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Executives

Mark Roberson – Acting Chief Executive Officer and Chief Financial Officer

Analysts

Warren Fulbright – Private Investor

Mark Smith - Feltl & Company

Samuel Cribbs – Private Investor

Charlie Pine – Feltl & Company

Robert O’Connell – Private Investor

PokerTek, Inc. (PTEK) Q2 2009 Earnings Call August 10, 2009 5:00 PM ET

Operator

Welcome to the second quarter 2009 PokerTek Incorporated earnings conference call. (Operator Instructions). I would now like to turn the call over to your host for today, Mr. Mark Roberson, Acting Chief Executive Officer and Chief Financial Officer.

Mark Roberson

Welcome everybody to PokerTek Incorporated earnings call for the second quarter ended June 30, 2009. I will make forward-looking statements on today's call, which are made pursuant to the Safe Harbor Provisions of the Private Securities Litigation Reform Act of 1995. These statements are not guarantees of future performance and are subject to risks and uncertainties that may impact our business.

We undertake no obligation to publicly update or revise any forward-looking statement. We also strongly encourage you to read the information contained in our public fillings with the SEC.

I will start off with a detailed review of our financial performance, provide some commentary on recent events, and look forward to your questions.

Before we get started with the details, I’d like to address the recent change in leadership with regard to the CEO position. Many times change brings with it the opportunity to take a fresh look at things, and we’ve made a number of recent changes that are worthy of discussing here today. First, I’ve assumed the role of both CFO and CEO on an interim basis. Currently, we are not engaged in an active search for either of these positions, as we believe the efficiencies and cost savings of having a single CEO-CFO outweigh the advantages of rushing to fill either role right away.

In connection with the transition, we’ve established an executive leadership committee comprised of Lyle Berman, Joe Lahti, and Lou White which will allow our board to take a more active role in the strategic direction of the company, provide support to our management team, and evaluate the long-term succession for the CEO role as we move forward. James Crawford, our President and one of the founders of the company, has become even more active day to day and has taken on increased responsibility for both sales and marketing of Heads-Up Challenge as well as PokerPro.

We took several additional steps to bolster our PokerPro sales team recently. We hired Raul Bouchot as our Director of Sales. Raul brings over 20 years of experience in the industry with Shufflemaster, TCS John Huxley and IGT. Raul’s deep gaming experience and industry relationships will contribute significantly to our growth especially on the international front where we’re already benefiting from his involvement.

We also promoted Chris Manley to National Sales Manager. Chris has been with us for 4 years and has been extremely successful expanding PokerPro and supporting our customer base in his region. With these recent changes and the great team of employees here in Charlotte, we have reason to feel confident in the future.

Moving on to the numbers, total revenue for the second quarter was $1.5 million. That’s a decrease of 60% from the second quarter of 2008. For the first half, revenue was $3.7 million, a 48% decrease from the first half of last year. Revenues were down primarily as a result of lower hardware product sales to Aristocrat and to our Heads-Up Challenge distributors during the current quarter and the first half of 2009.

Our revenues from recurring licensing and service fees totaled $1.2 million for the second quarter which was down modestly 15% from the second quarter of 2008. For the first half, recurring license fees came in at $2.6 million which was a decrease of $300,000, or 12% from the first half of 2008.

Product sales came in at $314,000 for the second quarter, which was down $2.1 million or 87% from the second quarter of 2008. For the first half, product sales totaled $1.1 million, down $3 million or 74% from the first half of 2008. Product sales were down primarily because we had no shipments to Aristocrat during the first half of 2009. We currently don’t expect to see additional orders from them in the near term, as we believe they have sufficient inventory and their Eastern European markets where business was particularly strong in 2008 had been especially impacted by weaker economic conditions.

Sales of Heads-Up Challenge were $288,000 in the second quarter. This compared to $1.4 million in the second quarter of 2008. Demand from our customers for the Heads-Up Challenge through traditional channels was lower during 2009 due to reduced purchasing power and financing that was available to these traditional operators and distributors during the current period.

As a result, we began transitioning our Heads-Up Challenge away from selling through traditional distribution to a new operator direct model. Going forward, we will begin placing tables directly with operators on a recurring revenue basis. As a result, we’ll be recognizing less upfront one-time product sale revenue and will be building annuity recurring revenue stream starting in early Q3.

Overall while total revenues are certainly down, what you will notice is that the quality of revenues has improved significantly with recurring revenues now representing a much larger proportion of the total than in past periods. For the second quarter of 2008, recurring revenue represented 37% of total. In the current quarter, recurring revenue increased to 79% of total revenues. Based on the changes in the Heads-Up Challenge business model, I would also expect that percentage to continue to rise.

Direct cost of revenue for the second quarter was $900,000, a decrease of 61% from the comparable period of 2008. For the first half of 2009, direct cost of revenue was $2.2 million, a decrease of 47%. The decline in direct cost was directly related to the lower PokerPro and Heads-Up Challenge hardware sales, although it was partially offset by slightly increased depreciation of the leased PokerPro product.

Total operating expenses came in at $2.1 million for the quarter. That’s a decrease of $1.1 million or 35% from 2008. For the first half, operating expenses were $4.6 million, a decrease of 32% from the comparable period of 2008. This decline is operating expenses is primarily attributable to our cost reduction initiatives. In addition, non-cash stock compensation expenses declined due to an increase in non-vested forfeitures.

We’re reduced our operating expenses significantly over the past year, and based on actions taken over the last couple of months, I would expect our cash operating expenses to continue to decline. As a result, net loss per common share was $0.15 for the second quarter, an improvement of 17% from $0.18 for the second quarter of 2008.

Net loss was $1.6 million for the second quarter of 2009, which is an improvement of 16% from the second quarter of 2008. For the first half, net loss per common share was $0.31, again that’s an improvement of 16% from a loss of 37% last year. For the six months, net loss was $3.5 million, a 16% improvement from $4.1 million in the first half of 2008.

EBITDA came in at negative $670,000 for the second quarter, a 20% improvement from $1.3 million in the second quarter of 2008. For the first half, EBITDA was $1.3 million negative, a 36% improvement.

Turning to the balance sheet and cash flow, we closed the quarter with cash equivalents of $1.1 million as well as healthy inventory positions in both product lines. Cash used in operations improved 57% to a use of $1.3 million as compared with a use of $3 million during 2008. For the quarter, cash used in operations was $381,000, a 60% sequential improvement from the first quarter representing our best quarterly cash consumption level since going public. The improvement in cash flow is a direct result of the cost reduction activities and reduced inventory spending.

Our PokerPro table count increased 15% from 237 at the end of second quarter of 2008 to 272 at June 2009. The 272 tables break down as follows: There were 174 tables on lease in North America including 55 cruise ships and 119 land-based tables, and we had 98 tables which had been sold to Aristocrat for lease in their jurisdictions.

New installations of PokerPro during the quarter included Isle of Capri Rhythm City in Iowa, Mountain View Casino in Nevada, Oaklawn Gaming and Racing in Arkansas. Again we added tables at Harrah’s Cherokee Casino in North Carolina as well as Black Oak Casino in California.

In early July, we de-installed 12 tables at the Excalibur in Las Vegas. The field trial was successful, in that over 30,000 new player accounts were created. Players played on our product and were exposed to automated poker for the first time in Nevada including many regular repeat players, and we received product approval in March 2009, which to our knowledge is the only electronic poker table and the only account based gaming platform to approval from Nevada.

This approval allows us to expand throughout the state of Nevada. Perhaps just as important though, Nevada approval adds substantial credibility when we talk with potential customers in all jurisdictions.

In July, we renewed our line of credit with Silicon Valley Bank providing continued access to working capital financing. We also took several actions to further curtain our operating expenses. One example is the new compensation structure implemented for our Board of Directors with payments in stock instead of cash effective July 1st. We also amended our founder’s loan to extend the term from 2010 to 2012 and to change the interest rate from 13% cash interest to either 13% paid in stock or 9% if those obligations are paid in cash.

We also made changes to our Heads-Up Challenge business as previously discussed, and we currently have approximately 15 operators signed up and placing units on the recurring revenue business. These new operators are enthusiastic and so far the response has been quite positive.

In addition, the gaming environment has been quite dynamic lately, and we’re closely following several recent events and trends that can significantly impact our business. In late May, the Mexican Government Secretariat issued new interpretations of the gaming laws in Mexico expanding and clarifying permissible electronic games. As a licensed gaming company, of course, we must thoroughly evaluate the market, the legality of our product under these regulatory interpretations, and the operators with whom we will partner. We are actively engaged in that process right now and believe the changing landscape in Mexico represents a significant opportunity both short term and long term for PokerPro.

In addition, we’re seeing more pressure than even on states to consider expansion of gaming and the legalization of activities such as poker. In Ohio, for example, the governor recently signed an executive order allowing for the expansion of slots and electronic table games under the supervision of the lottery in response to mounting budget pressures.

We won’t know the impact on us until the politicians and lottery officials determine the details of how the lottery will regulate and tax the racinos and the manufacturers, but we’re certainly watching that with interest. During July, for example, we culminated the yearlong process to wing the contract and installed our first tables in non-traditional gaming locations. Gaming borrowers are operating in bars under the direction of the Atlantic Lottery Commission in Canada. As our first lottery install and as our first non-traditional venue, we’re excited about the prospect of expanding with Atlantic Lottery and what that potentially means for other non-traditional venues and jurisdictions looking ahead.

With our relentless focus on costs and potential for new market opportunities to leverage our electronic gaming platform and to expand our amusement model, I’m more committed and enthusiastic than ever and believe we have the right people, technology, regulatory approvals, and market opportunities for success.

That concludes our prepared remarks for today, and I’ll now take any questions you may have.

Question-and-Answer Session

Operator

(Operator Instructions). Our first question will come from the line of Warren Fulbright, a stockholder.

Warren Fulbright – Private Investor

It’s probably about 14 months ago that we had a field trial in Atlantic City. What happened? Never heard a word about it after that.

Mark Roberson

We had a field trial. Our field trial partner in Atlantic City was Trump Plaza. We proceeded with the field trial, and several things occurred in New Jersey specifically and with the economy in general. Trump Plaza ended up filing for Chapter 11 in January this year, and immediately prior to that, we ended up removing our tables from the floor at Trump Plaza. At this point, as we look at New Jersey, New Jersey is a difficult market, and we have not identified an operator to partner with to continue the field that we believe would be financially rewarding for us, so we’re keeping our eye on New Jersey, but we’re in no big hurry to go to New Jersey and spend lots of money on a field trial if the economics aren’t right. At this point, we’re cautiously looking at New Jersey, but we’re not anxious to jump back into that market right now.

Warren Fulbright – Private Investor

Regarding Las Vegas, when you went into the Excalibur, all the new articles that came out was that once the trial period was finalized, the MGM Corporation had a 6-month exclusive on their properties. I was wondering with a lot of MGM Properties which are old circus properties, their poker rooms are minimal business now. Wouldn’t those be ripe areas like the Monte Carlo, Luxor, or Circus Circus and so on?

Mark Roberson

You’d think so. I think they still have fairly healthy poker businesses, but obviously I think those are the types of locations in Las Vegas where I think that our product would do well. Certainly, no doors are closed to that in the future.

Operator

Your next question comes from the line of Mark Smith - Feltl & Company.

Mark Smith - Feltl & Company

First off, looking at Mexico, you gave some brief update there. Can you give us some more color on what you view as the opportunity in Mexico if it works out that all of the legal issues work?

Mark Roberson

As we mentioned, the situation with Mexico is evolving very rapidly at this point. The laws that have been established there have been on books for quite a while, and the interpretation recently came out in May that appears to allow for electronic table games as well as potentially class III slots to enter the Mexican market. Basically, there are several hundred casinos in Mexico, and there are 4 operators in Mexico who basically dominate the market, and when I saw dominate the market, that may be too strong of a term, but basically, 4 operators in Mexico control around 60-70% of that market, if not more, and in the remaining market, it’s fragmented with a lot of smaller operator who also are potentially very quality operators, but that’s sort of how I’d look at segmenting the market. When you look at those 4 large operators, those 4 guys operate around 170 casinos at this point, with additional venues planned and in the works and permitted. I don’t necessarily think that all of those are potential good opportunities for a PokerPro room or installing PokerPro tables—some of them will and some of them won’t, but if you look at the number of casinos by those top four, that will sort of give you an idea of the magnitude of what Mexico could be for us.

Mark Smith - Feltl & Company

On Mexico, would you look at doing it yourself as far as putting those tables in, the same way that you have in Canada, or would you use a distributor, and what would be your reasoning one way or the other?

Mark Roberson

Right now, we’re in active discussions with several potential operators in Mexico, and we would do it on a direct basis. We would do it ourselves. As we announced, we hired Raul Bouchot into the company. One coincidence that is very fortunate for us is that Raul happens to have been born in Mexico City and speaks fluent Spanish and has some experience in that market. Most of the experience is actually not in Mexico, but that just happens to be a nice coincidence that makes him a great fit for leading our expansion into Mexico as well as other international and domestic opportunities, so at this point, we’re in discussions to distribute in Mexico on a direct basis and would continue to proceed that way.

Mark Smith - Feltl & Company

Off the top of my head, I believe that in your contract with Aristocrat, they were set up to buy 100 tables this year. Can you just talk a little bit about that as to whether that’s just kind of a moot point or whether there is any substance to that, and secondly on Aristocrat, when you say you don’t expect anything near term, is that like the next six months? Would you consider that near term or through the end of the calendar year?

Mark Roberson

I’d say and I may easily be proven wrong, but my conservative nature says that we’re not going to count on any product sales to Aristocrat for at least the balance of this year. I think they’ve got some inventory that they need to take care of themselves, and some of the markets that were really hot last year for them in the Eastern European markets certainly cooled off with the economic recession. So when I say near term, I do mean the balance of the year. With regard to our contract with Aristocrat, they’ve been a great partner and continue to be a great partner. They did have an obligation to place 100 tables, and we extended our contract with them at the end of last year. Now, there is a 1-year window where either party could opt out at the end of 2009 if that were deemed appropriate by either Aristocrat or us, but to this point, they’ve been a very good partner.

Mark Smith - Feltl & Company

Can you talk about the license revenue piece from Aristocrat? Put it in another way, of the 98 Aristocrat tables, how many of those are actively in the field being played?

Mark Roberson

Of the 98, less than half of those are actively placed in generating licensing revenue for us. When I say that, I believe that they have some inventory on reserve. That’s what I mean.

Mark Smith - Feltl & Company

We’ve definitely seen a slowdown in Heads-Up Challenge. The slowest quarter, really, since launching it. Can you talk about the plans for turning this thing around and how this model will work?

Mark Roberson

Part of the change is obviously in reaction what we see in the economy. Part of it was when Heads-Up Challenge was initially conceived and launched, the plan for Heads-Up Challenge was always to use it as a tool to generate recurring revenues of some sort, and when we entered the coin op market and learned more about the market, we really had a tough time generating any recurring revenue. It was really sort of pushing uphill to have operators pay for the product and then also pay recurring licensing fees. We sort of view this as an opportunity to get back to what we wanted to do originally, which was have a product that we put out more similar to the economics of PokerPro where we can generate a long-term annuity recurring revenue stream, and what that means is we basically are moving away from the traditional distributions channels in the US and we’re in the process of signing up operators, and we currently have over 15 operators in place right now taking units, and those operators will basically take units directly from us, not through a distributors, and they’ll place them in bars or restaurants and they will split the cash box the bar or restaurant. The economics for us are those operators will pay us an amount upfront and an amount every month in perpetuity, and the amount that they pay us, and it could vary a little bit at the edges, but basically it’s $1500 up front, and $150 a month, or some operators may pay $500 down and $200 a month. That’s that basic economics of what you’ll see going forward for Heads-Up Challenge as you try to build your model.

Mark Smith - Feltl & Company

If demand picks back up Heads-Up Challenge under this new model, do you have the capital to really build these tables and put them out there, or will you have to seek some additional financing?

Mark Roberson

Specifically to Heads-Up Challenge, we’ve got several 100 units in inventory that we could certainly place before needing to procure any more units from our vendor, ITP, and if we have that problem, it’ll be a really good problem to have, if Heads-Up Challenge rises to need that much capital.

Mark Smith - Feltl & Company

You have been pretty successful in cutting some of your expense on SG&A and R&D, but do we reach a point where you’re going to start cutting bone as you continue to make cuts?

Mark Roberson

I thought that ever since I first got here, and we’ve continued to cut without really getting to the bone. I think we’re close at this point. I think where we are right now is kind of where we need to be, and I think we’re lean and I think a company like ours ought to be lean. We’re lean enough, I think, to be in the right place. We’re not so lean that people can’t get the job done, which is where we want to be, and I think we can probably without adding to cost and adding people and adding expenses, we can continue to grow the business from this point forward and leverage the current operating structure that we have.

Operator

Your next question comes from the line of Samuel Cribbs – Private Investor.

Samuel Cribbs – Private Investor

Obviously with the approval of you guys in Nevada as far as the regulatory committee goes, it would seem that maybe the focus is shifting to Nevada, but also by judging by the taking outside maybe what happened with Trump, it looks like the news reports I saw and things where they were kind of saying that they were having a problem with traditional poker players really—I know I’ve read some stuff that says, well, I go there so I can have the full experience of playing, handling the cards and all that kind of stuff. So my main concern for the company is that it seems like one of the best places is more of the middle American casinos, and I wonder what sort of emphasis you’re going to put on the smaller casino as opposed to maybe the big casinos in Vegas and maybe leaving those so you really set sort of a grounding in maybe the smaller types of casinos in middle America?

Mark Roberson

If you look at our most recent installs over the last quarter or so, I would say they probably been some of our most successful installation at Harrah's Cherokee in North Carolina, Oak Lawn in Arkansas, Indiana Live in Indianapolis, Hoosier Park also in Indianapolis and a handful of others that are like what you described and a little bit more Middle America, a little less competition of just tons of poker rooms right beside each other all competing actively with each other, trying to drag the same players in, so I think you’re right to some degree. Those types of venues certainly provide an environment where any poker room and our product is certainly more successful, and we’re certainly not giving up on Las Vegas or giving up on Nevada. We’re still actively involved in that jurisdiction, and we’ll be back in there with the right operator at the right time, but with the things that we see happening in other jurisdictions, we’ve got to pick where our focus is, and we want to make sure our focus is where we can make the most money.

Samuel Cribbs – Private Investor

Is it your strategy to go to the singular casinos or have you tried a more broad base of maybe going to a company like Harrah’s and maybe discuss with them, specific casinos that might benefit from it as opposed to the big casinos in Vegas or how exactly when you guys, maybe this is something that’s changed with bringing Raul on board, but how exactly do you attempt to sell the product to the casinos? Is it on a casino by casino basis or is it sort of you would go to Harrah’s and tell them a little bit about your strategy?

Mark Roberson

It’s a little bit of both. To be honest with you we talk to certainly the large cooperates, and we have a contract with Harrah’s actually from way back. A lot of the decisions are made property by property, so a lot of our focus is really building relationships on a property by property basis at the local level.

Samuel Cribbs – Private Investor

As far as since obviously you brought Raul in, can you just give a little idea of and you mentioned his connection to Mexico and his being fluent but maybe what else you believe that his addition to the company will bring?

Mark Roberson

Well, I believe anytime you bring someone in who has 20 years of experience in the industry, you get a lot. The Mexico connection is really a fortunate coincidence. We would have hired Raul without that for sure, but he does bring a ton of experience with ShuffleMaster, IGT, and Huxley to the table that we simply haven’t had in our organization before. When you bring in that type of industry expertise or that background, a lot of things happen, and a lot of them are things that you don’t really plan on, they are just a result of someone with a different perspective and different experience coming in and looking at what you’re doing and can make good suggestions as well, but also Raul has a lot relationships throughout the industry in the US as well as in other international jurisdictions, so I think having someone who has those deep relationships will certainly benefit us as well.

Operator

Your next question comes from the line of Charlie Pine – Feltl & Company.

Charlie Pine – Feltl & Company

Just have a couple of questions regarding what you were discussing on the Mexico situation. You’re describing it as being a situation that’s evolving rather rapidly. Do you anticipate that you’ll be having any installs in the Mexican market during Q3, and if not Q3, do you expect it will be Q4, or if it doesn’t happen, when do you really believe that you’ll first get your installs in that market?

Mark Roberson

That’s a very good question and it’s always a dangerous one to answer because again it is evolving, and we got to make sure that we adequately do our due diligence in a number of areas, and that always takes a little bit longer than any of us would like. Absent any due diligence hiccups, I would certainly anticipate installing in the next two months to three months with an operator in Mexico. It could drag out a little longer than that, and I would hesitate to say for sure an install is going to be in Q3, but at this point that is certainly my hope. This is a short term. When I say it’s an opportunity short term and long term, there is a pretty short fuse on this thing, and it is moving rapidly, and I expect this again borrowing some pickup that we are not foreseeing, and we obviously still have to work through some contractual negotiations with customers which always take a little bit of time and effort. I think it’s something that could affect us, if not in Q3, certainly in Q4.

Charlie Pine – Feltl & Company

Do you have any way to quantify even if you if just get things nailed down with this particular operator about what the size of the table opportunity could be or within certain parameters? Have there been any new numbers that have been talked about as far as what their appetite might be?

Mark Roberson

Right now, there is a huge appetite. This market has changed rapidly, and all the operators down there are reacting to this change all at the same time, so it’s creating a rush for the entrance amongst all the operators who want to get poker into their operation, so it’s certainly moving rapidly, and there’s a lot of enthusiasm from the operators and certainly we’re enthusiastic about the opportunity. We certainly think over the next couple of years, there’s an opportunity to put in 100 to 200 tables, but that’s very preliminary subjective number at this point, but if you look at Mexico and look at the number of casinos and look at the size of Mexico, look at the population demographics, look at the number of people in that country, it becomes pretty easy to envision a significant number of tables.

Charlie Pine – Feltl & Company

Let me ask you one last thing regarding the new Heads-Up Challenge models. Your new 15 Heads-Up Challenge direct salespeople, are they actually placing units in the field as we speak right now?

Mark Roberson

Yes they are. They are not exactly our direct salespeople. They are not employees of the company, just to clarify that. Yes, they are basically independent operators who are purchasing products from us on a recurring basis, and they have placed product in the field and are continuing to.

Charlie Pine – Feltl & Company

When did they actually go live as a group? When did the first of these start placing tables?

Mark Roberson

We had a handful start in late Q2, getting started. We did not recognize any revenue related to the tables that were placed in Q2 simply because it was premature given contract status and just where we were with the first handful of operators, and those first handful really to some degree were guinea pigs for shaping how we were going to roll the program out to the other operators. So we didn’t recognize any revenue financially in Q2, but we actually started placing tables with a handful of these operators earlier than June.

Charlie Pine – Feltl & Company

How would you characterize what their efforts have been like so far say for the month of July?

Mark Roberson

At this point, we’re signing these guys up, and they’ve been pretty successful getting products placed. They have some machines obviously in locations that do better than others, and some of them have to move tables around, and there is normal learning curve there, but so far, the response has been really good, and I’ve seen some momentum pick up, not so much in July, but particularly in August.

Charlie Pine – Feltl & Company

Are you planning on adding more of these operators over the next several months, and

what sort of jurisdictions are they in, and how is it going up against the places where you already have distributors right now?

Mark Roberson

We have operators currently in several jurisdictions. I’ll name a few of them: Florida, California, Las Vegas, Illinois, Indiana, and several other jurisdictions, North Carolina as well. We’ve had one jurisdiction where one of our operators ran into some headwinds going up against an established operator, and they actually ended up some reworking together, but for the most part, our new operators are having a lot of success, walking into bars and placing tables and are doing very well at it.

Charlie Pine – Feltl & Company

Is your intention then to roll this model out on a nationwide basis?

Mark Roberson

Yes. That’s exactly what we’re doing. We’re not distributing through the traditional channels anymore, so that the new operators that we’ve signed up basically have an exclusive right to their territory, and nobody else can distribute in that territory except them, and we’re not in every jurisdiction yet. There are still some major jurisdictions we’re not in, and that’s just because we’re getting this thing started, and like I said, we’ve got about 15 guys lined up now, and we’re bringing in more every week into training.

Charlie Pine – Feltl & Company

When this is built out, how many operators do you think you’ll optimally have?

Mark Roberson

I don’t know that I have a specific cap in mid on number of operators yet. I think we’re just getting started, sort of scratching the surface at 15. I’d like to see certainly a lot more than that.

Operator

Your next question comes from the line of Robert O’Connell – Private Investor

Robert O’Connell – Private Investor

I’d like you to expand upon the reasons why the PokerPro installation in Excalibur was removed, and on a related issue, I was wondering what you view as the near and long-term future for PokerPro in the Las Vegas market?

Mark Roberson

Specifically with Excalibur, as we said, we went in there as a field trial site. We were in there 7 months, actually longer than that, from August until July. The field trial itself took seven months, which was a lot longer than any of us anticipated, and we probably should have anticipated taking that long and being that grueling because it was the first electronic poker system to ever through Nevada, completely new platform, new game, and also the first account based platform going through approval there. The field trial was a long and grueling process, and we stepped on our foot a little bit a couple of times and made the process harder than it needed to be, but that’s just part of going through a process like that. Needless to say, we made it through the trial, and when it came time for us to talk about what we’re going to do going forward post trial to make a sufficient return on the investment we had products sitting at Excalibur, we simply weren’t able to come to terms.

Robert O’Connell – Private Investor

Do you have other ideas or things in mind to break more permanently into the Las Vegas market? What are your plans for that particular market because it’s obviously a very large market for poker?

Mark Roberson

It’s a large market. It’s also a very competitive market, and as a player in Vegas, you have a lot of choices on where to play, which makes it difficult for all the poker rooms to try and compete against each other, unless you’re obviously one of the bigger prestigious destination poker rooms. As we look at Las Vegas, it’s certainly an important part of our strategy going forward, particularly from a perception and a relationship standpoint to have a presence in Las Vegas on the strip, and we do have some strategies on different things that we’re going to do secure a place back in Vegas over time. Again in the near term, it’s a focus for us, but it’s not the absolute the top focus to force our way back on the strip at all cost. When we do it, we want to make sure we do it in the right way that will produce a good economic return for us and for operator.

Operator

There are no further questions in queue at this time.

Mark Roberson

I appreciate everyone’s time and questions.

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