**UNITED
      STATES**


**SECURITIES
      AND EXCHANGE COMMISSION**


**Washington,
      DC 20549**





**FORM
      10-Q**





x QUARTERLY
      REPORT UNDER SECTION 13 OR 15(d)


OF
      THE
      SECURITIES EXCHANGE ACT OF 1934


For
      the
      quarterly period ended September 30, 2008





OR





 ̈ TRANSITION
      REPORT UNDER SECTION 13 OR 15(d)


OF
      THE
      SECURITIES EXCHANGE ACT OF 1934


For
      the
      transition period from _______ to _______





Commission
      File Number 0-16686





**POKER
      MAGIC, INC.**


(Exact
      name of registrant as specified in its charter)




Minnesota
            20-4709758(State
                or other jurisdiction of incorporation or organization)
            (I.R.S.
                Employer Identification No.)





130
      West
      Lake Street, Suite 300, Wayzata, MN


(Address
      of Principal Executive Offices)





(952)
      473-3442


(Registrant’s
      telephone number, including area code)





(Former
      name, former address and former fiscal year, if changed from last
      report)





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. Yes x  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.





Large
                accelerated filer ̈
            Accelerated
                filer ̈Non-accelerated
                filer ̈(Do not check if a smaller reporting company)
            Smaller
                reporting companyx





Indicate
      by check mark whether the registrant is a shell company (as defined in Rule
      12b-2 of the Exchange Act). Yes  ̈   No x





As
      of
      November 14, 2008 there were 9,194,991 shares of the issuer’s common stock,
      $0.001 par value, outstanding.





**Table
      of Contents**





Page**PART
                I – FINANCIAL INFORMATION**Item
                1.
            Financial
                Statements
            1Item
                2.
            Management’s
                Discussion and Analysis of Financial Condition and Results of
                Operations
            8Item
                4T.
            Controls
                and Procedures
            16**PART
                II – OTHER INFORMATION**Item
                1A.
            Risk
                Factors
            17Item
                2.
            Unregistered
                Sales of Equity Securities and Use of Proceeds
            17Item
                6.
            Exhibits
            18**SIGNATURES**
            18**EXHIBIT
                INDEX**
            19







**PART
      I - FINANCIAL INFORMATION**





**Item
      1. Financial Statements.**





Poker
        Magic, Inc.
 (A
        Development Stage Company)
 Balance
        Sheets
 
 September 30, 2008
              
              December 31, 2007(unaudited)
              
              (audited)ASSETSCurrent
                  AssetsCash
              
              $
              181,794
              
              $
              37,003Accounts
                  Receivable
              
              
              1,425
              
              
              -Inventory
              
              
              750
              
              
              750Prepaid
                  Expense
              
              
              21,079
              
              
              22,296Total
                  Current Assets
              
              
              205,048
              
              
              60,049Intangible
                  Assets, Net of Amortization
              
              
              20,678
              
              
              26,882Total
                  Assets
              
              $
              225,726
              
              $
              86,931LIABILITIES
                  AND SHAREHOLDERS' EQUITYCurrent
                  LiabilitiesAccounts
                  Payable
              
              $
              14,437
              
              $
              20,100Total
                  Current Liabilities
              
              
              14,437
              
              
              20,100Total
                  Liabilities
              
              
              14,437
              
              
              20,100Shareholders'
                  EquityCommon
                  Stock, $.001 par value: Authorized 250,000,000 shares: Issued and
                  outstanding 9,194,991and 7,664,991 shares.
              
              
              9,195
              
              
              7,665Additional
                  Paid-in Capital
              
              
              659,337
              
              
              301,867Deficit
                  Accumulated During the Development Stage
              
              
              (457,243
              )
              
              (242,701
              )Total
                  Shareholders' Equity
              
              
              211,289
              
              
              66,831Total
                  Liabilities and Shareholders' Equity
              
              $
              225,726
              
              $
              86,931
 
 The
        accompanying notes are an integral part of these financial
        statements.
  1
  Poker
        Magic, Inc.
 (A
        Development Stage Company)
 Statements
        of Operations
 (unaudited)
 
 Three months ended
              
              Three months ended
              
              Nine months ended
              
              Nine months ended
              
              Period from January10, 2006 (inception)September 30, 2008
              
              September 30, 2007
              
              September 30, 2008
              
              September 30, 2007
              
              to September 30, 2008Revenues
              
              $
              1,900
              
              $
              -
              
              $
              1,900
              
              $
              -
              
              $
              1,900Cost
                  of Revenue
              
              
              21,572
              
              
              -
              
              
              21,572
              
              
              -
              
              
              21,572Gross
                  Loss
              
              
              (19,672
              )
              
              -
              
              
              (19,672
              )
              
              -
              
              
              (19,672
              )Operating
                  Expenses Selling, General & Administrative
              
              
              76,387
              
              
              39,426
              
              
              196,332
              
              
              117,424
              
              
              439,033Operating
                  Loss
              
              
              (96,059
              )
              
              (39,426
              )
              
              (216,004
              )
              
              (117,424
              )
              
              (458,705
              )Other
                  IncomeInterest
                  Income
              
              
              1,069
              
              
              -
              
              
              1,462
              
              
              -
              
              
              1,462Net
                  Loss
              
              $
              (94,990
              )
              $
              (39,426
              )
              $
              (214,542
              )
              $
              (117,424
              )
              $
              (457,243
              )Basic
                  and diluted net loss per common share
              
              $
              (0.01
              )
              $
              (0.01
              )
              $
              (0.03
              )
              $
              (0.02
              )
              $
              (0.07
              )Weighted-average
                  number of common shares outstanding
              
              
              8,963,687
              
              
              7,400,208
              
              
              8,295,940
              
              
              7,210,339
              
              
              6,863,421
 
 The
        accompanying notes are an integral part of these financial
        statements.
  2
  Poker
        Magic, Inc.
 (A
        Development Stage Company)
 Statements
        of Cash Flows
 (unaudited)
 For the period fromFor the nine
                
                For the nine
                
                January 10, 2006months ended
                
                months ended
                
                (inception) toSeptember 30, 2008
                
                September 30, 2007
                
                September 30, 2008Cash
                    flows from operating activities:Net
                    loss
                
                $
                (214,542
                )
                $
                (117,424
                )
                $
                (457,243
                )Adjustments
                    to reconcile net loss to net cash provided by operating
                    activities:Amortization
                    of intangible asset
                
                
                6,204
                
                
                6,204
                
                
                20,679Common
                    stock issued for services
                
                
                -
                
                
                1,000
                
                
                6,500Consulting
                    service expense paid in stock
                
                
                36,717
                
                
                -
                
                
                95,888Officers
                    compensation expense paid in stock
                
                
                2,000
                
                
                -
                
                
                48,000Officers
                    compensation expense as contributed capital
                
                
                34,000
                
                
                -
                
                
                34,000Changes
                    in operating assets and liabilities:Accounts
                    Receivable
                
                
                (1,425
                )
                
                -
                
                
                (1,425
                )Prepaid
                    expense
                
                
                -
                
                
                75,468
                
                
                333Accounts
                    payable
                
                
                (5,663
                )
                
                (1,086
                )
                
                14,437Net
                    Cash used in operating activities
                
                
                (142,709
                )
                
                (35,838
                )
                
                (238,831
                )Cash
                    Flows from investing activities:Acquisition
                    of Select Video assets
                
                
                -
                
                
                -
                
                
                (17,000
                )Net
                    cash used in investing activites
                
                
                -
                
                
                -
                
                
                (17,000
                )Cash
                    Flows from financing activities:Proceeds
                    from subscription receivable
                
                
                -
                
                
                1,500
                
                
                14,000Proceeds
                    from issuance of common stock
                
                
                287,500
                
                
                20,000
                
                
                426,000Payment
                    of short-term debt
                
                
                -
                
                
                (2,375
                )
                
                (2,375
                )Net
                    cash provided by financing activities
                
                
                287,500
                
                
                19,125
                
                
                437,625Net
                    increase (decrease) in cash
                
                
                144,791
                
                
                (16,713
                )
                
                181,794Cash,
                    beginning of the period
                
                
                37,003
                
                
                41,345
                
                
                -Cash,
                    end of the period
                
                $
                181,794
                
                $
                24,632
                
                $
                181,794Non-cash
                    investing and financing activities:Acquisition
                    of certain assets and liabilities of Select Video in exchange
                    for common
                    stockInventory
                
                $
                -
                
                $
                -
                
                $
                750Intangible
                    Asset
                
                
                -
                
                
                -
                
                
                24,357Accounts
                    Payable
                
                
                -
                
                
                -
                
                
                (32,000
                )Note
                    Payable
                
                
                -
                
                
                -
                
                
                (7,084
                )Stock
                    issued in lieu of cash for note payable
                
                
                -
                
                
                4,709
                
                
                19,709Stock
                    issued in lieu of cash for prepaid services
                
                
                37,500
                
                
                111,300
                
                
                165,300Stock
                    subscriptions received for common stock
                
                
                -
                
                
                -
                
                
                14,000
 
 The
        accompanying notes are an integral part of these financial
        statements.
  3




Poker
        Magic, Inc.
 (A
        Development Stage Company)
 Notes
        to
        Financial Statements
 September
        30, 2008
  **NOTE
        1—SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES**
  ***Description
        of operations and basis of presentation***
  Poker
        Magic, Inc. (the “Company”) is a development stage company that was incorporated
        in the State of Minnesota on January 10, 2006. Our business consists primarily
        of marketing and licensing a new form of poker-based table game to casinos
        and
        online gaming facilities in the United States.
  On
        June
        26, 2008, and as a result of the expiration of the initial test period
        contemplated in the December 26, 2007 agreement together with the New Jersey
        Casino Control Commission’s adoption of temporary regulations governing the
        Winner’s Pot Poker game, the Company entered into an amendment to the License
        Agreement for the licensing of the game. Presently, two units (each unit
        consisting of the game’s table layout) are under license. The Company and
        Bally’s amended the License Agreement to provide that the monthly license fee
        for the use of one unit for a full week will be $475, and the monthly license
        fee for an additional unit for weekend use only is $200. The amendment also
        provides that Bally’s is solely responsible for any costs associated with any
        repairs or replacements of a unit or table signage resulting from ordinary
        wear
        and tear.
  ***Interim
        financial information***
 ******
 The
        accompanying unaudited financial statements have been prepared in accordance
        with accounting principles generally accepted in the United States and pursuant
        to the rules and regulations of the Securities and Exchange Commission (the
        “SEC”) for interim financial information. Accordingly, certain information and
        footnote disclosures normally included in financial statements prepared in
        accordance with accounting principles generally accepted in the United States
        have been omitted pursuant to such rules and regulations. Operating results
        for
        the three and nine month periods ended September 30, 2008 are not necessarily
        indicative of the results that may be expected for the year ending December
        31,
        2008 or any other period. The accompanying financial statements and related
        notes should be read in conjunction with the audited Financial Statements
        of the
        Company, and notes thereto, contained in this filing for the year ended December
        31, 2007.
  ***Liquidity***
  The
        accompanying financial statements have been prepared assuming the Company
        will
        continue as a going concern that contemplates the realization of assets and
        satisfaction of liabilities in the normal course of business. For the period
        from January 10, 2006 (inception) to September 30, 2008, the Company incurred
        a
        net loss of $457,243. The Company's ability to continue as a going concern
        is
        dependent on it ultimately achieving profitability, producing additional
        revenues and/or raising additional capital. Management intends to obtain
        additional debt or equity capital to meet all of its existing cash obligations
        and to support the revenue generating process; however, there can be no
        assurance that the sources will be available or available on terms favorable
        to
        the Company.
  ***Intangible
        assets***
  On
        March
        10, 2006, the Company purchased certain assets and assumed certain liabilities
        of Select Video, Inc. (Select Video). Three patents were acquired as a part
        of
        the March 10, 2006 purchase. The patents are stated at cost and are amortized
        on
        a straight-line basis over 60 months. Amortization expense was $2,068 for
        both
        of the three months ended September 30, 2008 and 2007, $6,204 for both of
        the
        nine months ended September 30, 2008 and 2007 and $20,679 for the period
        from
        January 10, 2006 (inception) to September 30, 2008. Estimated amortization
        expense for the next four years of patents issued as of December 31, 2007
        is as
        follows:
  4
  Poker
        Magic, Inc.
 (A
        Development Stage Company)
 Notes
        to
        Financial Statements
 September
        30, 2008
 
 Years
                  ending December 31:Remainder
                  of 2008
              
              $
              2,0682009
              
              
              8,2712010
              
              
              8,2712011
              
              
              2,068Total
              
              $
              20,678
  ***Impairment
        of long-lived assets***
  Management
        reviews the Company’s long-lived assets for impairment when events or changes in
        circumstances indicate that the carrying amount of an asset may not be
        recoverable. If impairment indicators are present and the estimated future
        undiscounted cash flows are less than the carrying value of the assets, the
        asset’s value will be adjusted appropriately. No impairment indicators were
        present as of September 30, 2008 or December 31, 2007.
  **NOTE
        2—NET LOSS PER COMMON SHARE**
  Basic
        net
        loss per common share is computed by dividing net loss by the weighted average
        number of vested common shares outstanding during the period. A reconciliation
        of the numerator and denominator used in the calculation of basic and diluted
        net loss per common share follows:
 
 Three months ended
              
              Three months endedSeptember 30, 2008
              
              September 30, 2007Numerator:Net
                  loss
              
              $
              (94,990
              )
              $
              (39,426
              )Denominator:Weighted-average
                  number of common shares outstanding
              
              
              8,963,687
              
              
              7,400,208Basic
                  and diluted net loss per common share
              
              $
              (.01
              )
              $
              (.01
              )
 
 Period from January 10,Nine months ended
              
              Nine months ended
              
              2006 (inception) toSeptember 30, 2008
              
              September 30, 2007
              
              September 30, 2008Numerator:Net
                  loss
              
              $
              (214,542
              )
              $
              (117,424
              )
              $
              (457,243
              )Denominator:Weighted-average
                  number of common shares outstanding
              
              
              8,295,940
              
              
              7,210,339
              
              
              6,863,421Basic
                  and diluted net loss per common share
              
              $
              (.03
              )
              $
              (.02
              )
              $
              (.07
              )
  The
        outstanding warrants during the three and nine months ended September 30,
        2008
        were excluded from the calculation of diluted loss per share as their effects
        were anti-dilutive due to the Company’s net losses for the periods.
  5
  Poker
        Magic, Inc.
 (A
        Development Stage Company)
 Notes
        to
        Financial Statements
 September
        30, 2008
  **NOTE
        3—COMMITMENTS AND CONTINGENCIES**
  The
        asset
        purchase agreement with Select Video dated March 10, 2006, stated that if
        and
        when the Company receives any revenue generated by Winners Pot Poker and
        other
        similar games, Select Video shall receive an amount equal to five percent
        (5%)
        of all gross proceeds generated by these games. As of September 30, 2008,
        $95 is
        owed to Select Video under this agreement.
  **NOTE
        4—SHAREHOLDERS’ EQUITY**
  ***Common
        stock***
  On
        January 10, 2006, the founders of the Company purchased 2,500,000 shares
        of
        common stock for $2,500.
  On
        March
        10, 2006, the Company purchased certain assets and assumed certain liabilities
        of Select Video in exchange for 3,022,991 shares of common stock issued at
        the
        deemed fair market value of $.001 per share or $3,023.
  On
        May
        23, 2006, the Company issued 60,000 shares of common stock at $.25 per share
        in
        lieu of cash for liabilities assumed.
  During
        2006, the Company raised additional cash of $87,500 at $.25 per share through
        the issuance of 350,000 shares of common stock.
  During
        2006, the Company issued 22,000 shares to various consultants at $.25 per
        share
        for services rendered.
  During
        2006, the Company issued 100,000 shares valued at $4,000 (value of the services
        to be provided) for services rendered and to be rendered.
  At
        December 31, 2006 a total of 6,104,991 shares of common stock were issued
        and
        outstanding. No warrants or options were issued in 2006.
  On
        January 15, 2007, the Company issued 600,000 shares of common stock to two
        consultants for services to be provided over a 12 month period commencing
        on
        January 15, 2007. These services were valued at $50,000.
  On
        January 15, 2007, the Company issued 500,000 shares of common stock to the
        two
        founders for their services to be provided over a 12 month period commencing
        January 15, 2007. These services were valued at $48,000.
  On
        July
        26, 2007, the Company settled the note payable of $7,084 for a cash payment
        of
        $2,375 and the issuance of 20,000 shares of common stock valued at $4,709
        for
        payment in full on the note.
  In
        July
        2007, the Company raised cash of $20,000 at $.25 per share through the issuance
        of 80,000 shares of common stock.
  On
        August
        1, 2007, the Company issued 65,000 shares of common stock for services to
        be
        provided over a 12 month period commencing retroactively on June 1, 2007.
        These
        services were valued at $5,000.
  On
        August
        1, 2007, the Company issued 100,000 shares of common stock to a consultant
        for
        services to be provided over a 12 month period commencing on August 1, 2007.
        These services were valued at $8,300.
  On
        August
        1, 2007, the Company issued 25,000 shares of common stock for services. These
        services were valued at $1,000.
  6
  Poker
        Magic, Inc.
 (A
        Development Stage Company)
 Notes
        to
        Financial Statements
 September
        30, 2008
  On
        November 26, 2007, the Company issued 50,000 shares of common stock to a
        consultant for services to be provided over a 12 month period commencing
        on
        November 26, 2007. These services were valued at $12,500.
  In
        December 2007, the Company raised cash of $30,000 at $.25 per share through
        the
        issuance of 120,000 shares of common stock.
  The
        Company believes the value of the services provided during 2007 was the best
        measurement of the value of the common stock.
  In
        January 2008, the Company raised cash of $25,000 at $.25 per share through
        the
        issuance of 100,000 shares of common stock.
  In
        May
        2008, the Company raised cash of $262,500 at $.25 per share through the issuance
        of 1,050,000 shares of common stock.
  On
        May
        28, 2008, the Company issued an investor a warrant to purchase 1,000,000
        shares
        of common stock at a price of $.35 per share if purchased within 6 months
        of
        issuance. The price increases to $.425 for months 7 to 12 and increases to
        $.50
        after 12 months. The warrant expires on May 27, 2010.
  On
        August
        26, 2008, the Company issued 200,000 shares of common stock for services
        to be
        provided over a 5 month period commencing retroactively on August 1, 2008.
        These
        services were valued at $20,000.
  On
        August
        26, 2008, the Company issued 60,000 shares of common stock for services to
        be
        provided over a 5 month period commencing retroactively on August 1, 2008.
        These
        services were valued at $5,000.
  On
        August
        26, 2008, the Company issued 60,000 shares of common stock for services to
        be
        provided over a 12 month period commencing retroactively on August 1, 2008.
        These services were valued at $5,000.
  On
        August
        26, 2008, the Company issued 10,000 shares of common stock for services.
        These
        services were valued at $2,500.
  On
        August
        26, 2008, the Company issued 50,000 shares of common stock for services.
        These
        services were valued at $5,000.
  At
        September 30, 2008 a total of 9,194,991 shares of common stock were issued
        and
        outstanding and 1,000,000 warrants are outstanding.
  **NOTE
        5—INCOME TAXES**
  On
        January 1, 2007, the Company adopted the provisions of FIN 48, which clarifies
        the accounting for uncertainty in income tax positions. This interpretation
        requires the Company to recognize in the consolidated financial statements
        only
        those tax positions determined to be more likely than not of being sustained
        upon examination, based on the technical merits of the positions. Interest
        and
        penalties are expensed as incurred. The adoption of FIN 48 did not result
        in an
        adjustment to the Company's financial statements.
  At
        September 30, 2008, the Company had federal and state net operating loss
        carryforward of approximately $444,000 available to offset future taxable
        income. The Company’s federal and state net operating loss carryforwards will
        begin to expire in 2026 if not used before such time to offset future taxable
        income or tax liabilities. Current and future changes in the stock ownership
        of
        the Company may place limitations on the use of these net operating loss
        carryforwards.
  7




**Item 2.**
            **Management’s
                Discussion and Analysis of Financial Condition and Results of
                Operations.**





*Our
      Management’s Discussion and Analysis of Financial Condition and Results of
      Operation set forth below should be read in conjunction with our audited
      consolidated financial statements, and notes thereto, contained in our Form
      10
      Registration Statement, as amended, filed with the SEC on August 6, 2008 and
      relating to our year ended December 31, 2007, and the period from January 10,
      2006 (inception) to December 31, 2006.*





**Cautionary
      Note Regarding Forward-Looking Statements**





Some
      of
      the statements made in this section of our report are forward-looking
      statements. These forward-looking statements generally relate to and are based
      upon our current plans, expectations, assumptions and projections about future
      events. Our management currently believes that the various plans, expectations,
      and assumptions reflected in or suggested by these forward-looking statements
      are reasonable. Nevertheless, all forward-looking statements involve risks
      and
      uncertainties and our actual actions or future results may be materially
      different from the plans, objectives or expectations, or our assumptions and
      projections underlying our present plans, objectives and expectations, which
      are
      expressed in this report. An example of specific factors that might cause our
      actual results to differ from our current expectations include but are not
      limited to:





·
            Our
                lack of a significant prior operating history to provide our management
                with a basis to better evaluate certain
                likelihoods





·
            Our
                need for additional financing





·
            The
                significant risk that our game may not be accepted by casinos or
                gaming
                establishments or, ultimately, by gaming consumers and
                enthusiasts





·
            Our
                inability to obtain required registrations, licenses and approvals
                with or
                from appropriate state gaming
                authorities





·
            Changes
                in legal and regulatory regimes applicable to our business or our
                games





·
            Our
                inability to effectively protect our intellectual property,
                or





·
            Our
                inability, for any reason, to retain our executive management
                personnel.





In
      light
      of the foregoing, prospective investors are cautioned that the forward-looking
      statements included in this filing may ultimately prove to be inaccurate—even
      materially inaccurate. Because of the significant uncertainties inherent in
      such
      forward-looking statements, the inclusion of such information should not be
      regarded as a representation or warranty by Poker Magic, Inc. or any other
      person that our objectives, plans, expectations or projections that are
      contained in this filing will be achieved in any specified time frame, if
      ever.


8





**General
      Overview**





Poker
      Magic Inc. is a Minnesota corporation formed in January 2006. In this report,
      we
      refer to Poker Magic, Inc. as “we,” “us,” “Poker Magic” or the “Company.” We are
      a development-stage company focused on promoting and placing our Winner’s Pot
      Poker game into casinos and entertainment facilities country-wide, including
      those located in Native American tribal lands. We believe that the long-term
      success of our operations will be determined by our ability to bring new and
      innovative products, game play and services to the market.





Our
      current gaming product is “Winner’s Pot Poker,” which is a table game form of
      five-card stud poker. In the Winner’s Pot Poker game, the dealer deals each
      player, and the dealer himself, two cards face down and three cards face up.
      Each player “antes” before the deal to be eligible to receive cards in the game.
      After each player has received his or her first three cards from the dealer,
      each player may either fold or place a first bet equal to the ante. The first
      bet may not be any more or less than the ante. After the next card is dealt,
      each of the remaining players has a choice between folding or placing a second
      bet that must be equal to twice the ante. The dealer may not fold. After the
      last card is dealt, the hands are compared and the winning hand (determined
      by
      using standard poker rankings) takes a predetermined percentage of the total
      bets and antes made in the course of the game. In addition, players are entitled
      to make certain optional “bonus bets.”





We
      had no
      revenues from January 10, 2006 (inception) through December 31, 2007, or from
      January 1, 2008 through August 27, 2008. We began generating revenues August
      28,
      2008 under the license agreement with Bally’s Park Place, Inc. discussed further
      in the *Revenue* section
      below.





For
      the
      three and nine months ended September 30, 2008, we incurred $21,572 and $21,572,
      respectively, in revenue-related costs and $76,387 and $196,332 respectively
      in
      operating expenses. During both periods, our expenses related primarily to
      our
      efforts to market our Winner’s Pot Poker game to casinos and gaming
      establishments, generate revenues and expand our revenue base, as well as other
      selling, general and administrative expenses. The most significant components
      of
      these other selling, general and administrative expenses were (i) compensation
      expense attributable to share issuances to third-party consultants and executive
      management for services rendered, and (ii) expenses for professional services
      such as legal and accounting services.





As
      of
      September 30, 2008, we had $181,794 in cash on hand and current liabilities
      of
      $14,437. As of the date of this filing, we had $167,009 in cash on hand, and
      our
      management presently believes this cash will be sufficient to continue
      operations through June 2009. Thereafter, we expect we will require additional
      capital. If our present expectations relating to our expenses prove inaccurate
      and we incur more expenses than anticipated, we will be required to seek
      additional financing prior to June 2009.


9





Management
      believes that the most significant uncertainties facing the Company relate
      to
      our ability to increase our revenues, the accuracy of our expense forecast,
      our
      ability to acquire necessary licenses, registrations and approvals, and our
      ability to obtain financing when and as needed and on terms acceptable to us.
      These uncertainties are discussed in greater detail under the caption “Trends
      and Uncertainties”.





**Results
      of Operations for the Three Months Ended September 30, 2008 Compared to the
      Three Months Ended September 30, 2007**





For
      the
      three months ended September 30, 2008 and September 30, 2007, we had revenues
      of
      $1,900 and $0 respectively and incurred $21,572 and $0, respectively, in
      revenue-related costs. During both three-month periods, we were focused
      primarily on efforts to (i) ensure temporary regulatory approval and compliance
      of the Winner’s Pot Poker game, and (ii) obtain the agreement of casinos and
      gaming establishments to provide gaming table space to the Winner’s Pot Poker
      game. During the period ended September 30, 2008, we were also focused on
      completing the process of amending our Registration Statement on Form 10
      originally filed with the SEC on January 29, 2008. Amendments to that
      Registration Statement were completed and filed with the SEC on March 11 and
      August 6, 2008.





During
      the three months ended September 30, 2008 and September 30, 2007, we incurred
      selling, general and administrative expenses in the pursuit of our plan of
      operation. For the three months ended September 30, 2008, we incurred selling,
      general and administrative expenses aggregating $76,387 compared to $39,426
      for
      the three months ended September 30, 2007. The increase in the most recent
      quarterly period was primarily attributable to increased professional expenses
      incurred in the course of amending our Registration Statement on Form 10/A
      filed
      with the SEC, professional consulting services related to compliance with
      regulations applicable to public reporting companies, and increased expenses
      incurred in the marketing of the Winner’s Pot Poker game.





**Results
      of Operations for the Nine Months Ended September 30, 2008 Compared to the
      Nine
      Months Ended September 30, 2007**





For
      the
      nine months ended September 30, 2008 and September 30, 2007, we had revenues
      of
      $1,900 and $0 respectively and incurred $21,572 and $0, respectively, in
      revenue-related costs. During both nine-month periods, we were focused primarily
      on efforts to (i) ensure temporary regulatory approval and compliance of the
      Winner’s Pot Poker game, and (ii) obtain the agreement of casinos and gaming
      establishments to provide gaming table space to the Winner’s Pot Poker game.
      During the period ended September 30, 2008, we were also focused on completing
      the process of amending our Registration Statement on Form 10 originally filed
      with the SEC on January 29, 2008. Amendments to that Registration Statement
      were
      completed and filed with the SEC on March 11 and August 6, 2008.





During
      the nine months ended September 30, 2008 and September 30, 2007, we incurred
      selling, general and administrative expenses in the pursuit of our plan of
      operation. For the nine months ended September 30, 2008, we incurred selling,
      general and administrative expenses aggregating $196,332 compared to $117,424
      for the nine months ended September 30, 2007. The increase in the most recent
      quarterly period was primarily attributable to increased professional expenses
      incurred in the course of amending our Registration Statement on Form 10/A
      filed
      with the SEC, professional consulting services related to compliance with
      regulations applicable to public reporting companies, and increased expenses
      incurred in the marketing of the Winner’s Pot Poker game.


10





Over
      the
      nine-month period ended September 30, 2008, the most significant components
      of
      our selling, general and administrative expenses were (i) general operating
      expenses relating to our Winner’s Pot Poker game and (ii) professional expenses
      for legal and accounting services. These expenses aggregated $35,447 and
      $102,319, respectively. In addition, we incurred $14,566 expense relating to
      consulting services rendered to the Company and $44,000 in expense relating
      to
      services rendered to the Company by executive management. Shares issued to
      consultants during the relevant period related to gaming-related and general
      business consulting services rendered to the Company.





In
      contrast, over the nine-month period ended September 30, 2007, the most
      significant components of our selling, general and administrative expenses
      were
      (i) expense relating to shares issued to our executive management and
      consultants, and (ii) expenses for professional services such as legal,
      accounting and professional consulting services related to compliance with
      regulations applicable to public reporting companies. These expenses aggregated
      $79,801 and $26,646, respectively. In the nine months ended September 30, 2007,
      a total of $45,801 related to shares issued to consultants and $34,000 related
      to shares issued to executive management. Shares issued to consultants during
      the relevant period related to general business consulting and introductory
      services, and accounting services rendered to the Company. Shares issued to
      executive management related to services rendered during fiscal
      2007.





We
      presently expect that compensation expense arising from share issuances to
      our
      executive management will continue to decrease from fiscal 2007 levels as we
      have no current plans or expectations to issue additional shares to our present
      management as compensation for services rendered or to be rendered during fiscal
      2008. We have recorded an expense for our estimated officer compensation as
      an
      addition to paid-in capital. We do, however, expect that we will continue to
      issue shares to consultants to compensate them for services rendered, primarily
      as a means to conserve our cash resources. In this regard, we do not anticipate
      hiring employees in the near future and expect instead, where necessary or
      appropriate, to rely on services provided by consultants through at least fiscal
      2008.





We
      anticipate that our professional expenses will increase during fiscal 2008
      as we
      continue to seek gaming regulatory compliance and licenses, prepare and file
      periodic reports with the SEC under the Securities and Exchange Act of 1934,
      and
      generally seek to comply with the various legal, accounting and governance
      rules
      and regulations applicable to public reporting companies.




11




Finally,
      we anticipate that the portion of our selling, general and administrative
      expenses relating to the general operations and the marketing of our Winner’s
      Pot Poker game to casinos and gaming establishments will increase during fiscal
      2008.





**Liquidity
      and Capital Resources**





Net
      cash
      used in operating activities was $142,709 during the nine months ended September
      30, 2008 compared to $35,838 for the nine months ended September 30, 2007.
      The
      increase in cash used was primarily the result of payments of legal and
      accounting expenses and expenses relating to our efforts to market our Winner’s
      Pot Poker game.





Net
      cash
      provided by financing activities was $287,500 during the nine months ended
      September 30, 2008 compared to $19,125 for the nine months ended September
      30,
      2007. The increase in the most recent period relates to proceeds received from
      private placement sales of common stock during January 2008.





As
      of
      September 30, 2008, we had $181,794 cash on hand and current liabilities of
      $14,437. As of the date of this filing, our management believes we have
      sufficient capital to continue operations through June 2009. Thereafter, we
      expect we will require additional capital. If we are unable to obtain additional
      financing when needed, we may be required to abandon our business or our status
      as a public reporting company.





Our
      primary non-cash asset at December 31, 2007 and September 30, 2008 was
      intellectual property rights and trademarks, which are the foundation for our
      product offerings. We currently own the rights to United States Patent Number
      5,839,732, issued on November 24, 1998, that relates to our current Winner’s Pot
      Poker table game. This patent was acquired from Select Video, Inc., a Delaware
      corporation, pursuant to an Asset Purchase Agreement dated March 10, 2006.
      In
      addition, we own a federally registered trademark for “WINNER’S POT POKER,”
Registration Number 2,172,043, issued on July 7, 1998, which was acquired
      pursuant to that same agreement. Finally, we also own registered trademarks
      for
“POKER MAGIC” and to “AC (ATLANTIC CITY) STUD POKER,” which we similarly
      acquired pursuant to the Asset Purchase Agreement with Select Video. Other
      than
      the trademark “Poker Magic” which we have adopted as our corporate name, we do
      not have any current plans for the sale or license of such other trademarks.
      We
      do not have any currently pending applications for un-issued patents, trademarks
      or copyrights. The expiration dates of our patent rights vary based on their
      filing and issuance dates. We intend to continue to actively file for patent
      protection, where reasonable, within the United States. We expect also to seek
      protection for our future products by filing for copyrights and trademarks
      in
      the United States.





Currently,
      we do not have any employees. Mr. Douglas M. Polinsky, the Chief Executive
      Officer and Chairman of our Board of Directors, and Joseph A. Geraci, II, our
      Chief Financial Officer and a director of the Company, both serve as consultants
      to the Company in their officer capacities. We rely on sales and marketing
      agents and outside professional services on an as-needed basis. We believe
      that
      using consultants to perform necessary operational functions is currently more
      cost effective than hiring full-time employees, and such practice affords us
      flexibility in directing our resources during our development stage. We plan
      to
      develop new gaming products primarily by utilizing the services of outside
      developers, sales agents and regulatory and compliance service providers in
      an
      effort to minimize capital expenditures and corporate expenses. We presently
      do
      not expect to incur any material capital expenditures in the near future or
      during the next 12 months. At this time, we do not anticipate purchasing or
      selling any significant equipment or other assets in the near
      term.


12





**Trends
      and Uncertainties**




As
      a
      development-stage company involved in the gaming business, we believe we can
      identify certain broad trends in our revenues and expenses, and components
      thereof. We also believe that the most significant risks and uncertainties
      surrounding our business relate to revenues and expenses, and regulatory and
      financing matters. These trends and uncertainties are discussed
      below.





***Revenues***





As
      indicated above, we began generating revenues August 28, 2008 under the license
      agreement with Bally’s Park Place, Inc. discussed below.We have also been
      focused on obtaining temporary regulatory approval/compliance of our Winner’s
      Pot Poker game and obtaining the agreement of casinos and gaming establishments
      to provide gaming table space to the Winner’s Pot Poker game.





On
      December 26, 2007, we entered into a license agreement with Bally’s Park Place,
      Inc. d/b/a/ Bally’s Atlantic City, permitting Bally’s, on a non-exclusive basis,
      to use one unit of the Winner’s Poker Pot game on a trial basis at no charge
      until such time that the New Jersey Casino Control Commission ended the test
      period for the game. We had earlier (on August 22, 2007) secured the issuance
      of
      temporary rules and amendments governing the implementation of Winner’s Pot
      Poker in Atlantic City casinos. The amendments and rules added Winner’s Pot
      Poker to the list of authorized table games in New Jersey, governed the physical
      characteristics of the Winner’s Pot Poker game layout, defined the card deck for
      use with the Winner’s Pot Poker game, specified the terms of the use of the
      cards during Winner’s Pot Poker game play, and contained technical proposals
      governing the operation of Winner’s Pot Poker. We had also earlier obtained a
      transactional waiver from the New Jersey Casino Control Commission for the
      licensure requirement applicable to casino service industry (CSI), which waiver
      permitted us to legally license to Bally’s Park Place the play of our Winner’s
      Pot Poker game in Bally’s Atlantic City casinos.





After
      a
      successful trial period, we amended our license agreement with Bally’s Park
      Place on June 26, 2008. Under the amended license agreement, Bally’s Park Place
      will pay us a license fee in the amount of (i) $475 per month for the right
      to
      the use of our Winner’s Pot Poker game in the Atlantic City casinos for a full
      week during that month, and (ii) $200 per month for the right to the use of
      our
      Winner’s Pot Poker game in the Atlantic City casinos on weekends only during any
      month. The amendment currently contemplates the licensure of only two Winner’s
      Pot Poker game units—one for full-week use and the other for weekend-only use.
      This amendment was entered into after the adoption by the New Jersey Casino
      Control Commission of temporary regulations governing the rules of the Winner’s
      Pot Poker game. The amended license agreement is a month-to-month agreement
      that
      may be cancelled by either party at any time. Currently, Bally’s is only
      utilizing the full week game and has deferred use of the weekend game at this
      time. We do not anticipate Bally’s use of the weekend-only game until early
      2009.


13




Based
      on
      our recent amendment of the license agreement with Bally’s Park Place, we began
      generating revenue from operations on August 28, 2008. Given that the present
      terms of the license agreement, as amended, provide that Bally’s Park Place
      licenses the right to use only two game units of our Winner’s Pot Poker product,
      our revenues under this agreement will be insignificant. Instead, we expect
      that
      we must continue to market our game to casinos and gaming establishments that
      present suitable opportunities for us, and that the most efficient way for
      us to
      begin generating more significant revenues will be to consummate a definitive
      license agreement with Harrah’s Entertainment or some other enterprise that
      involves a wider group of gaming-related affiliates and establishments. For
      example, Harrah’s Entertainment, indirectly (through subsidiaries and other
      affiliates) operates approximately 40 casinos across the United States. There
      is
      no assurance we will be able to enter into agreements with Harrah’s
      Entertainment.





As
      part
      of our marketing efforts for the Winner’s Pot Poker game, our management has met
      with the management or representatives of over ten different casinos or gaming
      establishments over the past nine months in an effort to secure additional
      licensing arrangements. To date, our licensing efforts have been focused on
      entering into such agreements with casinos and gaming establishments in
      Minnesota, New Jersey and Nevada. It is extremely difficult to anticipate,
      however, how much success we will have in our efforts to license our games
      to
      establishments other than Bally’s Park Place, if any at all, and thereby
      generate additional revenues. It is also difficult to assess how long we will
      be
      able to maintain our present arrangement with Bally’s Park Place in light of the
      fact that our amended license agreement has a month-to-month term.





***Expenses***





As
      indicated above, we expect that our selling, general and administrative expenses
      overall will increase, perhaps significantly, as we continue to seek gaming
      regulatory compliance and licenses, prepare and file periodic reports with
      the
      SEC under the Securities and Exchange Act of 1934, and generally seek to comply
      with the various legal, accounting and governance rules and regulations
      applicable to public reporting companies. We also expect that we will continue,
      when and as we deem necessary or appropriate, to continue compensating
      consultants with shares of our common stock as part of our effort to conserve
      cash resources.





***Regulation***





Currently,
      we have yet to obtain the final licensure required in the states of Nevada,
      New
      Jersey and Minnesota, which jurisdictions have been the focus of our marketing
      efforts thus far. In particular, we expect that we will require at least the
      following licenses, registrations and approvals in the near future to permit
      us
      to license our gaming products to casinos and gaming establishments in the
      relevant jurisdictions:


14





·
            Casino
                service industry (CSI) supplier license issued by the New Jersey
                Casino
                Control Commission (which license would be more broad and flexible
                than
                the current transactional waiver which we have thus far secured from
                the
                New Jersey Casino Control
                Commission)





·
            Distribution
                licenses permitting us to distribute Winner’s Pot Poker game units (i.e.,
                table layouts) to casinos and gaming establishments in Nevada, issued
                by
                the Nevada State Gaming Control
                Board





·
            Distribution
                licenses permitting us to distribute Winner’s Pot Poker game units to
                casinos and gaming establishments in Minnesota,
                and





·
            Registration
                with the Nevada Gaming Commission as a publicly traded
                company.





In
      addition, we will likely require positive results from suitability reviews
      (generally focusing on financial stability, honesty, character and integrity)
      of
      our executive management and other key personnel or significant shareholders
      conducted by the Nevada Gaming Commission and similar state agencies in other
      jurisdictions. We intend to continue working with the New Jersey Casino Control
      Commission and other state regulatory authorities to obtain the above-described
      and other registrations and licenses that we deem necessary or desirable as
      market opportunities come to light.





In
      general, we have little control over the various licensing, registration and
      suitability review processes and outcomes in the various states. It is possible
      that we may not be able to obtain required or desired licenses, registrations
      or
      approvals suitably fast enough to exploit potential opportunities with casinos
      or gaming establishments. It is also possible that our applications for
      licenses, registrations or findings of suitability may be rejected by state
      regulatory authorities.





***Financing***





As
      discussed above under the caption “Liquidity and Capital Resources,” our
      management believes we have sufficient capital to continue operations through
      June 2009. Thereafter, we expect we will require additional capital. Our current
      forecast for financing needs is largely based on our understanding of the
      expenses we anticipate incurring in our efforts to comply with gaming regulatory
      and public reporting company disclosure requirements. In this regard, we note
      that our current forecasts are largely based on our past experience with other
      enterprises and proposed budgets proposed by our professional consultants.
      If
      our actual expenses significantly exceed our present expectations we will likely
      require additional financing prior to June 2009.


15





Once
      needed, we cannot be certain that any required additional financing will be
      available on terms favorable to us, if at all. This is especially true in light
      of the current poor state of the U.S. capital markets and the general economic
      downturn that has occurred. If, however, we are able to raise additional funds
      by the issuance of our equity or equity-linked securities, including through
      the
      issuance and exercise of warrants, our existing shareholders will experience
      dilution of their ownership interest. If additional funds are instead raised
      by
      the issuance of debt or other senior or preferred equity instruments such as
      preferred stock, we may be subject to certain limitations in our operations,
      and
      such securities may have rights senior to those of our holders of common stock.
      If adequate funds are not available on acceptable terms, we may be unable to
      expand, develop or enhance products or to respond to competitive pressures.
      If
      we are unable to obtain additional financing when needed, we may be required
      to
      abandon our business or our status as a public reporting company.





**Going
      Concern**





We
      have
      incurred operating losses, accumulated deficit and negative cash flows from
      operations since January 10, 2006 (inception). As of December 31, 2007, we
      had
      an accumulated deficit of $242,701, and as of September 30, 2008, we had an
      accumulated deficit of $457,243. These factors, among others, raise substantial
      doubt about our ability to continue as a going concern. In this regard, our
      current independent auditors have included an explanatory paragraph in opinions
      they have previously issued related to our annual financial statements as to
      the
      substantial doubt about our ability to continue as a going concern. Our
      consolidated financial statements included in this filing do not include any
      adjustments related to recoverability and classification of asset carrying
      amounts, or the amount and classification of liabilities that might result,
      should we be unable to continue as a going concern. Our ability to continue
      as a
      going concern ultimately depends on achieving profitability, producing
      significant additional revenues or raising additional capital to sustain
      operations. Although we intend to obtain additional financing to meet our cash
      needs and to support the revenue-generating process, we may be unable to secure
      any additional financing on terms that are favorable or acceptable to us, if
      at
      all.





**Critical
      Accounting Policies**





For
      detailed information on our critical accounting policies and estimates, please
      see our financial statements and notes thereto included in this report and
      in
      our Registration Statement on Form 10/A filed with the SEC in August 2008.
      There
      have been no material changes to our critical accounting policies and estimates
      from those disclosed in our Registration Statement on Form 10/A.





**Item
      4T. Controls and Procedures.**





**Evaluation
      of Disclosure Controls and Procedures**





An
      evaluation of the effectiveness of our “disclosure controls and procedures” (as
      such term is defined in Rules 13(a)-15(e) of the Securities Exchange Act of
      1934) was carried out by the Company under the supervision and with the
      participation of our Chief Executive Officer and Chief Financial
      Officer.


16





Based
      on
      that evaluation, our Chief Executive Officer and Chief Financial Officer
      recognized the additional risks to an effective internal control environment
      with a limited accounting staff and the inability to fully segregate all duties
      within our accounting and financial functions, including the financial reporting
      and quarterly close process. Management has concluded that, with certain
      oversight controls that are in place and the duties we have been able to
      successfully segregate, the remaining risks associated with the lack of
      segregation of duties are not sufficient to justify the costs of potential
      benefits to be gained by adding additional employees given our development
      stage, the limited scope of our operations, and the number of business
      transactions we currently process. Management intends to periodically reevaluate
      this situation and continue to assess ways in which duties can be further
      segregated as our business evolves. Based on these evaluations, our Chief
      Executive Officer and Chief Financial Officer concluded our disclosure controls
      and procedures are effective.





**Changes
      in Internal Control Over Financial Reporting**





During
      the three months ended September 30, 2008, no change in our internal control
      over financial reporting occurred which has materially affected, or is
      reasonably likely to materially affect, our internal control over financial
      reporting.





**PART
      II - OTHER INFORMATION**





**Item
      1A. Risk Factors.**





There
      have been no material changes to our risk factors and uncertainties during
      or
      since the period covered by this report. For a discussion of risk factors
      applicable to Poker Magic and its business, please refer to the “Risk Factors”
section of our Registration Statement on Form 10/A filed with the SEC on August
      6, 2008.





**Item
      2. Unregistered Sales of Equity Securities and Use of
      Proceeds.**





On
      August
      26, 2008, the Company offered and sold an aggregate of 380,000 shares of common
      stock to five individuals and one entity in consideration of consulting services
      rendered (or to be rendered) to the Company. The services rendered (or to be
      rendered) included accounting services, marketing services and information
      technology services and such services were valued, in the aggregate, at $37,500.
      The Company offered and sold the shares in reliance on the exemptions from
      registration set forth in Sections 4(2) or 4(6) of the Securities Act of 1933.
      In this regard, the Company relied on representations from the recipients of
      the
      shares that they were (i) acquiring the shares for investment purposes only
      and
      not with a view toward distribution, (ii) either alone or through a purchaser
      representative, knowledgeable and experienced in financial and business matters
      such that each was capable of evaluating the risks of the investment, (iii)
      an
“accredited investor” as defined in Rule 501 under the Securities Act. In
      addition, the transaction described above involved a limited number of
      recipients, and all certificates representing the shares offered and sold
      contained a restrictive legend indicating that such shares constituted
“restricted securities” under the Securities Act of 1933.




17





**Item
      6. Exhibits.**





Exhibit
                No.
            
            Description31.1
            
            Certification
                of Chief Executive Officer31.2
            
            Certification
                of Chief Financial Officer32
            
            Certification
                of Chief Executive Officer and Chief Financial Officer pursuant to
                Section
                906 of the Sarbanes-Oxley Act of
                2002





**SIGNATURES**





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





POKER
                MAGIC, INC./s/
                Douglas PolinskyDouglas
                Polinsky*Chief
                Executive Officer*Dated:
                November 14, 2008/s/
                Joseph A. Geraci, IIJoseph
                A. Geraci, II*Chief
                Financial Officer*Dated:
                November 14, 2008




18


**INDEX
      TO EXHIBITS FILED WITH THIS REPORT**





Exhibit
                No.
            
            Description31.1
            
            Certification
                of Chief Executive Officer31.2
            
            Certification
                of Chief Financial Officer32
            
            Certification
                of Chief Executive Officer and Chief Financial Officer pursuant to
                Section
                906 of the Sarbanes-Oxley Act of
                2002




19