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Executives

Gordon Yuen – President and Chief Executive Officer

Andy Tsui – Vice President of Finance

Joe Piscano – Executive Vice President

Tony Lam – Senior Vice President Head of Operations

Traci Mangini – Senior Vice Present of Corporate Finance

Analysts

Michael Friedman – Noble Financial

Todd Eilers – Roth Capital

Wahid Chammas – Janus

Bob Poole – Bricoleur Capital

Elixir Gaming Technologies, Inc. (EGT) Q2 2008 Earnings Call August 13, 2008 8:30 AM ET

Operator

Welcome to the Elixir Gaming Technologies second quarter results conference call. (Operator Instructions) Now, I would now like to turn the conference over to Traci Mangini.

Traci Mangini

My name is Traci Mangini, and I’m the Senior Vice President of Corporate Finance for Elixir Gaming Technologies. With me today on the call are Gordon Yuen, our Chief Executive Officer, Joe Piscano, our Executive Vice President, Tony Lam, our new Senior Vice President and Head of Operations, and Andy Tsui, our new Vice President of Finance.

Before we start, let me review the Safe Harbor statement. Some of the statements that the company will make on this conference call, such as statements of the company’s plans and expectations are forward looking. While forward-looking statements reflect the company’s good faith belief, they are not guarantees of future performance and involve risks and uncertainties. The company’s actual results could differ materially from those discuss on this phone call. Some of these risks and uncertainties are described in today’s news announcement, as well in the company’s filings with the SEC including the company’s reports on Form 8-K, 10-K, and 10-Q. Elixir Gaming assumes no obligation to publicly update or revise any forward-looking statements.

Now on today’s call, we will review developments that have occurred since we reported our first quarter results on May 13, 2008. As disclosed in the press release, we have also posted an updated investor presentation that highlights key elements of our prepared remarks on our website at www.elixirgaming.com.

The agenda for today’s call will be as follows. First Gordon will provide an overview of the business to date as well as recent management changes. Then, Andy will provide a pertinent of the Q2 financial statements and updates on outstanding legacy business and legal issues, and lastly Tony will discuss the status of operations including the strategies employed to build win per day and how they have directly translated to marked improvements in July. This team along with Joe Piscano will then answer questions from the analysts and institutional investors.

Now, before I turn the call over to Gordon, I do believe that there is note that in our very short operating history, we have experienced successes and we’ve certainly experienced challenges. I remind investors that our operations in the Philippines are less than 1 year old, and operations in Cambodia since contract renegotiations are still in their infancy. Still, we’ve quickly established a very strong and meaningful presence in markets that we believe will be substantial long-term gaming markets. We’ve made significant progress in contracting for and placing slot machines as well as establishing the proper corporate infrastructure for future growth. We believe we now have the processes, strategies, and resources in place to build on our already materially improving net win while supporting measured installation growth.

With that, let me turn the call over to Gordon Yuen.

Gordon Yuen

Welcome everyone to EGT’s Q2 2008 conference call. In the last 11 months, we have been focusing on our unique business plan. EGT has achieved measurable success in many regards. As discussed on our last quarterly call, we have also faced a number of challenges, including the issues with our initial business arrangement in Cambodia. While we are disappointed with our early earnings results, we believe we have identified our challenges and are implementing solutions that make us a very strong company going forward. In fact, while it is early, I am pleased that these initiatives have already shown very strong improvement so far in our third quarter. Tony will discuss all this later in the call in detail.

We are learning, we are improving, and we are remaining firmly committed to capitalizing on the tremendous growth opportunities ahead of us. We believe that Elixir Gaming has achieved in a very short and early stage of our development what will lead the creation of long-term shareholder value.

I would also like to take this opportunity to update you on our current changes on our management team. We have appointed Tony Lam as our Senior VP Head of Operations. Tony has extensive operation experience in all his previous senior positions at various companies in Asia Pacific and North America, including CDC Corporation, a NASDAQ-listed company which focuses in technology. Tony is a very strong addition to the team and has already made significant progress in terms of shortening execution timelines and improving operational processes.

As announced this morning in our press release, David Reberger, our CFO, is leaving the company for personal reasons. David will remain on as a consultant for the company for the rest of the year. We are thankful to David for his contribution and wish him well in his future career. A global search to replace David is underway.

In the interim, I am very confident that our finance team will be able to assume the CFO responsibilities until a suitable replacement can be found. This team includes our Senior VP of Corporate Finance, Traci Mangini, and the team’s most recent addition, our VP of Finance, Andy Tsui. Andy joins our company from Mineral Technologies, Inc., and has 10 years of public company financial experience in the US. He is a certified public accountant and has extensive knowledge in financial reporting and SOX compliance.

With that, let me turn the call to Andy who will update you on Q2 financial results.

Andy Tsui

Total revenue for the quarter was $3.7 million, of which $769,000 was from slot participation business. Slot participation revenue was up 48% sequentially. EBITDA for the quarter was a loss of $7.1 million. We ended the quarter with 1018 machines in operation in 10 venues and an average net win of $29. The decline in machines in operation and venues from the time of our last report is the result of the temporary suspension of revenue collection from several venues in Cambodia and Vietnam during contract renegotiations.

SG&A expense for the quarter increased by $1.6 million to $6.7 million compared to Q1, of which approximately $2.6 million was due to non-cash stock-based compensation expenses. We anticipate cash SG&A expenses per quarter should trend in the $4.2 to $4.5 million range throughout the remainder of this year as we temporarily incurred higher audit and consulting fees in preparation for compliance with Sarbanes-Oxley. We anticipate completion of initial Sarbanes-Oxley compliance at the end of this year, while [inaudible] this critical early stage of the business. We believe we can implement cost reductions and reduce cash SG&A to approximately $3.8 to $4 million per quarter.

Turning to our balance sheet, we ended the quarter with $20.3 million in cash and $13.8 million in notes payable to our related party, Elixir International. The principal use of capital in the quarter was for the payment of previously ordered gaming machines. We believe that the current level of inventory in excess of 600 machines and access to additional 600-700 machines through leasing arrangement with our partner, Elixir International, will curtail any material new purchase of gaming equipment for the next to three to four quarters.

Now, I would like to provide a brief update regarding the company’s legacy business as well as the Shuffle Master litigations. The legacy business comprises of table game products which include automated shuffler, deck-checking devices, chip washers and Dolphin, which include RFID chips and non-gaming products. As we have previously disclosed, we are actively seeking strategic alternative for the table game business.

As for Dolphin, we have decided to retain Dolphin for the foreseeable future. The division is showing solid improvement, has positive cash flow, and has some material near-term growth prospects.

With respect to the Shuffle Master litigation, following the favorable ruling on our motion for summary judgment in February, the company filed a motion to recover its attorney fees for the case and also delivered a demand to Shuffle Master for $3 million in damages for the wrongful injunction we obtained in 2004. Shuffle Master filed an appeal on the District Court rulings on the motion for summary. The appeal is pending.

With that, I’ll turn the call over to Tony who will wrap up with a discussion on the status of our operations.

Tony Lam

. As some of you know, I jointed Elixir Gaming this past January and assumed the role of SVP of Operation on July 1. I am very excited to be part of the EGT team and see strong opportunities to continue to improve our execution and achieve long-term growth.

Currently, we have a total of 1262 units in operation in 14 venues in two markets. In the Philippines, there are 663 units in operation in 5 venues, and in Cambodia, there are 599 units in operation in 9 venues. As discussed on the Q1 conference call, over the last several months, we undertook a broad range of optimization initiatives, each aimed at generating improvement in net win per machine. These initiatives were focused on direct renegotiation of operating agreements on venues in Cambodia in order to reflect the added services we now provide, principally the treasury function, the implementation of slot management systems, and reconfiguration of slot floors. In a moment, I will provide an update on each of these initiatives; however, I would first like to share with you the strong results we have experienced so far in Q3.

Overall average net win for July was $51. This is a 55% improvement from June and 76% improvement from the average in Q2, and we expect the positive trend and momentum to continue. Here’s a breakdown by markets. In the Philippines, average net win was $36 for the second quarter, $38 for the month of June and $47 for the month of July. One venue continues to be a particularly solid strong performer, achieving a net win $73 for the month of July. We continue to see steady month-on-month improvements at another venue, and renovations and floor reconfigurations at a third venue are now complete, which should drive continued improvement there as well.

In Cambodia, average net win per machine was $23 for the second quarter, $29 for the month of June, and $56 for the month of July. This performance is particularly impressive considering our operations there are in their infancy and because most Cambodian business properties were closed July 26 through July 29 for national election. Performance was driven by several venues and is a direct result of the treasury function moving the operator to Elixir Gaming and our increased marketing efforts. Here are some important data points from two of our top producing venues.

Venue 1 has achieved average net win for the month of July of $195. This was up from $69 in June. This venue has benefited significantly from strong VIP play through marketing and multi-player roulette machines. Venue 2 has demonstrated remarkable results as well. It has improved to $99 in average net win for July. This is up from $47 in June. This venue has strongly benefited from promotional activities as well as multi-player machines.

I would now like to provide an update on each of the optimization initiatives that helped drive this strong improvement in average net win. Contract renegotiations: During the quarter, we faced initial challenges in Cambodia with our operation arrangements in Cambodia. As a result and as previously discussed, we decided to renegotiate our contracts directly with venue owners. While this cost us very valuable time in terms of ramping up revenues from this market, we were able to in a short period of time turn that challenge into an opportunity. I am pleased to report that as of the end of July, we have renegotiated all the contracts in Cambodia and in the process materially increased our revenue sharing in this market. Importantly, these contracts include treasury and audit rights which improve Elixir Gaming’s control of accounts receivables. Venue owners will remain responsible for all capital requirements regarding the maintenance and improvements to the facility, and we will go leverage with venue operators on marketing.

In July, we did elect to exit one contract for an underperforming venue that did not adhere to our treasury and audit terms. Importantly, we continued to re-evaluate underperforming venues. We are working closely with these venues to employ the strategies that are driving success in our high-performing venues; however, if after full deployment of our optimization strategies, if these venues still cannot demonstrate month-on-month value improvement, we will redeploy the machine to a venue where more appropriate return can be achieved. Notably, the cost to Elixir Gaming to redeploy machines is minimal, at approximately $100,000.

Treasury: We currently have 4 venues at which we are providing the treasury function. Importantly, for the month of July, approximately 86% of our revenue from this market is derived from these 4 venues. We will be having the treasury function to 3 more venues by the end of this quarter. In our remaining contracted venues in this market, the contract renegotiations have left Elixir Gaming having all the rights. At the moment, we have 4 dedicated treasury supervisory professionals on staff and intend to add 4 more in the near future.

The progressive gaming slot management system: We currently have the progressive slot system in place at 5 venues in Cambodia and are working to address the balance of the operating venues by the end of the third quarter. We missed our June 30th deadline to install all the venues because we were taking time to renegotiate the contracts. We are now on track and moving forward at a rapid pace. We expect that all venues will have a PGI system before the end of the third quarter. Again, the implementation of this system provides for increased data points on which machines are working best and provides us with a high level of accountability at each location.

Floor reconfigurations: By monitoring the play levels of installed machines, we make adjustments to floor size and game mix as required. We have spent time on the recent calls reviewing the game mix that players in certain markets find more favorable, and I want to report that we see clear evidence in improvements in win per machine when we effect such changes. While this is an ongoing process, major floor reconfigurations will be complete by month end.

Marketing: In Philippines, we have been successful in increasing traffic and improving net win numbers by providing live entertainments and concerts on weekends, with notable increase in revenue during the promotion days. In Cambodia, while food and beverage ordering have been helpful in increasing traffic and total betting, marketing incentives for VIPs have so far been the most effective. The increase in total net revenue and net wins are very encouraging, particularly since coming so quickly after the implementation of the initiatives. Our business in the Philippines continues to post steady gains due to efforts we have undertaken as well as continued maturation at these properties, and our business in Cambodia is clearly improving as a result of our more hands-on approach to this market. We believe our recent performance in several of these venues reaffirms the attractive market potential of Cambodia.

Turning to our contract pipeline and rollout plan, we continue to look to add new venues to our contract pipeline, and our primary focus remains not on quantity, but on quality. The new agreements are for what we believe are very high-value, high-return locations. This approach will ensure that we develop a strong base of attractive and sustainable venues from which to continue to grow our business.

As of yesterday, we opened two new venues in the Philippines adding a total of 200 machines to our installed base. The first one is Cotabato, which is in Cotabato City, one hour by air south of Manila, and the second one is San Petro, which is 40 km south of Manila. Notably, San Petro was a previously successful gaming venue that was under a contract with a smaller competitor. Given this, we anticipate a small rapid ramp-up in net win from this venue, and we believe the contract acquisition demonstrates our competitive advantage in this market.

We currently expect to end the year with 16 to 18 venues in operation. As Andy has discussed, the machines for these openings are already in inventory. We are actively reviewing several other exciting opportunities, and we will update the market at an appropriate time.

So in summary, we are encouraged by the recent improvements in venue and net win per day as a result of our optimization initiatives. Based on our projections for continued momentum and net win improvements focused on immediate cost containment and planned future expense reductions in part facilitated by anticipated SOX compliance, we project the company will turn EBITDA positive in the second half of 2009. While we are mindful of the work ahead, we believe these early results provide tangible evidence that the business plan we effected last year is moving steadily forward.

I will now turn the call back to Traci.

Traci Mangini

We are ready to open the line for questions.

Question-and-Answer Session

Operator

(Operator instructions) Our first question comes from Michael Friedman with Noble Financial.

Michael Friedman – Noble Financial

I was hoping you might be able to give us a little bit more meat around the guidance of turning EBITDA positive in the second half of 2009. How many machines should we expect? What kind of win per machine? Give us a little bit of an idea on SG&A. What about the depreciation, etc.? Can you walk us through a little bit of your thinking to get to that point in the second half of 2009?

Tony Lam

Well, currently our target is to hit 2500 machines by the end of 2009. We expect that conservatively speaking. The net win would be in the $70 to $80 range. In terms of the total revenue, we believe that to cover the run rate, we have to generate over $4 million per quarter, and in terms of depreciation, would you like to comment on that?

Andy Tsui

This is Andy. I think that depreciation would be around close to $4 to $4.5 million after we have all the machines in place.

Michael Friedman – Noble Financial

And that’s on an annual basis, the $4.5 million?

Andy Tsui

This is for the 6-month period, so it’s about $3 million per quarter, close to $3 million per quarter.

Michael Friedman – Noble Financial

Okay, and you talked about renegotiation in Cambodia as far as the percentage. Can you give us an idea as to what kind of percentage you’re getting there now, versus what you got before?

Tony Lam

In two of them where we now have full treasury, the percentage increased from 25% to 30%, and in a couple of others, where we have treasury rights as well, the percentage point increased from 25% to 45%.

Michael Friedman – Noble Financial

And you expect that you’re going to have treasury function in most of them, so that will get you up to mostly 45%, is that right?

Tony Lam

Well, with the treasury function, we will definitely have those in terms of all the high-performing venues which probably have larger amount of machines. We have a couple of smaller venues where we have full audit rights because it is not important for us to focus all our efforts there. We are focusing our efforts where the revenue is coming from.

Michael Friedman – Noble Financial

You talked about 16 to 18 venues in operation by the end of ’08. Can you give us an idea of what the average number of machines per venue would be?

Tony Lam

Well, we’re looking to a total of around anywhere from 1800 to 2000 machines by the end of the year.

Michael Friedman – Noble Financial

For 2009, you’re looking to add about 500 to 700 machines. Is that right? Would that be accurate?

Tony Lam

Yes.

Michael Friedman – Noble Financial

At one point, I think the guidance was much stronger as far as machine rollout. Is that a function of not being able to find high return properties, or can you give us a sense of why that’s changed?

Joe Piscano

Michael, it’s Joe here. It’s not so much finding the properties. If we look at the capital cost of the venues, what we’re trying to do is manage our capital and what we’re looking at is getting the venues, high-performing venues, to give us the best return for our capital in the next 12 months. At that point, we can revisit our rollout plan beyond 2009.

Michael Friedman – Noble Financial

Okay. A general conceptual question. Do you guys still believe that reaching $125 win per machine per day after 12 months in operation is achievable?

Gordon Yuen

I think with regard to that number, it’s definitely not only achievable, but I think in some of our venues, we have surpassed that, but not on all the venues as an average.

Michael Friedman – Noble Financial

Can you give us an update as to what you think that average may be for all the venues?

Gordon Yuen

Well, as I said earlier, we were anticipating to have 2500 machines by the end of next year in operation conservatively, and we will be performing in the $70 to $80 range in terms of average net win on the machines. I think one of the things that we need to be very careful on is that when we look at these numbers, a lot of discussion tends to be focused on the net win item. For me, I am more concerned with the total revenue number. What we’re trying to do is we’re trying to drive sustainable total revenue. Any time you add new venues to the portfolio, your net win numbers will come down somewhat, but the important thing is we want the total revenues to continue to go up because at the end of the day, that’s money in your pocket, and I believe that that’s the most important thing we’re trying to do. It’s to drive the total net revenue in our pocket. I think that’s what we should focus on, and not just on the net win.

Michael Friedman – Noble Financial

One other conceptual question here. You talked about still trying to get rid of and monetizing the table game business which is a gaming operation; yet, you’re going to keep the non-gaming Dolphin, which does not seem to be part of your core competency. Can you give us any feedback? It seems as though the operation is improving, and that’s good, but I’m still confused as to why you’d keep something that doesn’t seem to be part of your core competency and sell something that’s part of the gaming operation.

Gordon Yuen

I think one of the things that we should look at is that, and I don’t know if we can disclose this because it’s a futuristic statement, we are anticipating that we will be getting a very good order on the chip side for that particular business, number one. Number two is that we are having a steady stream of recurring revenue, and at this moment in time, we don’t feel that there is a hurry to dispose it unless we can sell for a very good price, which we don’t believe that is the case right now, so I think it goes along very well with the business, particularly in anticipation of a particularly large order on the chip side coming up.

Operator

The next question comes from the line of Todd Eilers from Roth Capital.

Todd Eilers – Roth Capital

Most of my questions are answered. I just had a couple more though. You mentioned renegotiating the contracts in Cambodia and you gave an amount of 45% for the new ones. Can you maybe give the blended average rev-share for you guys in Q2 and then maybe what your expectations are for fiscal ’08 and fiscal ’09 guidance?

Joe Piscano

Joe here, Todd. If you look at the blended average across all operations, a safe number to go would be 30%.

Todd Eilers – Roth Capital

With respect to CapEx, obviously you guys look like you pulled units and you’ve got some inventory to use for some of the properties that come on line. I don’t know if you gave an actual number, but what are you CapEx plans for the second half of ’08 in terms of total dollar amount and even for ’09 if you’re willing to give that as well?

Tony Lam

On the CapEx plan as far as each year machines is concerned, I think with the exception of maybe a few critical multiplayer machines that seem to generate very good revenue in Cambodia, we don’t plan on spending too much of that at all. In terms of ’09, definitely we’ve got enough machines to go the first and even maybe the second quarter, so I think that we’ll probably not be looking at spending any money on CapEx. Of course, if all of a sudden, we got a very good deal in the market with very high potential growth, then we would have to think seriously about it, and until we come across such a situation, we don’t plan on spending money this year on CapEx.

Todd Eilers – Roth Capital

Just one final question, on SG&A you guys gave a run rate of $4.2 to $4.5 million I think per quarter in cash SG&A. Can you maybe give us what your expectations are for non-cash portion of SG&A on a quarterly basis as well?

Andy Tsui

Right now, the most significant part of the non-cash expense is the stock option expenses. For the second quarter, we incurred approximately $2 million of non-cash stock option expenses. I think that number will probably stay pretty constant at this point until we have a new arrangement with the stock option issues or grant.

Operator

The next question comes from the line of Wahid Chammas with Janus.

Wahid Chammas – Janus

Thanks by the way for the much improved structure of the call. Truly appreciate it. I wanted to ask you if there is anything that changed in the last six months from a macro point of view. When you look at your markets in Cambodia and the Philippines, both the gaming operations that you own and those that you don’t, there’s been hyperinflation, there’s been, I would call it, a deterioration of the macro environment in those two countries, are you feeling anything, or gaming sufficiently underpenetrated that you won’t feel it? If you could just help me understand how your outlook has changed on those markets.

Joe Piscano

We’re very bullish on both markets, Wahid. When we look at Philippines, we believe there’s going to be a lot of growth in the Philippines. The new Paco City there and also up in Clark, we’ve got obviously quite a bit of growth up there. I believe in both markets, we’re going to see a lot of the Macao chocolate players move into those markets if borders tighten up in Macao. They are the obvious choice for those players to move to. There’s what they call proxy betting in the Philippines, selling into the Chinese market that there now is outperforming Paco. Last week obviously in Cambodia, I could see a lot of growth servicing the Ho Chi Minh City population. The Naga resort in Phnom Penh is growing. They’re now getting very strong VIP play there and reconfiguring their main floor. If we look at our revenues over the past three months, we can see growth in our numbers. Other operators such as Paco are also experiencing growth. Small companies also in Cambodia are experiencing growth, so overall, we’re very bullish on both markets.

Wahid Chammas – Janus

I think maybe, not to keep probing, but the difficulty you’ve had in the last year has been internal operations, which hopefully you guys are getting under control. As I look at those markets, and I look at the stock markets, and I look at what’s happening, is there anything that you guys are monitoring, or are you not seeing any challenges ahead?

Joe Piscano

In the Cambodian market, we look at that market, and it’s a matter of selecting the property, the right partner there, and we continue to do that. Initially when we started in this business, we went in and we signed up as many properties as we could. We’re a lot more diligent now. We risk profile the properties. We carry out quite a lot of due diligence before we go into any property. The areas of North Vietnam, we see potential there. Government-wise, we see the Cambodian gaming market from a regulator side becoming more regulated. Philippines, they’ve been regulated for over 25 years now. Probably there is less involvement in operations from the government and going more towards privatization. When the larger properties come in the Philippines, a lot of our properties are focused at locals, and we don’t see much of a deterioration there.

Operator

The next question comes from Bob Poole with Bricoleur Capital.

Bob Poole – Bricoleur Capital

The large chip order that was mentioned, is that a regular chip or an RFID chip order?

Joe Piscano

That will be an RFID chip, Bob.

Bob Poole – Bricoleur Capital

Joe, can you then talk about the state of the RFID chip market? That was once a market that seemed to have great promise. We haven’t heard much about it for some time. Is there still a market there? I am sure you don’t want to name names, but can you talk a little bit about why somebody is making an RFID chip order now and just sort of stayed at that business?

Joe Piscano

Basically, RFID chips are great chips. They follow construction of new properties. There will be a new property in Macao next year, and they need chips. We’re actually looking at two things with that chip business. Besides the large Macao properties, we’re noticing a lot of smaller properties or medium-sized properties underway in Laos, all of which require chips. Now, they may not, I know they won’t be going RFID, but there is a growing market for a world price chip. So there are two markets that we are looking at with RFID, and the RFID follows the new larger properties coming on.

Bob Poole – Bricoleur Capital

Right. Would it be correct, Joe, that none of your properties…Your properties are totally chipless, is that correct?

Joe Piscano

Our properties at the moment are chipless, but a number of the new properties which will be going up in Laos, on the Laos-Vietnam border, and in Northern Vietnam, they will all have table games as well, so there is a potential there.

Bob Poole – Bricoleur Capital

Okay. First of all, congratulations on the improvement in win per day. That’s market improvement, and I guess it’s also even better than it looks because of your increasing share of that win over that time. You are correctly, I believe, focusing on return on investment. When you sign a new deal now, what do you have to believe you are going to earn in terms of return of investment to actually do a deal now? In other words, what’s your hurdle rate now from a return on investment standpoint?

Tony Lam

Is your question directed toward the time it will take to recover our investment?

Bob Poole – Bricoleur Capital

No. I would really be talking about because I don’t know that that’s in and of itself particularly relevant to the economics of the business, so what is the return over the life of the capital investments? So if you buy a machine, you need to get a return on that machine over the life of the machine and a return in terms of percent return on investment or IRR from that machine. What would be sort of an IRR-based return on investment hurdle?

Tony Lam

Just to give you an example, we recently rejected a deal because we looked at the return on the later time in terms of when the machine would be 5 years, and we found that to be too long. When you talk about the IRR, of course, there are number of things that we can go into and look at, but right now, I think the important thing is that we need to look at venues, not mainly from an IRR point of view. Because it also depends on whether you are buying new machines or not, whether you are using a mixture of new and used machines, so one of the things that we look at, to be quite honest, I’m a little bit shy about talking about this, because we don’t want the investors to know exactly what it is that we want to do, but I did talk about earlier in my presentation regarding what actually drives success in venues. We believe that we know exactly what it is that pushes the performance of the high-performing venues, and it really requires a venue owner that is willing to work with us on replicating that model, and rather than focus on a number, we feel that if we can get to that point where we can work with a venue owner that is willing to work us and be involved 100% in attracting the proper marketing incentives for VIP players, we think we can make a killing off those venues, and I think for the next two quarters, that is precisely what we will be focusing on. We will hunker down, and we will just go blood thirsty after revenue, and I think Joe mentioned earlier before that there are no bad machines but bad venues probably. The key is if you go into these venues, for instance, either in Philippines or in Cambodia or in Macao even, the products are not significantly different. Then, why do you see a lot more people in certain venues? Well, of course, you know the operator has done a lot of work behind the scenes, and I think what we need to focus on is we are 100% certain, because I have personal discussions with those venue owners, that some of the numbers I discussed tonight, there is no fluke behind it. There has been a lot of work, a lot of commitment from the venue owners and I think this is actually more important. What we are looking for is to work with those partners, and I believe that in the recent trips, again these are things that we cannot talk about now, but I think Joe has met with couple of very high-potential partners that maybe we can work with, and in terms of commitment on the marketing side, and I think that is what we are looking for right now as we select venues.

Bob Poole – Bricoleur Capital

Tony, I appreciate that summary, and I appreciate all of your participation in this conference. Can you, Tony, actually give a little bit of your background because it sounds like you’ve already made a solid contribution, and I think we are going to depend on you significantly for this optimization. You have done this before, that is my understanding, but could you give a little detail on that?

Tony Lam

Bob, I wouldn’t take any credit for any of the success here. I think any success in any organization is a result of the team effort. I have learned a lot from Gordon and Joe since I joined the company. I think we were in a very difficult time back in February and March, and I never, I never for a single moment saw these two gentlemen hang their heads down. They’ve kept at it, and they pretty much pumped everybody up. It’s not easy. A lot of times, you forgot that we are a company in the first year of operations. Not only that, because we acquired Vending Data, people don’t consider us a new company. Imagine that amongst all these other things that we are doing right now, we have to comply with Sarbanes-Oxley even in Cambodia where we are literally in operation only in the last few months, and for those of you who have gone through the first year of SOX compliance, you’ll know exactly what I mean, the amount of paperwork, the SOX consultant coming back to you time after time again. In terms of my background experience, I’m not exactly a gaming person, but I have done a lot of work in terms of turnaround, in terms of looking for new businesses, in terms of building partnerships, and a lot of those experiences came from my last six-year venture with CDC Corporation, formerly known as China.com where we operated in a market that is not exactly similar to Cambodia, but there are a lot of similarities. Cambodia is kind of like China 30 years ago, and there are a lot of uncertainties and you have to deal with rule of law challenges, and that sort of stuff, and I have also done a lot of restructuring, cost cutting, and with my last employer, we went through numerous mergers and acquisition activities whereby we had to go through very tough integration processes. We have let people go when there is a necessity of so doing, but at this moment in time, with regards to EGT, it is the wrong thing to do if we cut and cut deeply because the first thing we need to do on the comfort side is to make sure that we get through the SOX thing, and trust me, it is very, very difficult. It is not an easy thing to do.

The second thing is that we got to maintain confidence and commitment from all employees, and we cannot hang our heads down, and we have gone through a very, very difficult time, and I think we are now seeing the silver lining, but we need to continue to work very hard. In terms of what I can do to help, I think the important thing is that I was talking to another investor several weeks ago, and my commitment is that if I can’t get the job done, nobody needs to fire me. I’ll get myself out of the office. That’s my commitment to this company.

Operator

We have no further questions from anyone in the conference.

Traci Mangini

To conclude, we just wanted to state we are making steady strides in our business, and we see a very clear path for improvement at our existing facilities as well as with further expansion. So, looking forward, again, we are mindful that we have a lot of work ahead, but with our strong business model, we expect to post significant growth in upcoming periods. Thank you all again for your continued support and interest, and we look forward to speaking with you again shortly. Thank you.

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Source: Elixir Gaming Technologies, Inc. Q2 2008 Earnings Call Transcript
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