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PokerTek Inc. Reports Operating Results (10-Q)

May 14, 2009 | About:

PokerTek Inc. (PTEK) filed Quarterly Report for the period ended 2009-03-31.

PokerTek Inc. was formed to develop and market the PokerPro system an electronic poker table that provides a fully-automated poker room environment to tribal casinos commercial casinos and card clubs. This system is designed to increase casino revenue by increasing hands per hour while helping to reduce the labor costs within poker rooms and is also designed to increase players' gaming experience by eliminating dealer and player mistakes and eliminating the need for dealer tipping. PokerTek Inc. has a market cap of $10.2 million; its shares were traded at around $0.93 with and P/S ratio of 0.7.

Highlight of Business Operations:

Depreciation of PokerPro systems increased by $0.1 million (17%) to $0.7 million for the three months ended March 31, 2009 as compared to $0.6 million for the three months ended March 31, 2008. The increase in depreciation of PokerPro systems resulted from the growth in the gross balance of PokerPro systems subject to depreciation. Cost of product sales decreased by $0.6 million (50%) to $0.6 million for the three months ended March 31, 2009 as compared to $1.2 million for the three months ended March 31, 2008. This decrease in cost of sales was attributable to the lower unit product sales of both PokerPro and Heads-Up Challenge.

Depreciation. Depreciation increased by $14,795 (30%) for the three months ended March 31, 2009 to $64,258 from $49,463 for the comparable period in 2008. The increase in depreciation was primarily attributable to depreciation associated with our investment in capitalized software.

Interest Income (Expense), net. Interest income (expense), net changed by $150,562 (229%) for the three months ended March 31, 2009 to an expense of $84,707 from income of $65,855 for the three months ended March 31, 2008. We incurred interest expense in 2009 on the loan from our founders and incurred fees associated with the credit line from Silicon Valley Bank. During 2008, we earned interest income on our ARS investments, which were liquidated on January 5, 2009 and contributed essentially no income for the three months ended March 31, 2009.

Net Loss. Net loss for the three months ended March 31, 2009 was $1.8 million, an improvement of $0.3 million (15%) from $2.1 million for the three months ended March 31, 2008. Net loss per share, basic and diluted, was $0.16 per share for the three months ended March 31, 2009, an improvement of $0.04 (20%) per share from $0.20 for the comparable period of 2008. Net loss and net loss per share improved over the prior year period due primarily to the combination of lower direct cost of revenue from the casino and amusement product lines and lower operating expenses, partially offset by lower revenue.

For the three months ended March 31, 2009, net cash used in operating activities was $0.9 million, as compared to $1.7 million for the three months ended March 31, 2008, a decrease of $0.8 million. The decrease in cash used in operating activities was primarily due to the reduction in net loss and lower accounts receivable and inventory. These favorable working capital improvements were partially offset by lower accounts payable and accrued expenses.

Net cash used in financing activities was $2.9 million for the three months ended March 31, 2009, primarily due to the liquidation of the UBS Credit Facility which occurred as a result of the sale of the ARS investment, as well as payments on our capital lease obligation. For the three months ended March 31, 2008, net cash provided by financing activities was $3.0 million, consisting primarily of proceeds from our loan to our founders ($2.0 million), and net advances from the UBS line of credit ($1.0 million).

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