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PokerTek Inc. Reports Operating Results (10-Q)

August 14, 2009 | About:

PokerTek Inc. (PTEK) filed Quarterly Report for the period ended 2009-06-30.

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 $8.1 million; its shares were traded at around $0.75 with and P/S ratio of 0.5.

Highlight of Business Operations:

Depreciation of PokerPro systems increased by $13,585 (2%) to $672,168 for the three months ended June 30, 2009 as compared to $658,583 for the three months ended June 30, 2008. Cost of product sales decreased by $1.5 million (85%) to $0.3 million for the three months ended June 30, 2009 as compared to $1.7 million for the three months ended June 30, 2008. This decrease in cost of sales was attributable to the lower unit product sales of both PokerPro and Heads-Up Challenge.

Interest Income (expense), net. Interest expense increased $57,207 (145%) for the three months ended June 30, 2009 to $96,564 from $39,357 for the three months ended June 30, 2008. We incurred interest expense in 2009 on the loan from our founders of $64,821 and recognized loan origination and unused line fees associated with the credit line from Silicon Valley Bank totaling $30,461. In addition, we incurred interest on our capital lease of $1,282. During 2008, our interest expense was partially offset by interest income earned on our ARS investments, which were liquidated on January 5, 2009 and contributed essentially no income for the three months ended June 30, 2009.

Net Loss. Net loss for the three months ended June 30, 2009 was $1.6 million, an improvement of $0.3 million (16%) from $2.0 million for the three months ended June 30, 2008. Net loss per share, basic and diluted, was $0.15 per share for the three months ended June 30, 2009, an improvement of $0.03 (17%) per share from $0.18 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.

Depreciation of PokerPro systems increased by $0.1 million (9%) to $ 1.3 million for the six months ended June 30, 2009 as compared to $1.2 million for the six months ended June 30, 2008. Cost of product sales decreased by $2.1 million (70%) to $0.9 million for the six months ended June 30, 2009 as compared to $3.0 million for the six months ended June 30, 2008. This decrease in cost of sales was attributable to the lower unit product sales of both PokerPro and Heads-Up Challenge.

Interest Income (Expense), net. Interest income (expense), net changed by $207,769 (784%) for the six months ended June 30, 2009 to an expense of $181,271 from income of $26,498 for the six months ended June 30, 2008. We incurred interest expense in 2009 on the loan from our founders of $128,930 and recognized loan origination and unused line fees associated with the credit line from Silicon Valley Bank totaling $48,156. In addition, we incurred interest on our capital lease of $2,700. During 2008, we earned interest income on our ARS investments, which were liquidated on January 5, 2009 and contributed essentially no income for the six months ended June 30, 2009.

Net Loss. Net loss for the six months ended June 30, 2009 was $3.5 million, an improvement of $0.6 million (16%) from $4.1 million for the six months ended June 30, 2008. Net loss per share, basic and diluted, was $0.31 per share for the six months ended June 30, 2009, an improvement of $0.06 (16%) per share from $0.37 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.

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