued salaries, wages, and related costs			752				746
Other accrued expenses			494				610
Sales tax liability			196				156
Accrued liabilities		$	3,516			$	3,066

Note 9. Long-Term Debt and Pledged Assets

Long-term debt consists of the following at December 31 (in thousands):

		2009				2008
Note payable due to a commercial bank through June 2011		$	687			$	1,089
Note payable due to a commercial bank through May 2011			113				182
Note payable due to a commercial bank			—				925
Capital leases			60				70
Total debt			860				2,266
Less: current maturities			(546	)			(523	)
Long-term portion debt		$	314			$	1,743

In June 2006, GPI SAS entered into a 1.5 million euro (approximately $1.9 million in June 2006) loan transaction with a French bank. The loan has a five-year term at a fixed rate of 3.4% per annum and is due in June 2011. The loan is repayable in fixed quarterly installments of 80,628 euros. The loan was secured by a minimum of 500,000 euros of GPI SAS’ marketable securities at the bank until November 2009, when this requirement was eliminated (see Note 2). There is no prepayment penalty. As of December 31, 2009, the remaining balance was 477,000 euros ($687,000).

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 9. Long-Term Debt and Pledged Assets  – (continued)

In May 2004, GPI SAS entered into a 350,000 euro (approximately $423,000 in May 2004) loan transaction with a French bank. The loan has a fixed interest rate of 3.6% per annum, is due in May 2011, and is secured by a mortgage on the manufacturing facility in France. The loan is repayable in fixed monthly installments of 4,720 euros. There is a prepayment penalty. As of December 31, 2009, the remaining balance was 78,000 euros ($113,000).

In March 2002, GPI USA entered into a $995,000 loan transaction secured by a deed of trust on its Las Vegas building and personal property at an interest rate equal to the greater of (i) 8% per annum, or (ii) 362.5 basis points over the average of the London Interbank Offered Rates (LIBOR) for six-month dollar deposits in the London market based on quotations of major banks, but may not exceed 12% per annum. The interest rate as of December 31, 2008 was 8.00%. This loan was paid off early, in September 2009, rather than through equal monthly installments through March 2012, at which time the entire remaining principal balance would have been due. There was no prepayment penalty.

In February 2001, GPI SAS borrowed 2.6 million euros (approximately $2.4 million in February 2001) from an unaffiliated party. Principal and interest payments were made quarterly until February 2008, at which time the loan was paid off.

Estimated annual principal maturities of long-term debt and future minimum payments under capital lease obligations at December 31, 2009 are as follows (in thousands):

Year		Capital Leases				Long-term Debt				Total
2010		$	21			$	533			$	554
2011			21				267				288
2012			21				—				21
2013			17				—				17
Total			80				800				880
Less: amount representing interest			(20	)			—				(20	)
Total of present value of minimum lease payments and long term debt			60				800				860
Less: current maturities			(13	)			(533	)			(546	)
Total long-term portion of obligations		$	47			$	267			$	314

Note 10. Commitments and Contingencies

Operating Lease Commitments

The Company has various operating leases that are used in the normal course of business. Our operating leases consist of building and storage rental expenses and equipment and vehicle rental expenses.

Operating lease expense for the years ended December 31, 2009 and 2008 was $510,000 and $496,000, respectively.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 10. Commitments and Contingencies  – (continued)

The following schedule reflects our future minimum lease payments under operating leases including related party payments (see Note 18) as of December 31, 2009 (in thousands):

Year		Minimum Lease Payments
2010		$	462
2011			445
2012			391
2013			375
2014			36
Total		$	1,709

Legal Proceedings and Contingencies

Liabilities for material claims against the Company are accrued when a loss is considered probable and can be reasonably estimated. Legal costs associated with claims are expensed as incurred.

On June 27, 2007, a putative class action complaint alleging violations of federal securities laws based on alleged misstatements and omissions by the Company, entitled Robert J. Kaplan v. Gerard P. Charlier, Paul S. Dennis, Eric P. Endy, Alain Thieffry, Elisabeth Carrette, Robert J. Kelly, Charles R. Henry, Laura McAllister Cox and Gaming Partners International Corporation was filed in the United States District Court for the District of Nevada, under Case No. 2:07-cv-00849-LDG-GWF. Plaintiff Kaplan has been designated by the court as “Lead Plaintiff.” On February 12, 2008, Plaintiff filed an amended complaint, deleting several of the above named defendants, and adding three others. The action is now captioned Robert J. Kaplan v. Gerard P. Charlier, Melody J. Sullivan a/k/a Melody Sullivan Yowell, David Grimes, Charles T. McCullough, Eric P. Endy, Elisabeth Carrette and Gaming Partners International Corporation. The Company engaged counsel and intends to vigorously defend against the claims presented. Defendants filed a Motion to Dismiss the Complaint on April 16, 2008. Defendants’ Motion to Dismiss was thereafter granted and an Order was entered dismissing the Amended Complaint without prejudice on November 18, 2008. Plaintiff filed a Second Amended Complaint on January 9, 2009. Defendants Motion to Dismiss the Second Amended Complaint was filed on February 27, 2009. On September 28, 2009, Defendants’ motion was granted and judgment dismissing the Second Amended Complaint with prejudice was entered on September 29, 2009. On October 29, 2009, Plaintiff filed his Notice of Appeal of the Court’s judgment to the 9^th Circuit Court of Appeals. Plaintiff has filed his opening brief in support of its appeal and defendants’ reply brief was filed on March 15, 2010. Plaintiff may file a responding brief by early April 2010. The matter will then await further action by the Court.

On August 31, 2007, a shareholders derivative complaint alleging breach of fiduciary duty, abuse of control, gross mismanagement, waste of corporate assets, and unjust enrichment, entitled Glenn D. Hutton, derivatively on behalf of Nominal Defendant Gaming Partners International Corp., plaintiff, vs. Gerard P. Charlier, Eric P. Endy, Alain Thieffry, Elisabeth Carrette, Robert J. Kelly, Charles R. Henry and David W. Grimes, defendants, and Gaming Partners International Corp., Nominal Defendant was filed in the United States District Court for the District of Nevada, under Case No., 2:07-cv-01180-JCM-LRL. Defendants filed a motion to dismiss the complaint on June 30, 2008 claiming, among other things, that the complaint should be dismissed for failure to make a demand on the directors. Defendants’ motion was granted after a hearing conducted on October 16, 2008. The Judgment and the Court’s Order Granting the Motion to Dismiss the Complaint without prejudice was entered on October 29, 2008. By letter dated January 14, 2009, plaintiff’s counsel made a formal demand that the members of the Board of Directors of Gaming Partners International Corporation take action to remedy alleged breaches of fiduciary duties by certain current and former executive officers and directors of the Company, specifically Gerard P. Charlier, Eric P. Endy, Alain Thieffry, Elisabeth Carrette, Robert J. Kelly, Charles R. Henry and David W. Grimes. The Board of Directors of GPIC appointed a Special Litigation Committee to commence an investigation into the matters raised in the demand letter.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 10. Commitments and Contingencies  – (continued)

After a thorough investigation, the Special Litigation Committee reported its findings to the Board of Directors concluding that the claims are unfounded and that no action concerning the allegations in the demand letter is required or necessary.

On January 22, 2009, a complaint was filed in a matter entitled Sibel Products, Inc. vs. Gaming Partners International Corporation in the Circuit Court of the Second Judicial District of Jefferson County, Illinois, Case No. 09-L-4. The complaint seeks a preliminary injunction in connection with an exclusive purchase agreement, for particular raw materials used to manufacture finished goods, between plaintiff and Gaming Partners International USA, Inc. The Company engaged counsel and intends to vigorously defend against the claims presented. On January 30, 2009, the Company filed a notice of removal of the action to the United States District Court for the Southern District of Illinois and Case Number 3:09-cv-87 was assigned. On April 7, 2009, plaintiff filed an Amended Complaint alleging breach of contract, tortious interference with perspective economic advantage and seeking preliminary injunctive relief. On July 27, 2009, plaintiff filed a Second Amended Complaint against the Company and the Company’s current manufacturing supplier. The Company agreed to defend and hold the manufacturer harmless against claims by plaintiff for tortious interference as a result of the purchase agreement between the Company and the manufacturer. Plaintiff’s motion for preliminary injunctive relief and defendants’ respective motions to dismiss the Second Amended Complaint were denied. The Company filed a counterclaim against plaintiff on January 22, 2010. After commencement of a trial on the matter on March 22, 2010, the matter was concluded as follows: plaintiff’s claims against the current manufacturing supplier were dismissed with prejudice; plaintiff’s claims against Gaming Partners International Corporation were dismissed with prejudice; judgment was entered in favor of Gaming Partners International USA, Inc. and against plaintiff on the counterclaim; and plaintiff and GPI USA entered into a proposed settlement agreement with regard to the claims set forth in the Second Amended Complaint. The settlement is expected to be completed within 30 days of its entry.

We are engaged in disputes and claims in the normal course of business. We believe the ultimate outcome of these proceedings will not have a material adverse impact on the consolidated financial position or results of operations.

Commitments

On October 25, 2001, GPI SAS entered into an exclusive patent license agreement with Enpat, Inc. The subject patents were subsequently sold by Enpat, Inc. to Shuffle Master Inc. in 2004. Thereafter, in 2005, Shuffle Master Inc. sold 50% of its rights in the subject patents to International Game Technology and later the other 50% of its rights in the subject patents also to International Game Technology. The agreement grants GPI SAS (and its affiliated GPIC companies) the exclusive rights to manufacture and distribute gaming chips and readers in the United States under the patents for a gaming chip tracking system and method, which utilizes gaming chips with embedded electronic circuits scanned by antennas in gaming chip placement areas (gaming tables and casino cage), or Radio Frequency Identification Devices (RFID) technology. The duration of the exclusive agreement is for the life of the patents, the last of which expires in 2015. Minimum annual royalty payments of $125,000 are required to be made by GPIC over the remaining life of the exclusive patent license agreement.

Employment Agreements

The Company has employment agreements with key employees which include severance commitments in the event the Company terminates the employee without cause. Total commitments under the agreements aggregate to approximately $716,000 as of December 31, 2009.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 11. Accumulated Other Comprehensive Income

Accumulated other comprehensive income consists of the following as of December 31 (in thousands):

		2009				2008
Foreign currency translation		$	3,241			$	2,541
Unrecognized pension transition asset, net of tax			32				45
Accumulated other comprehensive income		$	3,273			$	2,586

Note 12. Geographic and Product Line Information

We manufacture and sell casino table game equipment in one operating segment—casino game table equipment products. Although the Company derives its revenues from a number of different product lines, the Company does not allocate resources based on the operating results from the individual product lines nor does it manage each individual product line as a separate business unit.

The following table present certain data by geographic area for the years ended December 31 (in thousands):

		2009								2008
Revenues
United States		$	22,664				45.8	%		$	36,710				60.6	%
Asia(1)			20,488				41.4	%			13,549				22.4	%
Europe (includes Russia)			3,042				6.1	%			5,704				9.4	%
Other(2)			3,333				6.7	%			4,583				7.6	%
Total		$	49,527				100.0	%		$	60,546				100.0	%

The following table represents our net sales by product line for the years ended December 31, (in thousands):

		2009								2008
Casino chips:
American-style casino chips		$	21,783				44.1	%		$	30,182				49.9	%
European-style casino chips			10,803				21.8	%			8,245				13.6	%
Total casino chips			32,586				65.9	%			38,427				63.5	%
Table layouts			4,383				8.8	%			5,154				8.5	%
Playing cards			4,287				8.7	%			4,149				6.9	%
Table accessories and other products			2,770				5.6	%			5,226				8.6	%
Gaming furniture			2,248				4.5	%			3,580				5.9	%
Dice			1,842				3.7	%			1,901				3.1	%
Shipping			1,411				2.8	%			2,109				3.5	%
Total		$	49,527				100.0	%		$	60,546				100.0	%