UNITED
STATES SECURITIES AND EXCHANGE COMMISSION


Washington,
D.C. 20549





FORM
10-Q





(Mark
      One)R
            QUARTERLY
      REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
      1934For
      the 13 weeks ended May 3, 2009OR£
            TRANSITION
      REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
      1934For the transition period from
      _____________ to____________





Commission
File Number 000-23401





GAMETECH
INTERNATIONAL, INC.


(Exact
name of registrant as specified in its charter)





DELAWARE
            33-0612983(State
      or other jurisdiction
            (I.R.S.
      Employer Identification No.)of
      incorporation or organization)8850
      DOUBLE DIAMOND PKWY, RENO, NEVADA
            89521(Address
      of principal executive offices)
            (Zip
      code)Registrant’s
      telephone number, including area code: (775)
  850-6000








Indicate by check mark whether the
registrant (1) has filed all reports required to be filed by Section 13 or 15(d)
of the Securities Exchange Act of 1934 during the preceding 12 months (or for
such shorter period that the registrant was required to file such reports), and
(2) has been subject to such filing requirements for the past 90 days. YesRNo£





Indicate by check mark whether the
registrant has submitted electronically and posted on its corporate Web site, if
any, every Interactive Data File required to be submitted and posted pursuant to
Rule 405 of Regulation S-T during the preceding 12 months (or for
such shorter period that the registrant was required to submit and post such
files).  Yes£No£





Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer, or a smaller reporting company. See
the definitions of “large accelerated filer,” “accelerated filer,” ” and
“smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check
one):


Large accelerated filer£
            Accelerated filerRNon-accelerated
      filer   £
            Smaller
      reporting companyR





Indicate by check mark whether the
registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes£NoR





On June
2, 2009, the registrant had 11,706,269 outstanding shares of its Common Stock,
par value $0.001 per share.


































GAMETECH
INTERNATIONAL, INC.


QUARTERLY
REPORT ON FORM 10-Q


FOR
THE 13 WEEKS ENDED MAY 3, 2009


INDEX











PageNo.Part
      I.  Financial Information:Item
      1.  Financial Statements (Unaudited)Condensed
      Consolidated Balance Sheets as of May 3, 2009 (Unaudited) and November 2,
      2008
            
            3Unaudited
      Condensed Consolidated Statements of Operations for the 13 Weeks Ended May
      3, 2009, the 26 Weeks Ended May 3, 2009 and the Three and the Six Months
      Ended April 30, 2008
            
            4Unaudited
      Condensed Consolidated Statements of Cash Flows for the 26 Weeks Ended May
      3, 2009 and the Six Months Ended April 30, 2008
            
            5Notes
      to Unaudited Condensed Consolidated Financial Statements
            
            6Item
      2.  Management's Discussion and Analysis of Financial Condition
      and Results of Operations
            
            14Item
      3.  Quantitative and Qualitative Disclosures About Market
      Risk
            
            20Item
      4.  Controls and Procedures
            
            20Part
      II.  Other Information:Item
      1.  Legal Proceedings
            
            21Item
      1A.  Risk Factors
            
            21Item
      2.  Unregistered Sales of Equity Securities and Use of
      Proceeds
            
            21Item
      3.  Defaults Upon Senior Securities
            
            21Item
      4.  Submission of Matters to a Vote of Security
      Holders
            
            22Item
      5.  Other Information
            
            22Item
      6.  Exhibits
            
            23Signatures
            
            24









PART
1.  FINANCIAL INFORMATION
 
 ITEM
1.  FINANCIAL STATEMENTS
 
 GAMETECH
INTERNATIONAL, INC.
 CONDENSED
CONSOLIDATED BALANCE SHEETS
 (In
Thousands, except shares and per share amounts)


May
      3, 2009
            
            
            November
      2, 2008(Unaudited)
            
            
            (Note
      1)ASSETS:Current
      assets:Cash
      and cash equivalents
            
            $
            6,394
            
            
            $
            6,076Accounts
      receivable, net of allowances of $1,668 in 2009 and $1,217 in
      2008
            
            
            5,668
            
            
            
            6,303Inventory
            
            
            8,059
            
            
            
            8,976Deposits
            
            
            44
            
            
            
            42Prepaid
      expenses and other current assets
            
            
            821
            
            
            
            912Prepaid
      income taxes
            
            
            1,963
            
            
            
            1,634Current
      portion of notes receivable
            
            
            50
            
            
            
            119Deferred
      income taxes
            
            
            1,778
            
            
            
            1,825Total
      current assets
            
            
            24,777
            
            
            
            25,887Property,
      bingo equipment, furniture and other equipment, net
            
            
            23,469
            
            
            
            22,884Goodwill,
      net
            
            
            25,900
            
            
            
            25,900Intangibles,
      less accumulated amortization of $6,214 in 2009 and $6,197 in
      2008
            
            
            5,670
            
            
            
            6,302Restricted
      cash
            
            
            518
            
            
            
            3,158Notes
      receivable, net of current portion
            
            
            -
            
            
            
            1Deferred
      income taxes
            
            
            4,630
            
            
            
            4,539Debt
      acquisition costs, net
            
            
            251
            
            
            
            258Investments
            
            
            565
            
            
            
            566Total
      assets
            
            $
            85,780
            
            
            $
            89,495LIABILITIES
      AND STOCKHOLDERS’ EQUITY:Current
      liabilities:Accounts
      payable
            
            $
            255
            
            
            $
            2,278Accrued
      payroll and related obligations
            
            
            1,242
            
            
            
            1,168Accrued
      loss contingencies
            
            
            4,022
            
            
            
            4,022Current
      portion of long-term debt
            
            
            4,520
            
            
            
            4,509Deferred
      revenue
            
            
            3,662
            
            
            
            3,502Other
      accrued liabilities
            
            
            1,342
            
            
            
            1,285Total
      current liabilities
            
            
            15,043
            
            
            
            16,764Long-term
      debt, net of current portion
            
            
            30,262
            
            
            
            32,652Interest
      rate swap
            
            
            1,596
            
            
            
            668Deferred
      income taxes
            
            
            2
            
            
            
            1Total
      liabilities
            
            
            46,903
            
            
            
            50,085Stockholders’
      equity:Common
      stock, $0.001 par value: 40,000,000 shares authorized; 14,480,537 shares
      issued
            
            $
            14
            
            
            $
            14Additional
      paid in capital
            
            
            51,782
            
            
            
            51,561Retained
      earnings (deficit)
            
            
            (209
            )
            
            
            543Treasury
      stock, at cost, 2,774,268 shares in 2009 and 2,781,283 shares in
      2008
            
            
            (12,710
            )
            
            
            (12,708
            )Total
      stockholders’ equity
            
            
            38,877
            
            
            
            39,410Total
      liabilities and stockholders’ equity
            
            $
            85,780
            
            
            $
            89,495


The
accompanying notes are an integral part of these unaudited condensed
consolidated financial statements
 -3-
 GAMETECH
INTERNATIONAL, INC.
 CONDENSED
CONSOLIDATED STATEMENTS OF OPERATIONS
 (In
Thousands, except per share amounts)
 (Unaudited)


13
      Weeks Ended
            
            
            Three
      Months Ended
            
            
            26
      Weeks Ended
            
            
            Six
      Months EndedMay
      3, 2009
            
            
            April
      30, 2008
            
            
            May
      3, 2009
            
            
            April
      30, 2008Net
      revenue
            
            $
            12,588
            
            
            $
            13,870
            
            
            $
            25,294
            
            
            $
            29,054Cost
      of revenue
            
            
            4,668
            
            
            
            6,169
            
            
            
            10,136
            
            
            
            12,769Gross
      profit
            
            
            7,920
            
            
            
            7,701
            
            
            
            15,158
            
            
            
            16,285Gross
      Margin
            
            
            62.9
            %
            
            
            55.5
            %
            
            
            59.9
            %
            
            
            56.1
            %Operating
      expenses:General
      and administrative
            
            
            2,972
            
            
            
            2,556
            
            
            
            5,798
            
            
            
            5,314Sales
      and marketing
            
            
            3,339
            
            
            
            2,713
            
            
            
            5,975
            
            
            
            5,250Research
      and development
            
            
            1,311
            
            
            
            1,342
            
            
            
            2,703
            
            
            
            2,832Total
      operating expenses
            
            
            7,622
            
            
            
            6,611
            
            
            
            14,476
            
            
            
            13,396Income
      from operations
            
            
            298
            
            
            
            1,090
            
            
            
            682
            
            
            
            2,889Interest
      expense
            
            
            (519
            )
            
            
            (669
            )
            
            
            (2,039
            )
            
            
            (1,382
            )Impairment
      of investments
            
            
            -
            
            
            
            (285
            )
            
            
            -
            
            
            
            (977
            )Other
      income, net
            
            
            75
            
            
            
            45
            
            
            
            129
            
            
            
            169Income
      (loss) before income taxes
            
            
            (146
            )
            
            
            181
            
            
            
            (1,228
            )
            
            
            699Provision
      (benefit) for income taxes
            
            
            (77
            )
            
            
            68
            
            
            
            (476
            )
            
            
            255Net
      income (loss)$
            (69
            )
            
            $
            113
            
            
            $
            (752
            )
            
            $
            444Net
      income (loss) per share:Basic
            
            $
            (0.01
            )
            
            $
            0.01
            
            
            $
            (0.06
            )
            
            $
            0.04Diluted
            
            $
            (0.01
            )
            
            $
            0.01
            
            
            $
            (0.06
            )
            
            $
            0.04Shares
      used in calculating net income (loss) per share:Basic
            
            
            11,698
            
            
            
            12,226
            
            
            
            11,698
            
            
            
            12,327Diluted
            
            
            11,698
            
            
            
            12,438
            
            
            
            11,698
            
            
            
            12,561


The
accompanying notes are an integral part of these unaudited condensed
consolidated financial statements
 -4-
 GAMETECH
INTERNATIONAL, INC.
 CONDENSED
CONSOLIDATED STATEMENTS OF CASH FLOWS
 (Unaudited,
In Thousands)


26
      Weeks Ended
            
            
            Six
      Months EndedMay
      3, 2009
            
            
            April
      30, 2008Cash
      flows from operating activities:Net income (loss)
            
            $
            (752
            )
            
            $
            444Adjustments
      to reconcile net income (loss) to net cash provided by operating
      activities:Depreciation
      and amortization
            
            
            4,272
            
            
            
            5,248Obsolescence
      and loss on disposal of bingo terminals and related
    equipment
            
            
            63
            
            
            
            177Loss
      on disposal of furniture and other equipment
            
            
            93
            
            
            
            8Loss
      on investment impairment
            
            
            -
            
            
            
            977Stock
      compensation expense
            
            
            222
            
            
            
            21Deferred
      income taxes
            
            
            (42
            )
            
            
            71Amortization
      of debt acquisition costs
            
            
            27
            
            
            
            -Interest
      rate swap
            
            
            927
            
            
            
            -Interest
      on investments
            
            
            (81
            )
            
            
            (179
            )Interest
      on restricted cash
            
            
            (3
            )
            
            
            (12
            )Other
      changes in operating assets and liabilities:Accounts
      receivable, net
            
            
            635
            
            
            
            2,230Deposits
            
            
            (2
            )
            
            
            (48
            )Inventory
            
            
            917
            
            
            
            105Prepaid
      taxes
            
            
            (329
            )
            
            
            (343
            )Prepaid
      expenses and other current assets
            
            
            78
            
            
            
            (238
            )Notes
      receivable
            
            
            70
            
            
            
            63Accounts
      payable
            
            
            (171
            )
            
            
            (926
            )Accrued
      payroll and related obligations
            
            
            73
            
            
            
            123Deferred
      revenues
            
            
            160
            
            
            
            -Other
      accrued liabilities
            
            
            57
            
            
            
            (895
            )Net
      cash provided by operating activities
            
            
            6,214
            
            
            
            6,826Cash
      flows from investing activities:Proceeds
      from sale of short-term investments
            
            
            82
            
            
            
            3,570Restricted
      cash for capital expenditures
            
            
            2,642
            
            
            
            -Capital
      expenditures for property, bingo equipment, furniture, and other
      equipment
            
            
            (6,232
            )
            
            
            (2,388
            )Net
      cash provided by (used in) investing activities
            
            
            (3,508
            )
            
            
            1,182Cash
      flows from financing activities:Payments
      on long-term debt
            
            
            (2,365
            )
            
            
            (2,224
            )Repurchase
      of treasury stock
            
            
            (2
            )
            
            
            (2,873
            )Payment
      for debt acquisition costs
            
            
            (21
            )
            
            
            -Net
      cash (used in) financing activities
            
            
            (2,388
            )
            
            
            (5,097
            )Net
      increase in cash and cash equivalents
            
            
            318
            
            
            
            2,911Cash
      and cash equivalents at beginning of period
            
            
            6,076
            
            
            
            3,630Cash
      and cash equivalents at end of period
            
            $
            6,394
            
            
            $
            6,541Supplemental
      cash flow information:Cash
      paid during the period for:Interest
            
            $
            1,226
            
            
            $
            1,412Income
      taxes
            
            $
            45
            
            
            $
            552Non-cash
      investing and financing activities:Acquisition
      of assets included in accounts payable
            
            $
            129
            
            
            $
            315Settlement
      of related party receivable in the company's common stock
            
            $
            -
            
            
            $
            500Issuance
      of note payable for insurance
            
            $
            -
            
            
            $
            92


The
accompanying notes are an integral part of these unaudited condensed
consolidated financial statements
 -5-
 GAMETECH
INTERNATIONAL, INC.
 CONDENSED
CONSOLIDATED STATEMENTS OF CASH FLOWS
 (Unaudited,
In Thousands)


NOTES TO FINANCIAL STATEMENTS




1.
BASIS OF PRESENTATION




The
accompanying unaudited condensed consolidated financial statements and related
disclosures as of May 3, 2009, have been prepared in accordance with generally
accepted accounting principles in the United States (“GAAP”) applicable to
interim financial information and with the instructions to Form 10-Q and Rule
10-01 of Regulation S-X. Accordingly, they do not include all of the information
and footnotes required by GAAP for complete financial statements. In our
opinion, all adjustments (consisting of normal recurring adjustments) considered
necessary for a fair presentation of our financial position and interim results
have been included. Operating results for the 13 and 26 weeks ended May 3, 2009,
are not necessarily indicative of the results that may be expected for the
current fiscal year or any other period.




The
balance sheet at November 2, 2008, has been derived from the audited financial
statements at that date but does not include all of the information and
footnotes required by GAAP for complete financial statements. These condensed
unaudited consolidated financial statements should be read in conjunction with
the consolidated financial statements and related notes, as well as other
information included in our Annual Report on Form 10-K for the 53 weeks ended
November 2, 2008, and any other of our filings with the Securities and Exchange
Commission.




USE
OF ESTIMATES




The
preparation of financial statements in conformity with GAAP requires management
to make estimates and assumptions that affect the amounts reported in the
consolidated financial statements and accompanying notes. Allowance for doubtful
accounts, obsolescence, impairment of goodwill, impairment of investments, loss
contingencies, provision for income taxes, and stock-based compensation are
significant estimates made by us. Actual results could ultimately differ from
those estimates.




2.
SIGNIFICANT ACCOUNTING POLICIES




INVESTMENTS




Our
long-term investments consist of principal invested in auction rate securities
(ARS). The ARS held are private placement securities with long-term nominal
maturities with the interest rates reset through a Dutch auction each month.
Prior to fiscal 2008, the monthly auctions historically had provided a liquid
market for these securities. Our investments in ARS represent interests in
collateralized debt obligations supported by pools of residential and
commercial mortgages, credit cards, insurance securitizations, and other
structured credits, including corporate bonds. Some of the underlying collateral
for the ARS held consists of sub-prime mortgages.




Consistent
with our investment policy guidelines, the ARS investments had AAA/Aaa credit
ratings at the time of purchase. With the liquidity issues experienced in global
credit and capital markets, the ARS held by us have experienced multiple failed
auctions throughout Fiscal 2008 and 2009, as the amount of securities submitted
for sale exceeded the amount of purchase orders.




Given the
failed auctions, our ARS are illiquid until there is a successful auction for
them. Accordingly, we reclassified the entire balance of the ARS from short-term
to long-term investments in the first quarter of the 53 weeks ended November 2,
2008.




REVENUE
RECOGNITION




We
recognize revenue when the following criteria are met:




·
            Persuasive
      evidence of an arrangement between us and our customer
    exists,


·
            delivery
      has occurred or services have been
rendered,


·
            the
      price is fixed or determinable, and


·
            collectability
      is reasonably assured.




We earn
our revenue in a variety of ways. We offer our products for lease or sale. We
also sell service and software updates for equipment previously sold or
leased.




Bingo
Equipment




Revenue
is recognized for bingo terminals and bingo systems installed as a single
element placed in bingo halls under contracts based on (1) a fixed fee per
use per session; (2) a fixed weekly fee per terminal; or (3) a
percentage of the revenue generated by each terminal. Revenue recognition is a
key component of our results of operations, and determines the timing of certain
expenses, such as commissions. We recognize revenue when all of the following
factors exist: (a) evidence of an arrangement with the customer;
(b) play or availability of the bingo terminals; (c) a fixed or
determinable fee; and (d) collectability is reasonably assured. We exercise
judgment in assessing the credit worthiness of customers to determine whether
collectability is reasonably assured. Should changes in conditions cause us to
determine these factors are not met for future transactions, revenue recognized
for future reporting periods could be adversely affected.






-6-




Box
Equipment




Our
product sales revenues are generated from the sale of video lottery terminals
(“VLT’s”), conversion kits, content fees, license fees, participation fees,
equipment, and services. Revenues are recorded in accordance with the American
Institute of Certified Public Accountants (“AICPA”) Statement of Position
(“SOP”) No 97-2 Software Revenue Recognition and are reported net of discounts,
sales taxes and other taxes of a similar nature. Revenues related to contracted
production are recognized as the related work is delivered. We recognize license
fee revenues over the term of the associated agreement unless the fee is in
exchange for products delivered or services performed that represent the
culmination of a separate earnings process. Amounts received prior to completing
the earnings process are deferred until revenue recognition criteria are
met. In some instances, we recognize recurring participation revenue in
lieu of a one-time machine sale.  Our sales credit terms are
predominately 30 days. In certain limited circumstances, we may extend
credit terms up to 180 days.




CONCENTRATION
OF CREDIT RISKS




Financial
instruments, which potentially subject us to concentration of credit risk,
consist primarily of cash and cash equivalents, investments, restricted
short-term investments, and trade receivables. Cash equivalents and investments
are investment-grade, short-term debt instruments, consisting of treasury bills,
mortgage-backed securities, asset-backed commercial paper, unsecured corporate
notes, and money market accounts, all of which are maintained with high credit
quality financial institutions. Cash and cash equivalents are in excess of
Federal Deposit Insurance Corporation insurance limits.




No single
customer comprised more than ten percent of our total revenue during fiscal
years 2008 and 2007.   We conduct a substantial amount of our
business through distributor relationships, many of which we act as a collection
agent.  As of May 3, 2009, there was one distributor that represented 19%
of the consolidated accounts receivable balance, with sales during the quarter
representing 73% of box sales and 9% of overall sales; and for the 26 weeks
ended May 3, 2009, represented 74% of box sales and 12% of overall
sales.




DEFERRED
REVENUE




Deferred
revenue consists of amounts received or billed after product is delivered or
services are rendered, but prior to meeting all of the requirements for revenue
recognition.  Complex systems and/or multiple element contracts may
take several months to complete and our deferred revenues may increase as our
products evolve toward a more systems-centric environment.  Deferred
revenue totaled $3.7 million at May 3, 2009 as compared to $3.5 million at
November 2, 2008, and primarily represents amounts received for future
deliverables.




ACCOUNTS
RECEIVABLE AND ALLOWANCE FOR DOUBTFUL ACCOUNTS




Accounts
receivable are recorded when revenue is recognized in accordance with our
revenue recognition policy and represent claims against third parties that will
be settled in cash. The carrying value of our receivables, net of allowances,
represents our estimated net realizable value. The balance of accounts
receivable as of May 3, 2009 is $7.3 million with an allowance for doubtful
accounts totaling $1.6 million, for net accounts receivable of $5.7
million.




Bingo
Equipment




We
estimate the possible losses resulting from non-payment of outstanding accounts
receivable arising from the lease of our bingo units. Our customer base consists
primarily of entities operating in charitable, Native American, and commercial
bingo halls located throughout United States, Canada, Mexico, and the United
Kingdom. In some jurisdictions, the billing and collection function is performed
as part of a distributor relationship, and in those instances, we maintain
allowances for possible losses resulting from non-payment by both the customer
and distributor. We perform ongoing evaluations of our customers and
distributors for credit worthiness, economic trends, changes in our customer
payment terms, and historical collection experience when evaluating the adequacy
of our allowance for doubtful accounts. We also reserve a percentage of our
accounts receivable based on aging categories. In determining these percentages,
we review historical write-offs of our receivables, payment trends, and other
available information. While such estimates have been within our expectations
and the provisions established, a change in financial condition of specific
customers or in overall trends experienced may result in future adjustments of
our estimates of recoverability of our receivables.




Box
Equipment




We
estimate the possible losses resulting from non-payment of outstanding accounts
receivable arising from the sale of VLTs and related equipment. Our customer
base consists of casinos located in various states and Native American
territories as well as distributors in Louisiana and Oklahoma. We perform
ongoing evaluations of our customers and distributors for credit worthiness,
economic trends, changes in our customer payment terms, and historical
collection experience when evaluating the adequacy of our allowance for doubtful
accounts.




INVENTORIES




Inventories
are stated at the lower of cost or market. Our raw materials are valued using
the first-in, first-out method and our finished goods are valued using average
costing that approximates the first-in, first-out method. Management
periodically reviews inventory balances, using recent and future expected sales
to identify slow-moving or obsolete items. Inventories consist of the following
at May 3, 2009 (in thousands):




May
      3, 2009
            
            
            November
      2, 2008Raw
      Materials
            
            $
            2,859
            
            
            $
            2,474Work
      in Progress
            
            
            3,945
            
            
            
            4,480Finished
      Goods
            
            
            1,255
            
            
            
            2,022$
            8,059
            
            
            $
            8,976






-7-




PROPERTY,
BINGO EQUIPMENT, FURNITURE AND OTHER EQUIPMENT




Bingo
equipment includes portable and fixed-base player terminals, file servers,
caller units, point-of-sale units, and other support equipment. We record bingo
equipment, furniture, and other equipment at cost and depreciate these over the
estimated useful lives of the assets using the straight-line method. The
estimated useful lives are as follows:




Bingo
      equipment
            3-5
      yearsOffice
      furniture and equipment
            3-7
      yearsLeasehold
      improvements
            Remaining
      Life of LeaseBuilding
            39
      1⁄2 years




We
provide reserves for excess or obsolete bingo terminals on hand that we do not
expect to use. The reserves are based upon several factors, including estimated
forecast of bingo terminal demand for placement into bingo halls. The estimates
of demand for future bingo terminals may prove to be inaccurate, in which case
we may have understated or overstated the provision required for excess and/or
obsolete bingo terminals. Although we attempt to assure the accuracy of these
estimated forecasts, any significant unanticipated changes in demand or
technological developments could have a significant impact on the value of bingo
terminals, results of operations, and financial condition.




On August
22, 2008, we purchased from RKD Holdings, L.L.C. certain real property in
southwest Reno, Nevada for an aggregate purchase price of $7.2 million. The real
property includes an approximately 100,000 square foot building that is being
used as our new headquarters. We have invested approximately $3.3 million in
additional improvements to the interior of the building to add office space, and
provide for the manufacturing and assembly needs of bingo, VLT and slot
equipment. The purchase price of the building and related improvements have been
funded by proceeds from the New Credit Facility, of which $2.7 million was held
in a construction control cash account with U.S. Bank N.A.  The New
Credit Facility provided for the release of the funds to cover payments for the
construction of the additional improvements. As of May 3, 2009, all payments
were made and the account was closed.  We relocated to our new
corporate headquarters and completed all major building improvements during the
second quarter of 2009.  We expensed $321 thousand of related exit
fees such as the write-off of leasehold improvements, prepaid insurance, final
rents, prepaid real estate property taxes, and utilities related to our old
headquarters.




SOFTWARE
DEVELOPMENT CAPITALIZATION




We
capitalize costs related to the development of certain software products that
meet the criteria of Statement of Financial Accounting Standards (“SFAS”) No. 86
- Accounting for the Costs of
Computer Software to Be Sold, Leased, or Otherwise Marketed. SFAS No. 86
provides for the capitalization of computer software that is to be used as an
integral part of a product or process to be sold or leased, after technological
feasibility has been established for the software and all research and
development activities for the other components of the product or process have
been completed. We capitalize qualified costs of software developed for new
products and for significant enhancements to existing products. We cease
capitalizing costs when the product is available for general release to our
customers. We amortize the costs on a straight-line method over the estimated
economic life of the product beginning when the product becomes available for
general release. The achievement of technological feasibility and the
estimate of the product’s economic life require management’s judgment. Any
changes in key assumptions, market conditions, or other circumstances could
result in an impairment of the capitalized asset and a charge to our operating
results.




GOODWILL




We
account for goodwill and intangibles according to SFAS No. 142, Goodwill and Other Intangible
Assets. This rule provides that goodwill should not be amortized but
instead should be tested for impairment annually and whenever circumstances
indicate that the carrying value may not be recoverable.  Depending
upon the results of that measurement, the recorded goodwill may be written down
and charged to income from operations when its carrying amount exceeds its
estimated fair value. Amortization is still required for identifiable intangible
assets with finite lives.




Our
evaluation of the goodwill of our operations consists of two reporting units,
box and bingo. Goodwill of a reporting unit must be tested for impairment on at
least an annual basis.  We conduct our annual goodwill impairment
analysis during the fourth quarter of each fiscal year, measured as of July 31,
using an outside third party.  In addition to our annual review, we
assess the impairment of goodwill whenever events or changes in circumstances
indicate that the carrying value of a reporting unit may be greater than its
fair value.  Factors that we consider important that could trigger an
impairment review include significant underperformance relative to historical or
projected future operating results, significant changes in the manner of the use
of our assets or the strategy for our overall business and significant negative
industry or economic trends.




We do not
believe a triggering event requiring us to conduct an interim impairment test
has occurred as of May 3, 2009.  Although our market capitalization
continues to be significantly below book value, our stock price increased in the
second quarter of 2009 as compared to the prior quarter.




IMPAIRMENT
OF LONG-LIVED ASSETS




We review long-lived assets for
impairment whenever events or changes in circumstances indicate that the
carrying amount of an asset may not be recoverable in accordance with SFAS No.
144,Accounting for the
Impairment or Disposal of Long-Lived Assets.  Recoverability of
long-lived assets are measured by a comparison of the carrying amount of an
asset to future net cash flows expected to be generated by the asset,
undiscounted and without interest.  If such assets are considered to
be impaired, the impairment to be recognized is measured by the amount by which
the carrying amount of the assets exceeds the fair value of the
assets.




-8-




LEGAL
CONTINGENCIES




We are
currently involved in various claims and legal proceedings (see Note 7 Legal
Proceedings). Periodically, we review the status of each matter and assess the
potential financial exposure. If the potential loss from any claim or legal
proceeding is considered probable and the amount can be estimated, we accrue a
liability for the estimated loss. Significant judgment is required in both the
determination of probability and the determination as to whether an exposure can
be reasonably estimated.




Because
of uncertainties related to these matters, we base accruals on the best
information available at the time. As additional information becomes available,
we reassess the potential liability related to our pending claims and litigation
and may revise these estimates. Such revisions in the estimates of the potential
liabilities could have a material impact on our results of operations and
financial condition.




STOCK-BASED
COMPENSATION




We
generally grant stock options to our employees for a fixed number of shares with
an exercise price equal to the fair value of the shares on the date of the
grant.




We have
adopted the Financial Accounting Standards Board (“FASB”) SFAS No. 123(R), Share Based Payment. This
statement is a revision of SFAS No. 123, and supersedes APB Opinion No. 25, and
its related implementation guidance. SFAS No. 123(R) addresses all forms of
share-based payment awards including shares issued under employer stock purchase
plans, stock options, restricted stock, and stock appreciation rights. Under
SFAS No. 123(R), share-based payment awards result in a cost that will be
measured at fair value on the award’s grant date. Stock options exercised in
future periods will result in an adjustment within the Consolidated Statement of
Cash Flows depicting increase in net cash provided by financing activities
related to the cash received and an incremental tax benefit. In the fourth
quarter of the fiscal year 2005, our Board of Directors approved the
acceleration of the vesting of all unvested stock options awarded under the 1997
Incentive Stock Plan. As a result, all options outstanding at October 31, 2005,
were fully vested and no compensation cost for such options will be recognized
in any future periods.




For the
13 weeks ended May 3, 2009, we recognized stock-based compensation expense of
$111.6 thousand for stock options and restricted stock and a related tax benefit
of $41.9 thousand for a net cost of $69.7 thousand.  For the 26 weeks
then ended, we recognized stock-based compensation expense of $203.7 thousand
and a related tax benefit of $76.4 thousand for a net cost of $127.3 thousand.
For the 13 and 26 weeks ended May 3, 2009, there was an effect of $.01 to the
basic and diluted earnings per share as a result of recognizing the share-based
compensation expense, net of tax.




For the
three months ended April 30, 2008, we recognized a credit to compensation costs
of $43.0 thousand and a related tax expense of $15.7 thousand for a net credit
of $27.3 thousand.  For the six months then ended, we recognized a
compensation expense of $8.3 thousand and a related tax benefit of $3.0 thousand
for a net cost of $5.3 thousand.  For the three and six months ended
April 30, 2008, there was no effect to either the basic and diluted earnings per
share as a result of recognizing the share-based compensation expense, net of
tax.  The credit to compensation cost is due to changes in the
expected forfeiture rates used in our calculations.




As of May
3, 2009, the total compensation cost related to unvested stock option awards
granted to employees under our stock option plans but not recognized was $283
thousand. The cost of each award will be amortized on a straight-line basis over
its term, which range from two to four years, and will be adjusted for
subsequent changes in estimated forfeitures.  As of May 3, 2009, the
compensation related to unvested restricted stock awards granted to employees
under our stock option plan, but not yet recognized, was $399
thousand.  The cost will be adjusted for subsequent changes in
estimated forfeitures.




During
the 13 and 26 weeks ended May 3, 2009, pursuant to certain offer letters made to
certain employees during fiscal year 2008, we granted 200,000 stock options and
42,500 restricted stock grants.  For the three and six-month period
ended April 30, 2008, we did not grant any stock options but did grant 35,000
shares of restricted stock.




RECENT
ACCOUNTING PRONOUNCEMENTS




In
December 2007, the FASB issued SFAS No. 141(R), Business Combinations, and
SFAS No. 160, Accounting
and Reporting of Non-Controlling Interest in Consolidated Financial
Statements, an Amendment of ARB No. 51. These new standards will
significantly change the financial accounting and reporting of business
combination transactions and non-controlling (or minority) interests in
consolidated financial statements. We will be required to adopt SFAS No. 141(R)
and SFAS No. 160 on or after fiscal years beginning December 15, 2008. We
are evaluating the impact, if any, that the adoption of SFAS 141(R) and SAS No.
160 will have on our consolidated financials.  This adoption will be
effective our first fiscal quarter of 2010.




In
December 2007, the Securities and Exchange Commission issued Staff Accounting
Bulletin  (“SAB") No. 110 to permit entities, under certain
circumstances, to continue to use the “simplified” method, in developing
estimates of expected term of “plain-vanilla” share options in accordance with
SFAS No. 123 (R) Share-Based Payment. SAB No. 110 amended SAB No. 107 to permit
the use of the “simplified” method beyond December 31, 2007. We continue to use
the “simplified” method and will do so until more detailed relevant information
about exercise behavior becomes readily available.




In
February 2008, the FASB issued FASB Staff Position No. FAS 157-2 (“FSP 157-2”).
FSP 157-2 delays the implementation of SFAS 157 for nonfinancial assets and
nonfinancial liabilities, except for items that are recognized or disclosed at
fair value in the financial statements on a recurring basis. This statement
defers the effective date to fiscal years beginning after November 15, 2008
and interim periods within those fiscal years, which is fiscal year 2010 for the
Company.




In April
2008, the FASB issued Staff Position No. FAS 142-3 which amends the factors that
should be considered in developing renewal or extension assumptions used to
determine the useful life of a recognized intangible asset under FASB Statement
No. 142, “Goodwill and Other Intangible Assets.” The intent of this FSP is to
improve the consistency between the useful life of a recognized intangible asset
under Statement 142 and the period of expected cash flows used to measure the
fair value of the asset under FASB Statement No. 141 (revised 2007), Business Combinations, and
other U.S. generally accepted accounting principles (GAAP). We continue to
evaluate the effect of FAS No. 142-3 on our consolidated financial
statements.




-9-




3.
INVESTMENTS




Long-term
investments at May 3, 2009 consisted of $3.9 million of principal invested in
auction rate securities (ARS). The ARS held are private placement securities
with long-term nominal maturities with the interest rates reset through a Dutch
auction each month. Prior to fiscal 2008, the monthly auctions historically had
provided a liquid market for these securities. Our investments in ARS represent
interests in collateralized debt obligations supported by pools
of residential and commercial mortgages, credit cards, insurance
securitizations, and other structured credits, including corporate bonds. Some
of the underlying collateral for the ARS we hold consists of sub-prime
mortgages.




Consistent
with our investment policy guidelines, the ARS investments held had AAA/Aaa
credit ratings at the time of purchase. With the liquidity issues experienced in
global credit and capital markets, the ARS held by us at May 3, 2009 have
experienced multiple failed auctions as the amount of securities submitted for
sale exceeded the amount of purchase orders.




Although
six of the eight ARS continue to pay interest according to their stated terms,
based on the fair value of the investments and an analysis of
other-than-temporary impairment factors, we recorded a pre-tax impairment charge
of approximately $3.3 million for the 53 weeks ended November 2,
2008.  We did not record any additional pre-tax impairment charge for
the 26 weeks ended May 3, 2009. The current value of the ARS as of May 3, 2009
is $0.6 million.




4.
      GOODWILL AND INTANGIBLES




In fiscal
2007, we acquired the assets of Summit Gaming and added $26.5 million to
goodwill. In addition, we acquired $7.7 million in identifiable intangible
assets, which will be amortized over 5 to 10 years. We conduct our annual
goodwill impairment analysis during the fourth quarter of each fiscal year,
measured as of July 31, using an outside third party.   We performed
our 2008 annual impairment testing of goodwill and intangibles as of July 31,
2008. Based on a combination of factors, including the current economic
environment, decreased revenues and increased costs, we recorded a non-cash
goodwill impairment associated with our acquisition of Summit of $10.8 million
in the fourth quarter of fiscal 2008. The annual evaluation of goodwill and
other non-amortizing intangible assets requires the use of estimates about
future operating results of each reporting unit to determine their estimated
fair value.  Changes in forecasted operations can materially affect
these estimates.  Once an impairment of goodwill or other intangible
assets has been recorded, it cannot be reversed.




Intangible
      assets consisted of the following as of May 3, 2009 (dollars in
      thousands):Stated
      Value
            
            
            Accumulated
      Amortization
            
            
            Net
      Carrying Value
            
            
            Weighted
      Average Amortization Period (in years)Intellectual
      property (software)
            
            
            $
            3,557
            
            
            $
            (3,532
            )
            
            $
            25
            
            
            
            0.5Copyrights/trademarks
            
            
            
            247
            
            
            
            (64
            )
            
            
            183
            
            
            
            10.6Distributor
      buyouts
            
            
            
            260
            
            
            
            (260
            )
            
            
            -
            
            
            
            —Summit
      Gaming identifiable intangible assets:Customer
      relationships
            
            
            
            3,600
            
            
            
            (1,500
            )
            
            
            2,100
            
            
            
            3.2Patent
      applications
            
            
            
            620
            
            
            
            (108
            )
            
            
            512
            
            
            
            8.2Game
      software library
            
            
            
            3,600
            
            
            
            (750
            )
            
            
            2,850
            
            
            
            8.2$
            11,884
            
            
            $
            (6,214
            )
            
            $
            5,670Intangible
      assets consisted of the following as of November 2, 2008 (dollars in
      thousands):Stated
      Value
            
            
            Accumulated
      Amortization
            
            
            Net
      Carrying Value
            
            
            Weighted
      Average Amortization Period (in years)Intellectual
      property (software)
            
            
            $
            4,173
            
            
            $
            (4,090
            )
            
            $
            83
            
            
            
            0.7Copyrights/trademarks
            
            
            
            247
            
            
            
            (55
            )
            
            
            192
            
            
            
            10.8Distributor
      buyouts
            
            
            
            260
            
            
            
            (260
            )
            
            
            -
            
            
            
            0Summit
      Gaming identifiable intangible assets:Customer
      relationships
            
            
            
            3,600
            
            
            
            (1,140
            )
            
            
            2,460
            
            
            
            3.4Patent
      applications
            
            
            
            620
            
            
            
            (82
            )
            
            
            538
            
            
            
            8.4Game
      software library
            
            
            
            3,600
            
            
            
            (571
            )
            
            
            3,029
            
            
            
            8.4$
            12,500
            
            
            $
            (6,198
            )
            
            $
            6,302




-10-


Estimated
      future aggregate amortization expense for intangible assets subject to
      amortization as of May 3, 2009 is as follows (dollars in
      thousands):2009
            
            
            
            
            
            $
            6962010
            
            
            
            
            
            
            1,1532011
            
            
            
            
            
            
            1,1502012
            
            
            
            
            
            
            7302013
            
            
            
            
            
            
            430After
      2013
            
            
            
            
            
            
            1,511$
            5,670





A prepaid
royalty of $100,000 was paid during fiscal year 2008 related to a license
agreement to develop, manufacture, sell or lease games and gaming devices that
use the technology protected by claims in patents owned by Patent Investments
Co. Amortization will not be recognized on this until the life is determined
which will not occur until after the software is approved. As a result, the
table above does not include any amortization of this amount.




5. NET INCOME PER SHARE




Basic net
income per share is computed by dividing reported net income by the weighted
average number of common shares outstanding each period. Diluted net income per
share is computed by using the weighted average number of common shares and
other common equivalent shares outstanding during each period. Diluted common
shares are calculated in accordance with the treasury stock method, which treats
the proceeds from the exercise of all warrants and options as if they were used
to reacquire stock at market value.




(In thousands, except per share
    amounts)13
      Weeks Ended
            
            
            Three
      Months Ended
            
            
            26
      Weeks Ended
            
            
            Six
      Months EndedMay
      3, 2009
            
            
            April
      30, 2008
            
            
            May
      3, 2009
            
            
            April
      30, 2008Net
      income (loss), as reported
            
            $
            (69
            )
            
            $
            113
            
            
            $
            (752
            )
            
            $
            444Weighted
      average number of shares outstanding
            
            
            11,698
            
            
            
            12,226
            
            
            
            11,698
            
            
            
            12,327Incremental
      shares from the assumed exercise of dilutive stock options
            
            
            14
            
            
            
            212
            
            
            
            34
            
            
            
            234Dilutive
      weighted shares
            
            
            11,712
            
            
            
            12,438
            
            
            
            11,732
            
            
            
            12,561Weighted
      average number of anti-dilutive shares outstanding
            
            
            911
            
            
            
            75
            
            
            
            761
            
            
            
            75Net
      income (loss) per share:Basic
            
            $
            (0.01
            )
            
            $
            0.01
            
            
            $
            (0.06
            )
            
            $
            0.04Diluted
            
            $
            (0.01
            )
            
            $
            0.01
            
            
            $
            (0.06
            )
            
            $
            0.04




6.
TREASURY STOCK




On September 4, 2007, the Board of Directors
authorized spending up to $5.0 million in a share repurchase program. On
September 16, 2008, this program was extended through close of the trading day
December 31, 2008.  The actual amount and timing of dollars expended
and shares repurchased were subject to business and market conditions and
applicable SEC rules.  As of December 31, 2008, we had acquired
918,943 shares at a cost of approximately $4.7 million.  This program
is now expired, with no additional shares purchased.




7.
LEGAL PROCEEDINGS




On March
22, 2001, we filed GameTech International, Inc. v. Trend Gaming Systems, LLC,
CIV 01-0540 PHX LOA, a claim in the United States District Court for the
District of Arizona, seeking a declaratory judgment that we are not in material
breach of our November 1, 1999 Distribution Agreement with Trend Gaming Systems,
LLC (“Trend”), and seeking damages for past due payments and wrongful
withholdings by Trend. Trend counterclaimed, alleging that its payments were in
compliance with its contractual obligations. Trend also contended that we were
in breach of certain of our contractual obligations to Trend, including that we
had wrongfully terminated Trend. On December 16, 2002, the court entered at our
request an order enjoining Trend from using approximately $0.5 million in funds
it had collected on our behalf, pending a trial on our ownership interest in
those funds. The money was placed in two bank accounts/constructive trusts,
subject to the court’s control. The sums in those accounts now total
approximately $0.6 million. In addition, collections of accounts receivable by
Trend, if any, are also being placed in that account, pending the resolution of
the case. We have posted a $0.5 million deposit with the court as a bond, which
is presented as restricted cash on our condensed consolidated balance sheets.
The accounts receivable from Trend were fully reserved. During the quarter ended
April 30, 2008, we wrote off all receivables and related reserves. Trial in this
matter commenced October 4, 2004. On November 1, 2004, the jury returned a
verdict in favor of Trend against us in the amount of $3.5 million in
compensatory damages. The jury also awarded us $0.7 million in compensatory
damages against Trend for funds Trend collected on our behalf but failed to
remit to us. The court denied all of our post-trial motions, except that it
maintained the injunction imposing a constructive trust, pending resolution of
the issues on appeal. The court setoff the jury awards and entered an amended
judgment for Trend on March 12, 2005, in the amount of $2.8 million, plus
interest on that sum at the rate of 3.31% per annum beginning March 30,
2005.




We
appealed to the United States Court of Appeals for the Ninth Circuit on April 8,
2005. We posted a supersedeas bond on April 8, 2005, in the court-appointed
amount of $3.4 million, which bond stayed any action by Trend to collect on the
judgment, pending appeal. Trend initially sought an award of $0.8 million in
legal fees and $26 thousand in expenses and costs. In an amended request, Trend
sought an award of $1.4 million in legal fees and $61 thousand in expenses and
costs. The court awarded Trend $0.9 million in legal fees, expenses and costs
plus interest of 3.77% per annum beginning August 5, 2005. We appealed the fee
award to the United States Court of Appeals for the Ninth Circuit on August 5,
2005. We posted an additional supersedeas bond with the court on August 18,
2005, in the amount of $1.1 million, thereby staying any action by Trend to
collect the fees, pending appeal. Any cash used in the collateralization of the
bonds was accounted for as restricted short-term investments on our consolidated
balance sheets. On April 19, 2007, a three-judge panel of the United States
Court of Appeals for the Ninth Circuit heard oral arguments for the
appeal.




-11-


On May
16, 2007, the United States Court of Appeals for the Ninth Circuit issued its
ruling in our favor upholding each of the items we appealed, reversing the trial
court’s rulings and remanding the matter back to the trial court for a new
trial.  As a result of this decision, the supersedeas bonds we posted
prior to filing the appeal were released by the lower court as of August 18,
2007. Upon receipt of the released supersedeas bonds from the court we
terminated the supporting insurance policies and had the letters of credit
released giving us access to the certificates of deposit, which had served as
the cash security for the supersedeas bonds.




For the
year ended October 31, 2004, we recorded an estimated loss contingency in the
Trend litigation of $2.8 million, which was estimated based on the amounts of
the judgment described above. We recorded an additional loss contingency of $0.9
million in the third quarter of fiscal 2005 to account for the increased total
award to Trend for legal fees and expenses and costs. In addition, we recorded a
loss of $0.3 million through October 31, 2007, for the interest accrued on the
Trend judgment. With the United States Court of Appeals for the Ninth Circuit
ruling upholding each of the items we appealed, reversing the trial court’s
rulings and remanding the matter back to the trial court for a new trial, we
believe there is no further justification at this time for continuing to accrue
loss contingencies. This matter is now pending retrial, which is set to begin on
October 19, 2009 in the United States District Court for the District of
Arizona.




On March
2, 2004, a jury rendered a verdict in our favor and against Trend Gaming, LLC, a
Kentucky LLC (“Trend Gaming”) (involving a prior distribution agreement in
Virginia) awarding compensatory and punitive damages in the total amount of
approximately $1.5 million. The jury also returned a verdict against Steven W.
and Rhonda Hieronymus awarding compensatory and punitive damages of $1.0
million. The court reduced compensatory damages against Trend Gaming to $1.1
million. The court affirmed $0.2 million in punitive damages against Trend
Gaming and awarded us fees and costs of suit against Trend Gaming in the amount
of $0.7 million. Compensatory damages against Mr. and Mrs. Hieronymus have been
reduced to $0.8 million but the punitive damage award against them in the amount
of $0.2 million remains unchanged. Of the total compensatory damages of $1.1
million awarded to us, $0.8 million represents compensation for lost profits. We
can only collect such damages from one of the defendants to avoid a double
recovery. Defendants appealed the judgment against them. On March 5, 2007, the
Appellate Court entered its ruling affirming the judgment of the lower court in
our favor. On June 16, 2008, the Ninth Circuit Court of Appeals awarded attorney
fees in the amount of $0.1 million in favor of GameTech and jointly and
severally against Trend Gaming L.L.C., Steven W. Hieronymous, and the marital
estate of Steven W. Hieronymous and Rhonda Hieronymous. We have not recorded an
estimated gain contingency, as we can give no assurances whether we will be able
to collect any award from the defendants.




We are
involved in various other legal proceedings arising in the ordinary course of
our business. We do not believe that any of those proceedings will have a
material adverse effect on our business, results of operations, or financial
condition.




8.
INCOME TAXES




We
recorded our income tax benefit at an effective rate of 38.8% for the 26 weeks
ended May 3, 2009, compared with 36.5% for the six-month period ended April 30,
2008. The actual effective tax rate is different from the expected federal rate
of 34%, reflecting certain permanent differences between financial accounting
and tax accounting, and state and foreign tax provisions.




In fiscal
2008, we adopted FIN No. 48, Accounting for Uncertainty in Income
Taxes, an Interpretation of FASB Statement No. 109, which creates a
single model to address uncertainty in income tax positions and prescribes the
minimum recognition threshold a taxation is required to meet before being
recognized in the financial statements.  FIN No. 48 also provides
guidance on derecognition, measurement, classification, interest and penalties,
accounting in interim periods, disclosure, and transition.  The 2008
fiscal year is the first year that we were required to adopt FIN No. 48 as it
became effective after the beginning of an entity’s first fiscal year that
begins after December 15, 2006.  The impact of FIN No. 48 on our
financial position, cash flows and results of operations is not material,
therefore during fiscal 2008 and the 26 weeks ended May 3, 2009, we did not book
any interest or penalties related to unrecognized tax positions.




We file
numerous consolidated and separate income tax returns in the United States and
in many state and foreign jurisdictions. With few exceptions, we are no longer
subject to United States federal income tax examinations for years
before 2004, and are no longer subject to state and local, or foreign
income tax examinations for years before 2003.  However, we have
been randomly selected for an audit by the IRS and they are currently examining
fiscal year 2007.  At this time, we are not aware of any tax
deficiencies.




9.
CREDIT AGREEMENT




Our New
Credit Facility, as amended, provides a Senior Secured Revolving Credit Facility
(the “Revolver”) of $2.0 million, maturing on August 31, 2010, with monthly
interest-only payments due on the last day of each month beginning September 30,
2008. We select the interest rate calculation for each advance under the
Revolver from two allowable interest rate calculations. The first allowed
interest rate calculation, called the Base Rate, is the higher of the Agent’s
prime rate or the Federal Funds rate plus 0.50% (a “Base Rate Loan”). The second
allowed interest rate calculation is the 1, 2, 3, 6, or 12-month LIBOR rate plus
2.5%. As of May 3, 2009, there were no outstanding borrowings under the
Revolver.




Our New
Credit Facility also provides for a Senior Secured Term Credit Facility (the
“Term Loan”) of $38.0 million that requires monthly interest payments beginning
September 30, 2008, and quarterly principal payments of approximately $1.1
million beginning October 31, 2008, until its maturity on August 28, 2013, when
the balance will be due in full. The interest rate for the term loan varies
based upon the one-month LIBOR rate plus 2.80%. In connection with the Term Loan
agreement, we also entered into an interest rate swap agreement with U.S. Bank
N. A., which exchanged the variable one-month LIBOR rate of the Term Loan
for a fixed LIBOR rate of 3.99% per annum effective August 22, 2008,
through the maturity of the Term Loan. As of May 3, 2009, there was $34.6
million outstanding under the Term Loan at an average interest rate of 6.79% and
the value of the interest rate swap was ($1.6) million.




Under the
New Credit Facility, as amended, we must comply with various financial and
non-financial covenants. The financial covenants include a cash flow leverage
ratio, fixed charge coverage ratio, working capital requirement and liquidity
requirement. The non-financial covenants include restrictions on asset
divestitures; liens; transactions with related parties; limitations on
additional indebtedness; mergers, acquisitions and consolidations; cash
dividends; redemptions of stock; and change of control. The New Credit Facility
provides for a mandatory prepayment of principal equal to 50% of free cash flow
when a collateral shortfall is present, measured on an annual basis beginning
October 31, 2009. A collateral shortfall will exist if the outstanding principal
balance of the New Credit Facility exceeds the sum of (i) 100% of cash held in a
control account, (ii) 80% of accounts receivable, (iii) 50% of net book value of
finished goods and raw materials, (iv) 75% of the net book value of land,
buildings, and property improvements, and (v) 50% of the net book value of all
other fixed assets. Free cash flow is defined as EBITDA as of the fiscal year
then ended less the sum of (i) unfinanced capital expenditures, (ii) cash paid
interest, (iii) cash paid taxes, (iv) the change in working capital, and (v)
debt amortization under the New Credit Facility.  On January 28, 2009,
we entered into an amendment with both lenders of the New Credit Facility
(“Amendment”).  The Amendment waived the fixed charge coverage ratio
requirement for the fiscal 2008 year end.  The Amendment also reduced
the minimum fixed charge coverage ratio for the first fiscal quarter of 2009,
increased the base rate on the Revolver by 0.25%, and increased the LIBOR spread
on the Revolver from 2.0% to 2.5%.  At May 3, 2009, we were in
compliance with all of the covenants as amended.




-12-


10. BUSINESS SEGMENT
INFORMATION




Management
reviewed the Company’s operating segments in accordance with SFAS 131, Disclosure about Segments of an
Enterprise and Related Information. As a result of our acquisition of
Summit in March 2007, management determined that a new operating segment was
appropriate.  The segment discussion outline below represents the
adjusted segment structure as determined by management in accordance with SFAS
No. 131.





Management
has identified two operating segments. Each operating segment is considered a
reporting segment, which is described as follows:  the design,
development, and marketing of interactive electronic bingo systems consisting of
portable and fixed-based systems and the manufacturing and sale of gaming
equipment.





The
accounting policies of the reporting segments are the same as those described in
the summary of significant accounting policies. We evaluate the performance of
these segments based on many factors including sales, sales trends, margins, and
operating performance.




(In
      thousands, except per share amounts)13
      Weeks Ended
            
            
            Three
      Months Ended
            
            
            26
      Weeks Ended
            
            
            Six
      Months EndedMay
      3, 2009
            
            
            April
      30, 2008
            
            
            May
      3, 2009
            
            
            April
      30, 2008Net
      RevenueBingo
      Equipment
            
            $
            11,015
            
            
            $
            11,150
            
            
            $
            21,167
            
            
            $
            22,218Box
      Equipment
            
            
            1,573
            
            
            
            2,720
            
            
            
            4,127
            
            
            
            6,836$
            12,588
            
            
            $
            13,870
            
            
            $
            25,294
            
            
            $
            29,054Net
      Cost of RevenueBingo
      Equipment
            
            $
            3,751
            
            
            $
            4,582
            
            
            $
            7,627
            
            
            $
            9,273Box
      Equipment
            
            
            917
            
            
            
            1,587
            
            
            
            2,509
            
            
            
            3,496$
            4,668
            
            
            $
            6,169
            
            
            $
            10,136
            
            
            $
            12,769Net
      Income/(Loss)Bingo
      Equipment
            
            $
            1,165
            
            
            $
            487
            
            
            $
            1,940
            
            
            $
            503Box
      Equipment
            
            
            (1,234
            )
            
            
            (374
            )
            
            
            (2,692
            )
            
            
            (59
            )$
            (69
            )
            
            $
            113
            
            
            $
            (752
            )
            
            $
            444Depreciation
      and AmortizationBingo
      Equipment
            
            $
            1,734
            
            
            $
            2,215
            
            
            $
            3,616
            
            
            $
            4,587Box
      Equipment
            
            
            329
            
            
            
            321
            
            
            
            656
            
            
            
            640$
            2,063
            
            
            $
            2,536
            
            
            $
            4,272
            
            
            $
            5,227Interest
      ExpenseBingo
      Equipment
            
            $
            84
            
            
            $
            15
            
            
            $
            264
            
            
            $
            25Box
      Equipment
            
            
            435
            
            
            
            654
            
            
            
            1,775
            
            
            
            1,357$
            519
            
            
            $
            669
            
            
            $
            2,039
            
            
            $
            1,382May
      3, 2009
            
            
            November
      2, 2008Identifiable
      AssetsBingo
      Equipment
            
            
            
            
            
            
            
            
            
            $
            46,091
            
            
            $
            47,088Box
      Equipment
            
            
            
            
            
            
            
            
            
            
            39,689
            
            
            
            42,407$
            85,780
            
            
            $
            89,495




11. RELATED PARTY TRANSACTIONS




As of
November 2, 2008, there was a balance owing to a member of the board of the
Company in the amount of $34.5 thousand, net of discount. As of May 3, 2009, the
remaining balance was $24 thousand, net of discount. This relates to the
coverage of the board member for medical insurance until the age of
retirement.




-13-


ITEM 2.  MANAGEMENT’S
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS




The
following discussion should be read in conjunction with our unaudited condensed
consolidated financial statements and notes thereto included elsewhere in this
report, as well as our audited consolidated financial statements for the 53
weeks ended November 2, 2008, contained in our Annual Report on Form
10-K.




This
document includes various “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 represent our expectations or
beliefs concerning future events. Statements containing expressions such as
“believes,” “anticipates,” or “expects,” used in our press releases and periodic
reports on Forms 10-K and 10-Q filed with the SEC, are intended to identify
forward-looking statements. All forward-looking statements involve risks and
uncertainties. Although we believe our expectations are based upon reasonable
assumptions within the bounds of our knowledge of our business and operations,
there can be no assurances that actual results will not differ materially from
expected results. We caution that these and similar statements included in this
report are further qualified by important factors that could cause actual
results to differ materially from those in the forward-looking statements. Such
factors include those discussed under the heading “Risk Factors” in our Annual
Report on Form 10-K for the 53 weeks ended November 2, 2008, and in this report.
Readers are cautioned not to place undue reliance on forward-looking statements,
which speak only as of the date thereof. We undertake no obligation to publicly
release any revisions to such forward-looking statements to reflect events or
circumstances after the date hereof.




OVERVIEW




We
design, develop, and market bingo systems, VLT’s, slot machines and related
software, and server-based wireless gaming systems.  VLT’s, slot
machines and related software are collectively referred to as “box business”. We
entered the box business in March 2007 with our acquisition of Summit Gaming for
$40.9 million in cash.





For the
second quarter of 2009, our revenue from box business sales equaled 12% of total
revenue, lease revenue from portable bingo systems equaled 71% of total revenue,
and lease revenue from fixed-based bingo units equaled 17% of total
revenue.  During the 26 weeks ended May 3, 2009, revenue from box
business sales equaled 16% of total revenue, lease revenue from portable bingo
systems equaled 67% of total revenue, and lease revenue from fixed-based bingo
units equaled 17% of total revenue.





As of May
3, 2009, we had bingo systems in service in 40 states, one US territory, various
Native American locations and five foreign countries.  We had box
sales in 10 states and various Native American locations.  We are
marketing new server-based wireless gaming systems where users play a range of
games including bingo, video poker, keno and other slot machine
games.  The MiniTM wireless server-based gaming system was installed in
Europe during the second quarter of 2008.  The Elite TM server-based
gaming system was installed domestically in the third quarter of 2008 and in
Europe during the first quarter of fiscal 2009.  The European
configuration supports wireless bingo and fast action gaming for the European
bingo market.




We
generate bingo revenue by placing electronic bingo systems in bingo halls under
contracts based on (1) a fixed fee per use per session; (2) a fixed
weekly fee per terminal; or (3) a percentage of the revenue generated by
each terminal. Revenue growth for our bingo systems is affected by player
acceptance of electronic bingo as an addition or an alternative to paper
bingo.  Additionally, our bingo revenue growth is dependent on our
ability to expand operations into new markets and our ability to increase our
market share in our current markets. Fixed-base bingo terminals generate greater
revenue per terminal than portable bingo terminals, but also require a greater
initial capital investment.




We
typically install our electronic bingo systems at no charge to our customers,
and we capitalize the costs. We record depreciation of bingo equipment over
either a three- or five-year estimated useful life using the straight-line
method of depreciation.




Our box
business generates revenue from the sale of boxes (new and used), software
conversion kits, content fees, license fees, participation fees, parts, and
services. For the 13 and 26 weeks ending May 3, 2009, 92.3% and 93.7%,
respectively, of our box business sales were derived from the sale of new and
used equipment, conversion kits, and parts compared to 86.1% and 71.4% for the
three and six months ending April 30, 2008.  In some instances, we
recognize recurring participation revenue in lieu of a one-time machine sale.
Increasing market share in existing markets and expanding product placement into
new markets drive revenue growth.




Our bingo
and box expenses consist primarily of cost of revenue, general and
administrative expense, sales and marketing expense, and research and
development expense.  Cost of revenue consists of expenses associated
with technical and operational support of the bingo systems in bingo halls,
depreciation and amortization of bingo terminals, cost of sales related to
equipment sold, and repair/refurbishment/disposal costs of bingo terminals and
related support equipment.  General and administrative costs consist
of expenses associated with management of our company and the related support
including finance and accounting, legal, compliance, information systems, human
resources, allowance for doubtful accounts receivable, and amortization of
intangible assets acquired from the Summit acquisition.  Sales and
marketing expenses consist primarily of commissions paid to distributors for
promoting and supporting our products, and compensation paid to our internal
sales force to manage existing customers, to generate new customers, and sell
additional and upgraded equipment.  Research and development costs
consist of company-sponsored activities to provide customers with new or
enhanced games or game themes for our VLT and slot machines, improved bingo
terminals, and to develop and test new wireless server-based
systems.




For the
quarter, we reported a net loss of $69 thousand for the 13 weeks ended May 3,
2009, compared to a net profit of $0.1 million for the three months ended April
30, 2008. Although we experienced a $1.3 million decline in revenue for the
second quarter of 2009 compared to the same period of 2008, our gross margin
improved  from 55.5% to 62.9%.  Year to date, we reported a
net loss of $0.7 million for the 26 weeks ended May 3, 2009, compared to a net
profit of $0.4 million for the six months ended April 30, 2008. Although we
experienced a $3.8 million decline in revenue for the 26 weeks of 2009 compared
to the same period of 2008, our gross margin improved from 56.1% in 2008 to
59.9% for 2009.  This improvement in gross margin for both the second
quarter and year-to- date is the result of aligning service and operating
expenses to our revenue and business levels.  The increase in general
and administrative (“G&A”) expense for 2009 in both the second quarter and
year-to-date is due to a non-recurring charge of $0.6 million for the relocation
to our new corporate headquarters.  Sales and marketing expense
increased during these periods due to investing promotional costs with a
distributor to promote revenue growth in Louisiana.  Interest expense
for the second quarter of 2009 includes a $0.1 million non-cash benefit to
adjust for the value of the interest rate swap contract, while year-to-date
interest expense includes a $0.9 million non-cash expense adjustment for the
value of the interest rate swap contract.  For the quarter, we
recorded a deferred tax benefit of $77 thousand which brought our net loss to
$69 thousand or a loss of $0.01 cents per share.  Year-to-date, we
recorded a deferred tax benefit of $0.5 million which brought our net loss to
$0.7 million or a loss of $0.06 cents per share.





On
approximately February 6, 2009, we completed our relocation to the new corporate
headquarters. Substantially all the improvements to our new 100,000 square foot
facility were completed by the relocation date.




-14-


APPLICATION
OF CRITICAL ACCOUNTING POLICIES AND ESTIMATES




Management’s
Discussion and Analysis of Financial Condition and Results of Operations discuss
our condensed consolidated financial statements, which have been prepared in
accordance with U.S. generally accepted accounting principles. The preparation
of these financial statements requires us to make estimates and assumptions that
affect the reported amounts of assets and liabilities and the disclosure of
contingent assets and liabilities at the balance sheet dates and reported
amounts of revenue and expenses during the reporting period. On an ongoing
basis, we evaluate our estimates and judgments, including those related to
revenue recognition, bad debts, bingo terminal depreciation, goodwill
impairment, obsolescence, provision for income taxes, and contingencies and
litigation. We base our estimates and judgments on historical experience and on
various other factors that we believe are reasonable under the circumstances,
the results of which form the basis for making judgments about the carrying
values of assets and liabilities that are not readily apparent from other
sources. Actual results may differ from these estimates under different
assumptions or conditions.




Our
critical accounting policies are those that are both important to the portrayal
of our financial condition and results of operations and require management’s
most difficult, subjective, and complex judgment. These critical accounting
policies are discussed in “Management’s Discussion and Analysis of Financial
Condition and Results of Operations” in our 2008 Form 10-K. There have been no
changes to our critical accounting policies since the filing of our 2008 Form
10-K.




RESULTS
OF OPERATIONS




13
Weeks Ended May 3, 2009, compared to the Three Months Ended April 30,
2008




The
      following table sets forth certain selected unaudited condensed
      consolidated financial data for the periods indicated:13
      Weeks Ended May 3, 2009 and Three Months Ended April 30,
    2008(In
      Thousands)Bingo
      Equipment
            
            
            Box
      Equipment13
      Wks
            
            
            Three
      Mths
            
            
            $
      Change
            
            
            %
      Change
            
            
            13
      Wks
            
            
            Three
      Mths
            
            
            $
      Change
            
            
            %
      ChangeEnded
            
            
            Ended
            
            
            Favorable/
            
            
            Favorable/
            
            
            Ended
            
            
            Ended
            
            
            Favorable/
            
            
            Favorable/5/3/2009
            
            
            4/30/2008
            
            
            (Unfavorable)
            
            
            (Unfavorable)
            
            
            5/3/2009
            
            
            4/30/2008
            
            
            (Unfavorable)
            
            
            (Unfavorable)Net
      Revenue
            
            $
            11,015
            
            
            $
            11,150
            
            
            $
            (135
            )
            
            
            -1.21
            %
            
            $
            1,573
            
            
            $
            2,720
            
            
            $
            (1,147
            )
            
            
            -42.17
            %Cost
      of Revenue
            
            
            3,751
            
            
            
            4,582
            
            
            
            831
            
            
            
            18.14
            %
            
            
            917
            
            
            
            1,587
            
            
            
            670
            
            
            
            42.22
            %Gross
      Profit
            
            
            7,264
            
            
            
            6,568
            
            
            
            696
            
            
            
            10.60
            %
            
            
            656
            
            
            
            1,133
            
            
            
            (477
            )
            
            
            -42.10
            %Gross
      Margin
            
            
            65.95
            %
            
            
            58.91
            %
            
            
            7.04
            %
            
            
            
            
            
            
            41.70
            %
            
            
            41.65
            %
            
            
            0.05
            %Operating
      Expenses:General
      and administrative
            
            
            1,888
            
            
            
            2,023
            
            
            
            135
            
            
            
            6.67
            %
            
            
            1,084
            
            
            
            533
            
            
            
            (551
            )
            
            
            -103.38
            %Sales
      and marketing
            
            
            2,963
            
            
            
            2,549
            
            
            
            (414
            )
            
            
            -16.24
            %
            
            
            376
            
            
            
            164
            
            
            
            (212
            )
            
            
            -129.27
            %Research
      and Development
            
            
            565
            
            
            
            917
            
            
            
            352
            
            
            
            38.39
            %
            
            
            746
            
            
            
            425
            
            
            
            (321
            )
            
            
            -75.53
            %Total
      operating expenses
            
            
            5,416
            
            
            
            5,489
            
            
            
            73
            
            
            
            1.33
            %
            
            
            2,206
            
            
            
            1,122
            
            
            
            (1,084
            )
            
            
            -96.61
            %Income
      from operations
            
            
            1,848
            
            
            
            1,079
            
            
            
            769
            
            
            
            71.27
            %
            
            
            (1,550
            )
            
            
            11
            
            
            
            (1,561
            )
            
            
            -14190.91
            %Interest
      Expense
            
            
            (84
            )
            
            
            (15
            )
            
            
            (69
            )
            
            
            -460.00
            %
            
            
            (435
            )
            
            
            (654
            )
            
            
            219
            
            
            
            33.49
            %Impairment
      of investments
            
            
            0
            
            
            
            (285
            )
            
            
            285
            
            
            
            100.00
            %
            
            
            0
            
            
            
            0
            
            
            
            0
            
            
            
            0Other
      income (expense), net
            
            
            71
            
            
            
            34
            
            
            
            37
            
            
            
            108.82
            %
            
            
            4
            
            
            
            11
            
            
            
            (7
            )
            
            
            -63.64
            %Income
      (loss) before income taxes
            
            
            1,835
            
            
            
            813
            
            
            
            1,022
            
            
            
            125.71
            %
            
            
            (1,981
            )
            
            
            (632
            )
            
            
            (1,349
            )
            
            
            -213.45
            %Provision
      (benefit) for income taxes
            
            
            670
            
            
            
            326
            
            
            
            (344
            )
            
            
            -105.52
            %
            
            
            (747
            )
            
            
            (258
            )
            
            
            489
            
            
            
            189.53
            %Net
      income (loss)
            
            $
            1,165
            
            
            $
            487
            
            
            $
            678
            
            
            
            139.22
            %
            
            $
            (1,234
            )
            
            $
            (374
            )
            
            $
            (860
            )
            
            
            -229.95
            %




Net
Revenue




Bingo net
revenue decreased $135 thousand for the 13 weeks ended May 3, 2009, or 1.2% to
$11.0 million from $11.2 million compared to the three months ended April 30,
2008. The decrease in bingo net revenue is primarily due to hall closures and
price adjustments from the economy and competition, which was partially offset
by an increase due to new business from new products.




Box net
revenues decreased $1.1 million for the 13 weeks ended May 3, 2009, or 42.2% to
$1.6 million from $2.7 million compared to the three months ended April 30, 2008
primarily due to weakened demand.  In addition, the Company has
experienced some delays in releasing new products as we collaborate with
regulators to obtain approvals on new software programs and other features in
certain markets.




Cost
of Revenue




Bingo
cost of revenue decreased 18% to $3.8 million for the 13 weeks ended May 3,
2009, from $4.6 million for the three months ended April 30, 2008. Bingo
equipment depreciation decreased by approximately $0.5 million for the 13 weeks
ended May 3, 2009, primarily due to certain products becoming fully depreciated,
and service labor decreased by $0.2 million due to aligning expenses to business
levels.




Box cost
of revenue decreased 42.2% to $0.9 million for the 13 weeks ended May 3, 2009,
from $1.6 million for the three months ended April 30, 2008. The decrease in
cost of revenue is directly related to the decline in net revenue.




-15-


Gross
Profit




Bingo
gross profit increased 10.6% to $7.3 million for the 13 weeks ended May 3, 2009,
from $6.6 million for the three months ended April 30, 2008.  Bingo
gross margin increased to 65.9% of net revenue for the 13 weeks ended May 3,
2009, from 58.9% of net revenue for the three months ended April 30,
2008.  The 7.0 point increase in bingo gross margin is related to cost
containment efforts in service and operations plus other cost of revenue
decreases as described above.




Box gross
profit decreased 42.1% to $0.7 million for the 13 weeks ended May 3, 2009, from
$1.1 million for the three months ended April 30, 2008.  The decrease
is directly related to the decrease in net revenue as described
above.  Box gross margin remained constant at 41.7% of net revenue for
both the 13 weeks ended May 3, 2009 and for the three months ended April 30,
2008.




Operating
Expenses




Bingo
general and administrative costs decreased 6.7% to $1.9 million or 17.1% of net
revenue for the 13 weeks ended May 3, 2009, from $2.0 million, or 18.1% of net
revenue for the three months ended April 30, 2008. This decline in costs is
related to expenses incurred in the 2nd quarter
2008 for regulatory licensing and legal matters that have since been resolved,
offset in part by non-recurring charges for the relocation to our corporate
headquarters.  These relocation charges of approximately $0.6 million
include one-time moving expenses, write-off of leasehold improvements and other
assets, plus landlord settlement for early termination of our old corporate
headquarters.




Box
general and administrative costs increased 103% to $1.1 million or 68.9% of net
revenue in the 13 weeks ended May 3, 2009, from $0.5 million, or 19.6% of net
revenue for the three months ended April 30, 2008. The increase is due to the
increased cost of equipment testing, regulatory submissions, jurisdictional
licensing, audit and legal fees as we position ourselves for growth in our box
business.




Bingo
sales and marketing expenses for the 13 weeks ended May 3, 2009 increased by
$0.4 million or 16.2% over the three months ended April 30, 2008 to $2.9
million. This increase in bingo sales and marketing expenses is due to the
increase in employee related costs as we build the sales organization
to  take advantage of both new markets and competitive opportunities,
and an increase in distributor commissions as the revenue in their markets has
increased.




Box sales
and marketing expenses for the 13 weeks ended May 3, 2009 increased to $0.4
million, from $0.2 million for the three months ended April 30,
2008.  This increase is primarily due to investing promotional costs
with a distributor to promote revenue growth in Louisiana.




Bingo
research and development expenses decreased 38.4% to $0.6 million for the 13
weeks ended April 30, 2009, from $0.9 million for the three months ended April
30, 2008. The decrease is due to the timing of incurring costs for development
and equipment testing activity of bingo systems.






Box
research and development expenses increased by $0.3 million to $0.7 million for
the 13 weeks ended May 3, 2009, from $0.4 million for the three months ended
April 30, 2008. The increase is due to the increased demand from major VLT
customers for custom software development and new hardware design.




Interest
Expense




Interest
expense was $0.5 million for the 13 weeks ended May 3, 2009, compared to $0.7
million for the three months ended April 30, 2008, a decrease of $0.2
million.  The decrease is primarily due to the non-cash benefit to
adjust for the value of the interest rate swap contract and a lower effective
annual borrowing rate of 6.79% for 2009 compared to 9.0% for 2008.




-16-


26
Weeks Ended May 3, 2009, compared to the Six Months Ended April 30,
2008




The
      following table sets forth certain selected unaudited condensed
      consolidated financial data for the periods indicated:26
      Weeks Ended May 3, 2009 and Six Months Ended April 30,
2008(In
      Thousands)Bingo
      Equipment
            
            
            Box
      Equipment26
      Wks
            
            
            Six
      Mths
            
            
            $
      Change
            
            
            %
      Change
            
            
            26
      Wks
            
            
            Six
      Mths
            
            
            $
      Change
            
            
            %
      ChangeEnded
            
            
            Ended
            
            
            Favorable/
            
            
            Favorable/
            
            
            Ended
            
            
            Ended
            
            
            Favorable/
            
            
            Favorable/5/3/2009
            
            
            4/30/2008
            
            
            (Unfavorable)
            
            
            (Unfavorable)
            
            
            5/3/2009
            
            
            4/30/2008
            
            
            (Unfavorable)
            
            
            (Unfavorable)Net
      Revenue
            
            $
            21,167
            
            
            $
            22,218
            
            
            $
            (1,051
            )
            
            
            -4.73
            %
            
            $
            4,127
            
            
            $
            6,836
            
            
            $
            (2,709
            )
            
            
            -39.63
            %Cost
      of Revenue
            
            
            7,627
            
            
            
            9,273
            
            
            
            1,646
            
            
            
            17.75
            %
            
            
            2,509
            
            
            
            3,496
            
            
            
            987
            
            
            
            28.23
            %Gross
      Profit
            
            
            13,540
            
            
            
            12,945
            
            
            
            595
            
            
            
            4.60
            %
            
            
            1,618
            
            
            
            3,340
            
            
            
            (1,722
            )
            
            
            -51.56
            %Gross
      Margin
            
            
            63.97
            %
            
            
            58.26
            %
            
            
            5.70
            %
            
            
            
            
            
            
            39.21
            %
            
            
            48.86
            %
            
            
            -9.65
            %Operating
      Expenses:General
      and administrative
            
            
            3,527
            
            
            
            4,153
            
            
            
            626
            
            
            
            15.07
            %
            
            
            2,270
            
            
            
            1,161
            
            
            
            (1,109
            )
            
            
            -95.52
            %Sales
      and marketing
            
            
            5,258
            
            
            
            4,957
            
            
            
            (301
            )
            
            
            -6.07
            %
            
            
            719
            
            
            
            293
            
            
            
            (426
            )
            
            
            -145.39
            %Research
      and Development
            
            
            1,441
            
            
            
            1,969
            
            
            
            528
            
            
            
            26.82
            %
            
            
            1,262
            
            
            
            863
            
            
            
            (399
            )
            
            
            -46.23
            %Total
      operating expenses
            
            
            10,226
            
            
            
            11,079
            
            
            
            853
            
            
            
            7.70
            %
            
            
            4,251
            
            
            
            2,317
            
            
            
            (1,934
            )
            
            
            -83.47
            %Income
      from operations
            
            
            3,314
            
            
            
            1,866
            
            
            
            1,448
            
            
            
            77.60
            %
            
            
            (2,633
            )
            
            
            1,023
            
            
            
            (3,656
            )
            
            
            -357.38
            %Interest
      Expense
            
            
            (264
            )
            
            
            (25
            )
            
            
            (239
            )
            
            
            -956.00
            %
            
            
            (1,775
            )
            
            
            (1,357
            )
            
            
            (418
            )
            
            
            -30.80
            %Impairment
      of investments
            
            
            0
            
            
            
            (977
            )
            
            
            977
            
            
            
            100.00
            %
            
            
            0
            
            
            
            0
            
            
            
            0
            
            
            
            0Other
      income (expense), net
            
            
            121
            
            
            
            143
            
            
            
            (22
            )
            
            
            -15.38
            %
            
            
            9
            
            
            
            26
            
            
            
            (17
            )
            
            
            -65.38
            %Income
      (loss) before income taxes
            
            
            3,171
            
            
            
            1,007
            
            
            
            2,164
            
            
            
            214.90
            %
            
            
            (4,399
            )
            
            
            (308
            )
            
            
            (4,091
            )
            
            
            -1328.25
            %Provision
      (benefit) for income taxes
            
            
            1,231
            
            
            
            504
            
            
            
            (727
            )
            
            
            -144.25
            %
            
            
            (1,707
            )
            
            
            (249
            )
            
            
            1,458
            
            
            
            585.54
            %Net
      income (loss)
            
            $
            1,940
            
            
            $
            503
            
            
            $
            1,437
            
            
            
            285.69
            %
            
            $
            (2,692
            )
            
            $
            (59
            )
            
            $
            (2,633
            )
            
            
            -4462.71
            %




Net
Revenue




Bingo net
revenue for the 26 weeks ended May 3, 2009 decreased 4.7% to $21.2 million from
$22.2 million compared to the six months ended April 30, 2008.  The
decrease in bingo net revenue is primarily due to hall closures and price
adjustments from the economy and competition.  This was partially
offset by an increase due to new business from new products.




Box net
revenue for the 26 weeks ended May 3, 2009 decreased 39.6% to $4.1 million from
$6.8 million compared to the six months ended April 30, 2008.  The
decrease in box revenues is primarily due to weakened demand.  In
addition, the Company has experienced some delays in releasing new product as we
collaborate with regulators to obtain approvals on new software programs and
other features in certain markets.




Cost
of Revenue




Bingo
cost of revenue decreased 18% to $7.6 million for the 26 weeks ended May 3,
2009, from $9.3 million for the six months ended April 30,
2008.  Bingo equipment depreciation decreased by approximately $0.9
million due to certain product becoming fully depreciated, and service labor
decreased by $0.5 million due to aligning expenses to our business
levels.




Box
business cost of revenue decreased 28.2% to $2.5 million for the 26 weeks ended
May 3, 2009, from $3.5 million for the six months ended April 30,
2008.  The decrease in cost of revenue is related to the decline in
net revenue.




Gross
Profit




Bingo
gross profit increased 4.6% to $13.5 million for the 26 weeks ended May 3, 2009,
from $12.9 million for the six months ended April 30, 2008.  Bingo
gross margin increased to 64.0% of net revenue from 58.3% of net revenue for the
respective periods.  Bingo gross margin increased 5.7 points due to
lower cost of revenue and cost containment efforts as described
above.




Box gross
profit decreased 51.6% to $1.6 million for the 26 weeks ended May 3, 2009, from
$3.3 million for the six months ended April 30, 2008 directly related to the
decrease in net revenue.  Box gross profit decreased to 39.2% of net
revenue for the 26 weeks ended May 3, 2009, from 48.9% of net revenue for the
six months ended April 30, 2008.  The decline in box gross margin of
9.7 points is due to a mix of lower margin sales to Louisiana, which is a
distributor-based jurisdiction.




-17-


Operating
Expenses




Bingo
general and administrative costs decreased 15.1% to $3.5 million or 16.7% of net
revenue for the 26 weeks ended May 3, 2009, from $4.2 million, or 18.7% of net
revenue for the six months ended April 30, 2008.  The decline is
related to expenses incurred in the 2n quarter
of 2008 for regulatory licensing and legal matters that have since been
resolved, partially offset by non-recurring charges for the relocation of our
corporate headquarters.




Box
general and administrative costs increased 95.5% to $2.3 million or 55% of net
revenue in the 26 weeks ended May 3, 2009, from $1.2 million or 17% of net
revenue for the six months ended April 30, 2008. The increase is due to the
increased cost of equipment testing, regulatory submission, jurisdictional
licensing, and audit and legal fees as we position ourselves for growth in our
box business.




Bingo
sales and marketing expenses for the 26 weeks ended May 3, 2009 increased by
$0.3 million or 6% over the six months ended April 30, 2008 to $5.3
million.  This increase in bingo sales and marketing expenses is due
to the increase in employee related costs as we build the sales organization to
take advantage of both new markets and competitive opportunities and an increase
in distributor commissions as the revenue in their markets has
increased.




Box sales
and marketing expenses for the 26 weeks ended May 3, 2009 increased to $0.7
million, from $0.3 million for the six months ended April 30, 2008. This
increase is primarily due to investing promotional costs with a distributor to
promote revenue growth in Louisiana.




Bingo
research and development expenses decreased 26.8% to $1.4 million for the 26
weeks ended April 30, 2009, from $2.0 million for the six months ended April 30,
2008. The decrease is due to the timing of incurring costs for development and
equipment testing activity of bingo systems.




Box
research and development expenses increased by $0.4 million to $1.3 million for
the 26 weeks ended May 3, 2009, from $0.9 million for the six months ended April
30, 2008. The increase is due to the increased demand from major VLT customers
for custom software development and new hardware design.




Interest
Expense




Interest
expense was $2.0 million for the 26 weeks ended May 3, 2009 compared to $1.4
million for the six months ended April 30, 2008, an increase of $0.6
million.  Interest increased for the 26 weeks ended May 3, 2009 due to
a $0.9 million non-cash expense to adjust for the value of the interest rate
swap contract, offset by $0.2 in capitalized interest and a lower effective
borrowing rate.




LIQUIDITY
AND CAPITAL RESOURCES




We have
funded our operations and capital expenditures through cash from operations and
other capital sources. As of May 3, 2009, and November 2, 2008, we had a working
capital balance of $9.7 million and $9.1 million, respectively. As of May 3,
2009, our principal source of liquidity included cash and cash equivalents of
$6.4 million and a $2.0 million revolving credit facility with no amounts drawn.
Current liabilities include an accrued liability of $4.0 million in connection
with a contingent litigation judgment.




Operating
activities provided $6.2 million of cash for the 26 weeks ended May 3, 2009
compared with $6.8 million for the six months ended April 30, 2008. The $6.2
million consisted of a net loss of $0.7 million, adjusted by $4.3 million for
depreciation, amortization, obsolescence provisions, and loss on disposal of
equipment, a $0.9 million non-cash benefit adjustment for the interest rate
swap, and $1.8 million provided by other net changes in operating assets and
liabilities. During the six months ended April 30, 2008, the $6.8 million
consisted primarily of our net income of $0.4 million adjusted by $5.2 million
for depreciation, amortization, obsolescence provisions, and loss on disposal of
bingo terminals and related equipment, a $1.0 million impairment of investments,
and $0.2 million provided by other net changes in operating assets and
liabilities.




We used
approximately $3.5 million of cash in investing activities during the 26
weeks ended May 3, 2009 compared to $1.2 million of cash provided during
the six months ended April 30, 2008. The $3.5 million consisted of
$6.2 million of capital expenditures, offset in part by the use of $2.6
million of restricted cash to fund capital spending on the improvements for our
new headquarters.  During the six months ended April 30, 2008, the
$1.2 million included $3.6 million received from the sale of short-term
investments offset in part by $2.4 million of capital expenditures.





Financing
activities used $2.4 million during the 26 weeks ended May 3, 2009 compared to
$5.1 million during the six months ended April 30, 2008. The $2.4 million used
during the 26 weeks ended May 3, 2009 was for the payments on long-term debt.
The $5.1 million used during the six months ended April 30, 2008 included
payments on long-term debt of approximately $2.2 million and the purchase of the
Company’s common stock for approximately $2.9 million.




-18-


Our New
Credit Facility, as amended, provided a total of $40.0 million of financing,
$38.0 million of which is in the form of a term loan and $2.0 million of which
is in the form of a revolving line of credit.  Proceeds from the New
Credit Facility were used to refinance our prior credit facility, acquire real
property, and for general corporate purposes.  The term loan matures
on August 28, 2013 with monthly interest payments beginning September 30, 2008
based upon one-month LIBOR rate plus 2.80% and quarterly principal payments of
approximately $1.1 million beginning October 31, 2008 until the loan is repaid
in full.  The Senior Secured Revolving Credit Facility matures on
August 31, 2010, with monthly interest-only payments due on the last day of each
month beginning September 30, 2008 with an interest rate of either (i) the
higher of the Agent's prime rate or the Federal Funds rate plus 0.50% (a "Base
Rate Loan) or (ii) 1, 2, 3, 6, or 12-month LIBOR rate plus 2.5%. With respect to
the term loan, we entered into an interest rate swap agreement which exchanged
the variable one-month LIBOR rate for a fixed LIBOR rate of 3.99% per annum
effective August 22, 2008 through the maturity of the loan.  The New Credit
Facility provides for a mandatory prepayment of principal equal to 50% of free
cash flow when a collateral shortfall is present, measured on an annual basis
beginning October 31, 2009. A collateral shortfall will exist if the outstanding
principal balance of the New Credit Facility exceeds the sum of (i) 100% of cash
held in a control account, (ii) 80% of accounts receivable, (iii) 50% of net
book value of finished goods and raw materials, (iv) 75% of the net book value
of land, buildings, and property improvements, and (v) 50% of the net book value
of all other fixed assets. Free cash flow is defined as EBITDA as of the fiscal
year then ended less the sum of (i) unfinanced capital expenditures, (ii) cash
paid interest, (iii) cash paid taxes, (iv) the change in working capital, and
(v) debt amortization under the New Credit Facility.  In the event a
collateral shortfall exists on October 31, 2009 and the Company is required to
make a prepayment, management does not believe the Company's operations will be
adversely affected.




We
believe that cash flows from operations, cash, cash equivalents, and amounts
available under our New Credit Facility will be sufficient to support our
operations, provide for budgeted capital expenditures, and meet liquidity
requirements through the remainder of fiscal 2009. Our long-term liquidity
requirements depend on many factors, including the rate at which we expand our
business and whether we do so internally or through acquisitions. In addition,
we may pursue strategic opportunities that could require us to fund our portion
of operating expenses of such ventures and may require us to advance additional
amounts should any partners in such ventures be unable to meet unanticipated
capital requirements or similar funding events. To the extent that the funds
generated from the sources described above are insufficient to fund our
activities in the long term, we may be required to raise additional funds
through public or private financing. No assurance can be given that the
additional financing will be available or that, if it is available, it will be
on terms acceptable to us. In the event we were unable to raise additional
capital if needed, further measures would be necessary, including the delay or
reduction of our operations, research and development and other activities.
Certain of these measures may require third-party consent or approvals,
including our lenders under the New Credit Facility, certain regulatory bodies,
and others, and there are no assurances such consent or approvals could be
obtained. Management does not believe that these limitations will adversely
affect our operations or our ability to acquire necessary
capital.




On
September 4, 2007, the Board of Directors authorized expending up to $5.0
million in a share repurchase program. On September 16, 2008, this program was
extended through close of the trading day December 31, 2008.  The
actual amount and timing of dollars expended and shares repurchased were subject
to business and market conditions and applicable SEC rules.  As of
December 31, 2008, we had acquired 918,943 shares at a cost of approximately
$4.7 million.  This program is now expired, with no additional shares
purchased.




Contractual
Obligations


The
      following table presents information on contractual obligations held as of
      May 3, 2009 (in thousands):Payments
      Due by PeriodTotal
                  
                  
                  Less
      than 1 year
                  
                  
                  1
      - 3 years
                  
                  
                  3
      - 5 years
                  
                  
                  More
      than 5 yearsLong-Term
      Debt Obligations:Term
      Loan Facility
                  
                  $
                  34,647
                  
                  
                  $
                  4,471
                  
                  
                  $
                  13,413
                  
                  
                  $
                  16,763
                  
                  
                  $
                  -Estimated
      Interest Payments
                  
                  
                  7,519
                  
                  
                  
                  2,240
                  
                  
                  
                  4,902
                  
                  
                  
                  377
                  
                  
                  
                  -Other
      Notes Payable
                  
                  
                  135
                  
                  
                  
                  49
                  
                  
                  
                  86
                  
                  
                  
                  -
                  
                  
                  
                  -Operating
      Leases
                  
                  
                  1,070
                  
                  
                  
                  729
                  
                  
                  
                  341
                  
                  
                  
                  -
                  
                  
                  
                  -Total
                  
                  $
                  43,371
                  
                  
                  $
                  7,489
                  
                  
                  $
                  18,742
                  
                  
                  $
                  17,140
                  
                  
                  $
                  -
  Purchase
Commitments




From time
to time, we enter into commitments with our vendors to purchase box parts, bingo
terminals and support equipment at fixed prices and/or guaranteed quantities. We
entered into a construction agreement in September 2008 with a general
contractor for $2.7 million for improvements to our new corporate headquarters,
which was funded by loan proceeds in a restricted cash account. As of May 3,
2009, this commitment was fulfilled and the building improvements were
completed.




Various
orders for product have been placed throughout fiscal 2008 and the first two
quarters of 2009, of which $0.1 million was outstanding as of May 3,
2009.  All purchases are expected to occur by the end of fiscal
2009.




-19-


ITEM
3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK




Market
Risks




At May 3,
2009, we held auction rate securities (“ARS”) with an aggregate purchase price
of approximately $3.9 million. With the liquidity issues experienced in global
credit and capital markets, the ARS held by us at May 3, 2009 have experienced
multiple failed auctions as the amount of securities submitted for sale exceeded
the amount of purchase orders.  Although six of the eight ARS continue
to pay interest according to their stated terms, based on the fair value of the
investments and an analysis of other-than temporary impairment factors, we
recorded a pre-tax impairment charge of approximately $3.3 million as of the 53
weeks ended November 2, 2008.  We did not incur an impairment charge for
the 13 weeks ended May 3, 2009.  If uncertainties in the credit and capital
markets deteriorate further or we experience any additional rating downgrades on
any of our ARS, we may incur up to an additional $0.6 million impairment charge
related to our ARS (representing the aggregate fair value of our ARS at May 3,
2009), which could negatively affect our financial condition and reported
earnings.





On August
22, 2008, we terminated our existing credit facility. Concurrently, we entered
into a Senior Secured Credit Facility (the “New Credit Facility”) with U.S. Bank
N.A. as lender, lead arranger and administrative agent, and Bank of the West as
lender (collectively “Lenders”) that provides up to $40.0 million of financing
for our company, $38.0 million of which is represented by a term loan note and
$2 million of which is a Senior Secured Revolving Credit Facility. U.S. Bank
N.A. will hold up to $25.0 million of the New Credit Facility and Bank of the
West will hold up to $15.0 million. As of May 3, 2009, the balance of the term
loan was $34.6 million, and there was no outstanding balance on the
revolver.





The term
loan requires monthly interest payments which began on September 30, 2008, and
quarterly principal payments of approximately $1.1 million which began on
October 31, 2008, until its maturity on August 28, 2013, when the balance will
be due in full. The interest rate for the term loan varies based upon the
one-month LIBOR rate plus 2.80%.  With respect to the term loan, we
also entered into an interest rate swap agreement with U.S. Bank N.
A., which exchanged the variable one-month LIBOR rate of the term loan for
a fixed LIBOR rate of 3.99% per annum effective August 22, 2008, through
the maturity of the term loan. As of May 3, 2009, there was $34.6 million
outstanding under the term loan, and the average interest rate is
6.79%.




Because
the interest rate on the term loan is fixed under a LIBOR swap agreement,
increases in interest rates will not affect our cash flow. However, if we find
it necessary to accelerate the amortization of the term loan, we could be
required to pay early breakage fees on the LIBOR contracts in the event that
interest rates decrease. We do not anticipate the need to accelerate
amortization of the term loan at any time for the remainder of fiscal
2009.





ITEM
4. CONTROLS AND PROCEDURES




Disclosure
Controls and Procedures




We
maintain disclosure controls and procedures that are designed to ensure that
information required to be disclosed in the reports we file or submit under the
Securities Exchange Act of 1934 is recorded, processed, summarized and reported
within the time periods specified in the SEC rules and forms, including, without
limitation, controls and procedures designed to ensure that such information is
accumulated and communicated to our management, including our Chief Executive
Officer (“CEO”) and Chief Financial Officer (“CFO”), as appropriate, to allow
timely decisions regarding required disclosure.




We have
evaluated, with the participation of our Chief Executive Officer and Chief
Financial Officer, the effectiveness of our disclosure controls and procedures
as of May 3, 2009. Based on this evaluation, our Chief Executive Officer and
Chief Financial Officer have concluded that our disclosure controls and
procedures are effective as of May 3, 2009.




Internal Control
over Financial Reporting




Management’s
Report on Internal Control over Financial Reporting




Internal
control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f)
under the Exchange Act) refers to the process designed by, or under the
supervision of, our CEO and CFO, and effected by our board of directors,
management and other personnel, to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of financial statements
for external purposes in accordance with generally accepted accounting
principles.  Management is responsible for establishing and
maintaining adequate internal control over our financial reporting.




Changes
in Internal Control over Financial Reporting




There
have been no changes in our internal control over financial reporting during the
13 weeks ended May 3, 2009 that have materially affected, or are reasonably
likely to materially affect, our internal control over financial
reporting.




-20-


PART II. OTHER INFORMATION




ITEM
1. LEGAL PROCEEDINGS




For a
discussion of our current litigation, see Note 7 (Legal Proceedings) to our
consolidated financial statements included herein.




We are
involved in various other legal proceedings arising in the ordinary course of
our business. We do not believe that any of those proceedings will have a
material adverse effect on our business, results of operations, or financial
condition.




ITEM
1A. RISK FACTORS




Other
than as described below, there have been no material changes from the risk
factors previously disclosed in our 2008 Form 10-K and Form 10-Q for the 13
weeks ended February 1, 2009.




We
must continue to meet NASDAQ Global Market continued listing requirements or we
risk delisting.




Our
common stock is listed on the NASDAQ Global Market.  In order to maintain
that listing, we are required to satisfy minimum financial and other continued
listing requirements, including, without limitation, maintaining a $1.00 per
share minimum closing bid price for our common stock.  In response to
current market conditions, NASDAQ has temporarily suspended the enforcement
rules requiring the minimum $1.00 closing bid price through July 19,
2009.




If the
closing bid price of our common stock is below $1.00 for 30 consecutive business
days after July 19, 2009, we could receive notice from NASDAQ stating that the
minimum bid price of our common stock is below continued listing
standards.  To regain compliance, our common stock would need to close at
$1.00 or more for any 10 consecutive business days during the 180 calendar days
following our receipt of the notice.  If we are unable to regain compliance
within 180 calendar days, NASDAQ would determine whether we meet the initial
listing criteria for the NASDAQ Capital Market other than the bid price
requirement.  If we met such criteria, we would be afforded an additional
180 calendar days to regain compliance with the minimum bid price
rule.




Given
current economic conditions and the volatility of our stock price, there is no
guarantee that we will be in compliance with the NASDAQ Global Market’s minimum
bid requirement when the suspension is lifted.  If we are unable to meet
the minimum bid when the temporary suspension is lifted, or if we fail to
satisfy any other continued listing standard under the NASDAQ Global Market
rules, NASDAQ may commence delisting proceedings against us. If we were to be
delisted, the market liquidity of our common stock would likely be adversely
affected and the market price of our common stock would likely decrease. 
In addition, our stockholders’ ability to trade or obtain quotations on our
shares could be severely limited because of lower trading volumes and
transaction delays.  These factors could contribute to lower prices and
larger spreads in the bid and ask price of our common stock.




ITEM
2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS




Not Applicable




ITEM
3. DEFAULTS UPON SENIOR SECURITIES




Not
Applicable





-21-


ITEM
4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS




We held our 2009 Annual Meeting of Stockholders on
April 1, 2009.  The following nominees were elected to our Board of
Directors to serve as directors until the next annual meeting of stockholders
and until their successors are elected and qualified:




Nominee
            
            Voters
      in Favor
            
            WithheldDonald
      K. Whitaker
            
            8,992,876
            
            1,641,868Richard
      H. Irvine
            
            8,992,530
            
            1,642,214Scott
      H. Shackelton
            
            8,989,875
            
            1,644,869Richard
      T. Fedor
            
            8,988,836
            
            1,645,908Jay
      M. Meilstrup
            
            7,050,884
            
            3,583,896




The
following additional items were voted upon by our stockholders:




Proposal
to ratify the appointment of Grant Thornton LLP, an independent registered
public accounting firm, as our independent auditor for the fiscal year ending
November 1, 2009.






Votes
      in Favor
            
            Against
            
            Abstained
            
            Not
      Voted10,628,831
            
            5,572
            
            3,341
            
            1,115,915




ITEM
5. OTHER INFORMATION




Not
Applicable




-22-


ITEM
6. EXHIBITS





2.1
            Asset
      Purchase Agreement dated August 30, 2006, between GameTech International,
      Inc. and Summit Amusement & Distributing Ltd. (1)3.1
            Certificate
      of Incorporation of the Registrant, as amended (2)3.2
            Certificate
      of Designation of Series A Junior Participating Preferred Stock of the
      Registrant (3)3.3
            Second
      Amended and Restated Bylaws of the Registrant (4)4.1
            GameTech
      International, Inc. Registration Rights
  Agreement (5)4.2
            Rights
      Agreement, dated as of March 7, 2003, between GameTech International, Inc.
      and Mellon Investor Services, LLC, as rights agent (6)4.3
            Specimen
      Common Stock Certificate (3)31.1
            Certification
      of Chief Executive Officer pursuant to Rule 13a-14(a) and Rule 15d-14(a)
      promulgated under the Securities Exchange Act of 1934, as
      amended.31.2
            Certification
      of Chief Financial Officer pursuant to Rule 13a-14(a) and Rule 15d-14(a)
      promulgated under the Securities Exchange Act of 1934, as
      amended.32.1
            Certification
      of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted
      pursuant to Section 906 of the Sarbanes-Oxley Act of
  2002.32.2
            Certification
      of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted
      pursuant to Section 906 of the Sarbanes-Oxley Act of
  2002.(1)
            Incorporated
      by reference to Exhibit 2.1 to the Registrant’s Current Report on Form 8-K
      dated August 30, 2006 as filed with the Commission on or about August 31,
      2006.(2)
            Incorporated
      by reference to Exhibits 3.1 to the Registrant’s Registration Statement on
      Form S-1 (Registration No. 333-34967) as filed with the
      Commission on or about September 4, 1997.(3)
            Incorporated
      by reference to Exhibits 3.2 and 4.3 to the Registrant’s Quarterly Report
      on Form 10-Q for the quarterly period ended July 31, 2003, as filed with
      the Commission on or about March 17, 2003.(4)
            Incorporated
      by reference to Exhibit 3.3 to the Registrant’s Quarterly Report on Form
      10-Q for the quarterly period ended April 30, 2004, as filed with the
      Commission on or about March 16, 2004.(5)
            Incorporated
      by reference to Exhibit 4.1 to Amendment No. 1 to the Registrant’s
      Registration Statement on Form S-1 (Registration No. 333-34967)
      as filed with the Commission on or about October 17,
      1997.(6)
            Incorporated
      by reference to Exhibit 4.2 to the Registrant’s Current Report on Form 8-K
      dated March 7, 2003, as filed with the Commission on or about March 10,
      2003.








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SIGNATURES







Pursuant
to the requirements of the Securities Exchange Act of 1934, the registrant has
duly caused this report to be signed on its behalf by the undersigned, thereunto
duly authorized.






Signature
            
            Title
            
            Date/S/ Jay M. Meilstrup
            
            Chief
      Executive Officer and President(Principal
      Executive Officer)
            
            June
      5, 2009/S/ Marcia R. Martin
            
            Chief
      Financial Officer(Principal
      Financial and Accounting Officer)
            
            June
      5, 2009







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