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PokerTek Reports Second Quarter 2011 Financial Results

About PokerTek, Inc.

PokerTek, Inc. (NASDAQ:PTEK) ( www.pokertek.com) is a licensed gaming company headquartered in Matthews, NC that develops and distributes electronic table games solutions for the gaming industry. The company’s products are installed worldwide and include PokerPro and Blackjack Pro. For more information, visit: www.pokertek.com.

This press release contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, which are made in accordance with the Private Securities Litigation Reform Act of 1995. The forward-looking statements herein include, but are not limited to, the expected adoption of our gaming systems by casinos and other customers, and the expected acceptance of our gaming systems by players. Our actual results may differ materially from those implied in these forward-looking statements as a result of many factors, including, but not limited to, the impact of global macroeconomic and credit conditions on our business and the business of our suppliers and customers, overall industry environment, customer acceptance of our products, delay in the introduction of new products, further approvals of regulatory authorities, adverse court rulings, production and/or quality control problems, the denial, suspension or revocation of permits or licenses by regulatory or governmental authorities, termination or non-renewal of customer contracts, competitive pressures, and our financial condition, including our ability to maintain sufficient liquidity to operate our business. These and other risks and uncertainties are described in more detail in our most recent annual report on Form 10-K and other reports filed with the Securities and Exchange Commission. Forward-looking statements speak only as of the date they are made. We undertake no obligation to update or revise such statements to reflect new circumstances or unanticipated events as they occur, except as required by applicable laws, and you are urged to review and consider disclosures that we make in the reports that we file with the Securities and Exchange Commission that discuss other factors germane to our business.

POKERTEK, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
     
Three Months Ended June 30, Six Months Ended June 30,
  2011   2010   2011     2010
Revenue $ 1,578,003 $ 1,281,940 $ 3,260,629 $ 2,849,960
Cost of revenue   457,688     513,300     934,359     1,140,951  
Gross profit   1,120,315     768,640     2,326,270     1,709,009  
Operating expenses:
Selling, general and administrative 1,109,073 1,184,351 2,295,241 2,309,538
Research and development 241,056 247,256 505,816 532,436
Share-based compensation expense 108,687 148,464 266,638 370,043
Depreciation   20,478     34,373     40,759     73,705  
Total operating expenses   1,479,294     1,614,444     3,108,454     3,285,722  
Operating loss   (358,979 )   (845,804 )   (782,184 )   (1,576,713 )
Interest expense, net   26,727     37,018     53,009     69,573  
Net loss from continuing operations before income taxes   (385,706 )   (882,822 )   (835,193 )   (1,646,286 )
Income tax provision 15,003 9,866 19,541 38,607
Net loss from continuing operations   (400,709 )   (892,688 )   (854,734 )   (1,684,893 )
Loss from discontinued operations   (429 )   (1,147,199 )   (10,403 )   (1,211,587 )
Net loss $ (401,138 ) $ (2,039,887 ) $ (865,137 ) $ (2,896,480 )
 
Net loss from continuing operations per common share - basic and diluted $ (0.06 ) $ (0.15 ) $ (0.13 ) $ (0.29 )
Net loss from discontinued operations per common share - basic and diluted   -     (0.20 )   -     (0.21 )
Net loss per common share - basic and diluted $ (0.06 ) $ (0.35 ) $ (0.13 ) $ (0.50 )
Weighted average common shares outstanding - basic and diluted 6,609,726 5,851,058 6,411,406 5,740,174
 

 

POKERTEK, INC.
CONSOLIDATED BALANCE SHEETS
   

June 30, 2011 (Unaudited)

December 31, 2010
Assets
Current assets:
Cash and cash equivalents $ 1,168,598 $ 666,179
Accounts receivable, net 1,067,907 1,057,511
Inventory 977,548 997,064
Prepaid expenses and other assets 239,672 213,495
Net assets of discontinued operations   331,547     379,441  
Total current assets   3,785,272     3,313,690  
 
Long-term assets:
Gaming systems, net 2,028,692 2,255,030
Property and equipment, net 51,838 80,755
Other assets   275,770     402,498  
Total long-term assets   2,356,300     2,738,283  
Total assets $ 6,141,572   $ 6,051,973  
 
Liabilities and Shareholders' Equity
Current liabilities:
Accounts payable $ 498,599 $ 327,662
Accrued liabilities 468,207 648,604
Deferred revenue 929,531 817,789
Long-term liability - related party, current portion 40,163 21,402
Long-term debt, current portion 3,538 30,793
Current liabilities of discontinued operations   84,463     113,185  
Total current liabilities   2,024,501     1,959,435  
 
Long-term liabilities:
Deferred revenue 5,750 118,436
Long-term liability - related party 303,435 368,598
Long-term debt   700,000     800,000  
Total long-term liabilities   1,009,185     1,287,034  
Total liabilities 3,033,686 3,246,469
Commitments and contingencies
Shareholders' equity
Preferred stock, no par value per share; - -
authorized 5,000,000 none issued and outstanding
 
Common stock, no par value per share; authorized 40,000,000 - -
shares, issued and outstanding 6,923,950 and 6,187,853 shares at
June 30, 2011 and December 31, 2010, respectively
 
Additional paid-in capital 47,995,141 46,827,622
Accumulated deficit   (44,887,255 )   (44,022,118 )
Total shareholders' equity   3,107,886     2,805,504  
Total liabilities and shareholders' equity $ 6,141,572   $ 6,051,973  
 

POKERTEK, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
   
Six Months Ended June 30,
2011 2010
Cash flows from operating activities:
Net loss $ (865,137 ) $ (2,896,480 )
Net loss from discontinued operations 10,403 1,211,587
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization 752,960 1,066,915
Share-based compensation expense 266,638 370,043
Provision for doubtful accounts and other receivables 124,547 30,958
Changes in assets and liabilities:
Accounts and other receivables (108,927 ) 424,040
Prepaid expenses and other assets 78,001 72,987
Inventory 7,674 336,998
Gaming systems (485,863 ) (709,281 )
Accounts payable and accrued expenses (55,862 ) (216,792 )
Deferred revenue   (562 )   (24,422 )
Net cash provided by (used in) operating activities from continuing operations (276,128 ) (333,447 )
Net cash provided by (used in) operating activities from discontinued operations   (17,629 )   87,164  
Net cash provided by (used in) operating activities   (293,757 )   (246,283 )
 
Cash flows from investing activities:
Purchases of property and equipment   -     (5,688 )
Net cash used in investing activities   -     (5,688 )
 
Cash flows from financing activities:
Proceeds from issuance of common stock, net of expenses 823,431 332,691
Repayments of capital lease   (27,255 )   (12,814 )
Net cash provided by (used in) financing activities   796,176     319,877  
Net increase (decrease) in cash and cash equivalents 502,419 67,906
Cash and cash equivalents, beginning of year   666,179     636,374  
Cash and cash equivalents, end of period $ 1,168,598   $ 704,280  
 
Supplemental Disclosure of Cash Flow Information
Cash paid for:
Interest $ 38,118 $ 37,396
Income taxes 18,051 49,510
 
Non-cash transactions:
Amortization of commitment fee issued in common stock $ 22,550 $ -
Gaming inventory purchase - related party - 396,500
Issuance of common stock for commitment fee - 112,750
Issuance of common stock for debt cancellation 100,000 -
Transfers from inventory to property and equipment 11,842 -
 

POKERTEK, INC.
RECONCILIATION TO EBITDAS
(UNAUDITED)
     
 
 
Three Months Ended June 30, Six Months Ended June 30,
  2011   2010   2011   2010
Net loss from continuing operations $ (400,709 ) $ (892,688 ) $

(854,734

) $ (1,684,893 )
Interest (income) expense, net 26,727 37,018 53,009 69,573
Income tax provision 15,003 9,866 19,541 38,607
Other taxes 6,376 1,276 16,090 18,631
Depreciation and amortization 377,131 473,418 752,960 1,066,915
Stock-based compensation expense   108,687     148,464     266,638     370,043  
EBITDAS (1) $ 133,215   $ (222,646 ) $

253,504

  $ (121,124 )
 
 
(1) EBITDAS is defined as net income (loss) from continuing operations before interest, taxes, depreciation, amortization, share-based compensation, and non-cash charges. EBITDAS does not purport to represent net earnings or net cash used in operating activities, as those terms are defined under generally accepted accounting principles, and should not be considered as an alternative to such measurements or as indicators of the Company's performance. The Company's definition of EBITDAS may not be comparable with similarly titled measures used by other companies.




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