Form 10-Q


SECURITIES AND EXCHANGE COMMISSION


Washington, DC 20549








[X]
Quarterly Report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934For the quarterly period ended June 30, 2009[    ]
Transition Report pursuant to 13 or 15(d) of the Securities Exchange Act of 1934For the transition period __________  to __________Commission File Number: 000-52575
















Nevada
20-8583866(State or other jurisdiction of incorporation or organization)
(IRS Employer Identification No.)





106 Chelsea Parkway , Boothwyn, Pa 19061(Address of principal executive offices)





(610) 494 5534(Registrant’s telephone number)(Former name, former address and former fiscal year, if changed since 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  xNo   ̈





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 filer   ̈Non-accelerated filer     ̈
Smaller reporting company  x





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





Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date: 4,647,474 common shares as of  August 11, 2009








1






















TABLE OF CONTENTS
PagePART I - FINANCIAL INFORMATIONItem 1.
Financial Statements
3Item 2.
Management’s Discussion and Analysis of Financial Condition and Results of Operations
19Item 3.
Quantitative and Qualitative  Disclosures About Market Risk
24Item 4T.
Controls and Procedures
24PART II - OTHER INFORMATIONItem 1.
Legal Proceedings
25Item 2.
Unregistered Sales of Equity Securities and Use of Proceeds
25Item 3.
Defaults Upon Senior Securities
25Item 4.
Submission of Matters to a Vote of Security Holders
25Item 5.
Other Information
25Item 6.
Exhibits
25











2












PART I - FINANCIAL INFORMATION





Item 1.Financial Statements





The Company’s unaudited financial statements included in this Form 10-Q are as follows:1
Balance Sheet as   Consolidated  Balance Sheets as of  June 30, 2009 and December 31, 2008 (audited);2
Consolidated  Statements of Operations for the three months and six months ended June 30, 2009 and  2008;3
Consolidated  Statements of Cash Flows for the six months ended June 30, 2009 and 2008;4
Notes to Consolidated Condensed Financial Statements.











3










Item 1. Financial Statements.


LIGHTNING GAMING, INC. AND SUBSIDIARIES


CONSOLIDATED BALANCE SHEETS


June 30,
2009


December
31, 2008(unaudited)AssetsCurrent AssetsCash

$
1,311,195


$
2,429,493Accounts receivable, net


773,150



68,518Inventory


981,241



824,268Prepaid expenses


115,437



211,868Total Current Assets


3,181,023



3,534,147Property, Plant and Equipment, net


1,256,470



1,488,541Intangible Assets net


193,517



144,567Other Assets


120,776



143,094Total Assets

$
4,751,786


$
5,310,349Liabilities and Stockholders' DeficitCurrent LiabilitiesCurrent portion of  long term debt

$
8,515,879


$
15,879Accounts payable


345,786



538,512Accrued  interest


1,534,006



-Accrued expenses


1,105,016



813,544Total Current Liabilities


11,500,687



1,367,935Long Term DebtLong term debt


3,904,626



12,290,831Accrued interest and other long term liabilities


327,165



1,250,765Fair value of warrants


1,000



-Total Long Term  Liabilities


4,232,791



13,541,596CommitmentsStockholders' DeficitPreferPreferred stock: $0.001 par value; authorized 10,000,000 shares, no shares issued and outstanding
issu


-



-Common stock: $0.001 par value; authorized 90,000,000 shares,
4,655,285  shares issued and 4,647,474 outstanding at June 30, 2009 and December 31, 2008


4,656



4,656Additional Paid in Capital


2,322,338



3,174,647Accumulated deficit


(13,300,875)



(12,770,674
)Treasury stock, 7,811 shares at cost


(7,811)



(7,811)Total Stockholders’ Deficit


(10,981,692)



(9,599,182
)Total Liabilities and Stockholders’ Deficit

$
4,751,786


$
5,310,349See Notes to Consolidated Condensed Financial Statements





4









LIGHTNING GAMING, INC. AND SUBSIDIARIES


CONSOLIDATED STATEMENTS OF OPERATIONS


Three Months Ended June 30, 2009 and 2008


Three Months EndedJune 30,2009


2008RevenuesSales of systems and parts

$
1,014,488


$
220,356License and service  fees


288,386



71,639Total revenues



1,302,874



291,995Costs and operating expensesCost of products sold

370,095



99,656Operating expenses

130,930



224,502Research and development

299,874



429,026Selling, general & administrative expenses


554,829



546,161Depreciation and amortization


294,049



231,687Total costs and operating expenses


1,649,777



1,531,032Operating loss



(346,903)



(1,239,037)Non-operating expenseNet interest expense


(311,618)



(245,698)Change in value of warrants


108,718



-Other expense


(1,480)



(2,847)Net loss


$
(551,283)


$
(1,487,582)Net loss per common share-basic and diluted


$
(0.12)


$
(0.32)Weighted average common shares outstanding-
basic and diluted



4,647,474



4,644,184See Notes to Consolidated Condensed Financial Statements

















5











LIGHTNING GAMING, INC. AND SUBSIDIARIES


CONSOLIDATED STATEMENTS OF OPERATIONS


Six Months Ended June 30, 2009 and 2008


Six Months EndedJune 30,2009


2008RevenuesSales of systems and parts

$
1,399,800


$
462,292License and service  fees


587,340



144,126Total revenues



1,987,140



606,418Costs and operating expensesCost of products sold

553,461



195,289Operating expenses

269,471



357,996Research and development

567,211



845,091Selling, general & administrative expenses


875,359



1,170,671Depreciation and amortization


525,284



376,567Total costs and operating expenses


2,790,786



2,945,614Operating loss



(803,646)



(2,339,196)Non-operating expenseNet interest expense


(619,887)



(450,905)Change in value of warrants


14,894



-Other expense


(14,803)



(2,847)Net loss


$
(1,423,442)


$
(2,792,948)Net loss per common share-basic and diluted


$
(0.31)


$
(0.60)Weighted average common shares outstanding-
basic and diluted



4,647,474



4,644,485See Notes to Consolidated Condensed Financial Statements




























LIGHTNING GAMING, INC. AND SUBSIDIARIES


CONSOLIDATED STATEMENTS OF CASH FLOWS


Six Months Ended June 30, 2009 and 2008











Six Months EndedJune 30,2009


2008NET CASH USED IN OPERATING ACTIVITES

$
(1,417,660)


$
(1,395,175)CASH FLOWS FROM INVESTING ACTIVITIESPurchase of equipment


(480,431)



(936,660)Increase in intangible and other assets


(115,000)



(182,601)Proceeds from sale of  equipment


903,034



210,000NET CASH PROVIDED  BY  (USED IN) INVESTING ACTIVITIES


307,603



(909,261)CASH FLOWS FROM FINANCING ACTIVITIESPayment on capital lease


(8,241)



-Proceeds from  issuance of debt


-



2,088,107Purchase of treasury stock


-



(7,811)NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES


(8,241)



2,080,296NET DECREASE  IN CASH


(1,118,298)



(224,140)CASH - Beginning of period


2,429,493



2,638,266CASH - End of period

$
1,311,195


$
2,414,126Supplemental Disclosure of cash Flow Information:Cash paid for interest

$
2,835


$
1,679Non cash financing activities:Issuance of capital stock warrants in connection with notes payable

$
-


$
159,000See Notes to Consolidated Condensed Financial Statements











7










LIGHTNING GAMING, INC. AND SUBSIDIARIES


Notes to Consolidated Condensed Financial Statements


June 30, 2009





Note 1.   Nature of Business and Summary of Significant Accounting Policies





Nature of Business:





On January 29, 2008, under the Agreement and Plan of Merger dated September 28, 2007, Lightning Gaming, Inc. (formerly known as  Red Pearl Acquisition Corp.) (the “Company”) completed a merger (the "Merger") with Lightning Poker, Inc. (“Lightning Poker”), as a result of which Lightning Poker became a wholly-owned
subsidiary of the Company.





Lightning Poker was formed to manufacture and market a variety of gaming products to commercial and tribal casinos, card clubs, other gaming and lottery venues, bars and restaurants and the home market. The major product to date is a fully automated, proprietary electronic poker table (the “System”).
The System is designed to improve economics for casino operators while improving overall player experience.




The Company routinely enters into license agreements  for the use of intellectual properties and technologies in its products. These agreements generally provide for royalty advances and license fee payments when the agreements are signed and minimum commitments which are cancellable in certain circumstances.








Basis of Presentation:





The unaudited interim financial statements contained herein should be read in conjunction with the Company’s annual report on Form 10-K filed on April 8, 2009 (“Form 10-K”). The accompanying interim financial statements are presented in accordance with the requirements of  Article 8.03 of Regulation S-X promulgated
by the Securities and Exchange Commission (“SEC”) and, accordingly, do not include all the disclosures required by generally accepted accounting principles with respect to annual financial statements. The interim consolidated condensed financial statements have been prepared in accordance with the Company’s accounting practices described in the Form 10-K but have not been audited. In management’s opinion, the financial statements include all adjustments, which consist only of normal recurring
adjustments, necessary for a fair statement of the Company’s results of operations for the periods presented. The balance sheet data as of December 31, 2008 were derived from the Company’s audited financial statements, but do not include all disclosures required by accounting principles generally accepted in the United States of America (“GAAP”). The results of operations for the six months ended June 30, 2009 are not necessarily indicative of the results to be expected for the
entire year.





There were no material changes during the most recent fiscal quarter in the Company’s significant accounting policies described in the Form 10-K.





The allowance for doubtful accounts at June 30, 2009 and December 31, 2008 was $89,900 and $10,000, respectively.





The Company’s financial statements have been prepared on a going concern basis, which assumes realization of all assets and settlement or payment of all liabilities in the ordinary course of business. We have limited capital resources, net operating losses and negative cash flows from operations since the Company’s inception
and expect these conditions to continue for the foreseeable future. The generation of cash flow sufficient to meet the Company’s cash needs in the future will depend on the Company’s ability to obtain the regulatory approvals required to distribute the System and successfully market it to more casinos and card clubs. The Company believes it will be able to support its operations for the foreseeable








8









Lightning Gaming, Inc. and Subsidiaries Notes to Consolidated Condensed Financial Statements (Continued)


Note 1.   Nature of Business and Summary of Significant Accounting Policies (Continued)


Basis of Presentation (Continued)





future. However, if sales of the System do not meet, or the Company’s expenses exceed, the Company’s projections, the Company may need to raise additional funds through an offering of securities or a credit facility. If that becomes necessary, there is no assurance that the Company would be able to obtain such financing on
reasonable and feasible terms. If the Company needs additional funding and is unable to obtain it, the Company’s financial condition would be adversely affected. In that event, the Company would have to postpone or discontinue planned operations and projects. The Company’s continuance as a going concern is dependent upon these factors, among others. The financial statements do not include any adjustments that might result from the outcome of this uncertainty. The Company has  received
assurance from a major stockholder to support its operations for 2009 should such support become necessary.




Certain amounts in the accompanying financial statements have been reclassified to conform to the current presentation. There was no effect on the net loss.





Recent Accounting Pronouncements





In September 2006, the Financial Accounting Standards Board (“FASB”) issued Statement of Financial Accounting Standards (“SFAS”) No. 157 Fair Value Measurements. SFAS No. 157 defines fair value, establishes a framework for measuring fair value in accordance with
GAAP, and expands disclosures about fair value measurements. SFAS No. 157 established a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value. These tiers include: Level 1, defined as observable inputs such as quoted prices in active markets; Level 2, defined as inputs other than quoted prices in active markets that are either directly or indirectly observable; and Level 3, defined as unobservable inputs in which little or no market data exist, therefore requiring an entity
to develop its own assumptions. The fair value hierarchy also requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value.





The Company adopted SFAS No.157 as of January 1, 2008, for financial instruments measured at fair value on a recurring and nonrecurring basis. Although the adoption of SFAS No.157 did not materially impact its financial condition, results of operations, or
cash flows, the Company is now required to provide additional disclosures as part of its financial statements.





In March 2008, the FASB issued SFAS No. 161 Disclosures about Derivative Instruments and Hedging Activities. SFAS No. 161 improves financial reporting on derivative instruments and hedging activities by requiring enhanced disclosures to enable investors to better understand
their effects on an entity’s financial position, financial performance and cash flows. The new standard is effective for financial statements issued for fiscal years and interim periods beginning after November 15, 2008. The Company is not currently the holder of any derivative instruments; thus, adoption of SFAS No. 161 would not currently have any effect on the Company's results of operations, financial condition, or cash flows.





In May 2008, the FASB issued SFAS No. 162, The Hierarchy of Generally Accepted Accounting Principles . SFAS No. 162 identifies the sources of accounting principles and the framework for selecting principles to be used in the preparation of financial statements that are presented in
conformity with  GAAP. The GAAP hierarchy was previously set forth in the American Institute of Certified Public Accountants Statement on Auditing Standards No. 69, The Meaning of Present Fairly in Conformity With Generally Accepted Accounting Principles. Though the FASB does not expect a change in current practice, the FASB issued SFAS No. 162 in order for the GAAP hierarchy to reside in the accounting literature established by the FASB.
SFAS No. 162 is effective 60 days following the SEC’s approval of the Public Company Accounting Oversight Board amendments to AU Section 411, The Meaning of Present Fairly in Conformity With Generally Accepted Accounting Principles. Any effect of applying the provisions of SFAS No.162 shall be reported as a change in accounting principle in accordance with SFAS No. 154, Accounting Changes and Error
Corrections.








9










Lightning Gaming, Inc. and Subsidiaries Notes to Consolidated Condensed Financial Statements (Continued)





Note 1.   Nature of Business and Summary of Significant Accounting Policies (Continued)


Recent Accounting Pronouncements (Continued)





The Company is currently reviewing SFAS No. 162 to determine its impact on the Company’s  financial statements upon adoption.





In June 2008, the FASB issued FASB Staff Position Emerging Issues Task Force (“EITF”)  No. 03-6-1, Determining Whether Instruments Granted in Share-Based Payment Transactions
Are Participating Securities .The FASB concluded in this EITF that unvested share-based payment awards that contain nonforfeitable rights to dividends or dividend equivalents are participating securities and shall be included in the calculation of earnings per share pursuant to the two-class method. This  EITF is effective for financial statements issued for fiscal years beginning after December 15, 2008, requiring all prior-period earnings per share data to be adjusted retrospectively. The Company
adopted  EITF No. 03-6-1 and it did not  have any effect on the Company's results of operations, financial condition, or cash flows.





Effective January 1, 2009 we adopted the provisions of EITF  No. 07-5, "Determining Whether an Instrument (or Embedded Feature) is Indexed to an Entity’s Own Stock”. EITF
No. 07-5 applies to any freestanding financial instruments or embedded features that have the characteristics of a derivative, as defined by SFAS No. 133, “Accounting for Derivative Instruments and Hedging Activities,” and to any freestanding financial instruments that are potentially settled in an entity’s own common stock. As a result of adopting EITF No. 07-05,  our outstanding  warrants exercisable for
7,009,145 shares, previously treated as equity pursuant to the derivative treatment exemption, were no longer afforded equity treatment. These warrants have a weighted average exercise price of $1.70 per share and a weighted average remaining life of 3 years. As such, effective January 1, 2009 we reclassified the fair value of these  warrants, which have exercise price reset features, from equity to liability status as if these warrants were treated as a derivative liability since their date of issue.
On January 1, 2009, we reclassified from additional paid-in capital, as a cumulative effect adjustment, $909,000 to beginning retained earnings and $16,000 to a long-term warrant liability to recognize the fair value of such warrants on such date. The fair value of these warrants decreased  to $1,000 as of June 30, 2009. As such, we recognized a gain from the change in fair value of these warrants for the three months and  six months ended June 30, 2009 of approximately $109,000
and 15,000, respectively.





In accordance with  loans obtained by the Company (Note 5), the lenders hold warrants to purchase 7,009,145 shares of the Company’s common stock at any time through June 2013 at prices ranging between $1.10 and $2.00 per share.  The purchase price is subject to adjustment from time to time
pursuant to the provisions of the respective warrant agreements. The warrants were not issued with the intent of effectively hedging any future cash flow, fair value of any asset, liability or any net investment in a foreign operation. The warrants do not qualify for hedge accounting, and as such, all future changes in the fair value of these warrants will be recognized currently in earnings until such time as the warrants are exercised or expire. The Company measures its warrants  at fair value. In
accordance with SFAS No. 157, warrants  are classified within Level 3 because they are valued using the Black-Scholes model . Some of the inputs to these valuations are unobservable in the market and are significant.











10










Lightning Gaming, Inc. and Subsidiaries Notes to Consolidated Condensed Financial Statements (Continued)





Note 1.   Nature of Business and Summary of Significant Accounting Policies (Continued)


Recent Accounting Pronouncements (Continued)





These warrants do not trade in an active securities market, and as such, the Company estimates the fair value of these warrants using the Black-Scholes option pricing model using the following assumptions:


June 30,

January 1,2009

2009Annual dividend yield


—



—Expected life (years)


3.0



3.6Risk-free interest rate


3.52
%


2.24
%Expected volatility


48
%


40
%





The Company currently has no reason to believe future volatility over the expected remaining life of these warrants is likely to differ materially from historical volatility. The expected life is based on
the remaining term of the warrants. The risk-free interest rate is based on one-year U.S. Treasury securities.





In May 2009, the FASB issued SFAS No. 165, “Subsequent Events”.  SFAS  No. 165 establishes general standards of accounting for and disclosure of events that occur after the balance sheet date but before financial statements are issued or are available
to be issued.  SFAS No. 165 is effective for interim or annual financial periods ending after June 15, 2009. The adoption of SFAS No. 165 did not have a  material impact on  the Company.





In June 2009, the FASB issued SFAS No. 168, “The FASB Accounting Standards CodificationTMand the Hierarchy of Generally Accepted
Accounting Principles – a replacement of FASB Statement No. 162”.  SFAS No. 168 provides for the FASB Accounting Standards CodificationTM (the “Codification”) to become the single official source of authoritative, nongovernmental GAAP.  The Codification did not change GAAP but reorganizes the literature.  SFAS No. 168 is effective for interim and annual periods ending after
September 15, 2009, the quarter ending September 30, 2009 for the Company.





In December 2007, the FASB issued SFAS No. 160 , Noncontrolling Interest in Consolidated Financial Statements - an amendment of ARB No. 51. SFAS No. 160 changed reporting standards for noncontrolling interests in a subsidiary. It  is effective for fiscal years beginning
on or after December 15, 2008. The Company adopted SFAS No.160 and it did  not  have any effect on the Company's results of operations, financial condition, or cash flows.










Lightning Gaming, Inc. and Subsidiaries Notes to Consolidated Condensed Financial Statements (Continued)
Note 2.   Inventory





Inventory consists of the following:


June 30,
2009


December 31,
2008Finished tables

$
424,392


$
246,609Raw materials and work in process


556,849



577,659Inventory

$
981,241


$
824,268





Note 3.   Property and Equipment





Property and equipment consist of the following:


June 30,
2009


December 31,
2008Equipment, principally Systems

$
2,467,648


$
2,474,113Furniture and fixtures


42,606



43,426Property, plant and equipment


2,510,254



2,517,539Less accumulated depreciation


(1,253,784
)


(1,028,998
)Property, plant and equipment, net

$
1,256,470


$
1,488,541





Note 4.   Intangible Assets





Intangible assets consist of the following:





June 30,
2009


December 31,
2008Non-compete agreement

$
167,052


$
167,052Purchased licenses and software


189,964



74,964Total intangibles


357,016



242,016Less accumulated amortization


(163,499)



(97,449)Intangible assets, net

$
193,517


$
144,567





The weighted average amortization period for the non-compete agreement acquired in 2007 is 2 years.  The software licenses acquired in 2009 and 2008 are being amortized over 3 years.















Lightning Gaming, Inc. and Subsidiaries Notes to Consolidated Condensed Financial Statements (Continued)


Note 5.   Debt





Long Term Debt consists of the following:





June 30, 2009


December 31, 2008Capital Lease obligation interest at 7.5% payable monthly through March, 2013

$
72,680

$
80,921Notes Payable 8% interest due 2010


8,500,000


8,500,000Notes Payable 8% interest due 2011


4,000,000


4,000,000Total long term debt


12,572,680


12,580,921Less: current maturities


(8,515,879)


(15,879)Less: unamortized fair market value of  warrants


(152,175)


(274,211)Total long term debt

$
3,904,626

$
12,290,831





In June 2008, the Company entered into a $4,000,000 three -year loan agreement with interest at 8% per annum.  The Notes issued under the loan agreement are secured by the assets of Lightning Poker.  In connection with the loan, the Company issued warrants to purchase $4,000,000 worth of common stock  at an exercise
price of $2.00 per share .  The warrants are exercisable through June 2013.





Interest is payable at maturity of the Notes.





In March 2008, the Company entered into a capital lease obligation to finance the purchase of a recreational vehicle.  Annual payments, including interest, under the capital lease are $22,152 . The capital lease is secured by the vehicle and a certificate of deposit in the amount of $40,000. The certificate of
deposit is included in other assets.





In accordance with the loans obtained by the Company, the lenders hold warrants to purchase 7,009,145 shares of the Company’s common stock at any time
through June 2013 at prices ranging between $1.10 and $2.00 per share.  The purchase price is subject to adjustment from time to time pursuant to the provisions of the respective warrant agreements.  The Company accounts for the value of these warrants in the same manner used for stock-based compensation. Expense recognized for the three months ended








13










Lightning Gaming, Inc. and Subsidiaries Notes to Consolidated Condensed Financial Statements (Continued)





Note 5.   Debt (Continued)





June 30, 2009 and June 30,2008 and six months ended June 30, 2009 and June 30,2008 related  to these warrants was  $61,018, $79,133, $122,035  and $132,346, respectively, and was included in interest expense.





Certain notes in the amount of $1,500,000 and related accrued interest of $282,612 at June 30, 2009 are convertible, at the discretion of the lender into shares of the Company’s common stock at the per-share purchase price of common stock in the next equity financing.





Note 6. Commitments





The Company’s  discussions with the staff of the Pennsylvania Gaming Control Board (“PGCB”) , which it reported in the Form 10-K  in Note 6 to the consolidated condensed financial statements, have been satisfactorily resolved without a consent agreement or any similar action.  The Company has
been granted a manufacturer’s  license by the PGCB.





In  2008  the Company entered into a technology agreement with Intuecode for a nonexclusive perpetual license to use its  gaming platform/ operating system.   The agreement provides for royalty fees on a per unit basis and is for a term of two years.





In March 2009 the Company entered into an exclusive  license agreement with Hasbro, Inc. to use the Scrabble brand in gaming devices distributed in the United States and Canada.  The initial term of the agreement is  five years with the Company’s right to extend the agreement for two additional five-
year terms if certain performance standards are met. The agreement calls for minimum annual payments and may be cancelled under certain conditions.





In April 2009 the Company entered into an exclusive  license agreement with Mattel, Inc. to use the Scrabble brand in gaming devices distributed  worldwide excluding  the United States and Canada.  The initial term of the agreement is five years with the Company’s right to extend the
agreement for two additional two- year terms if certain performance standards are met. The agreement calls for minimum annual payments and may be cancelled under certain conditions.





The Company routinely enters into license agreements  for the use of intellectual properties and technologies. These agreements generally provide for royalty advances and license fee payments when the agreements are signed and minimum commitments which are cancellable in certain circumstances.





At June 30, 2009, the Company had total  license fee commitments and advances  made and potential future royalty and license fee payments as follows:





Minimum
CommitmentsTotal royalty and license fee commitments

$
1,425,000AdvAdvances  made


(75,000
)PotePotential future payments

$
1,350,000








14












Lightning Gaming, Inc. and Subsidiaries Notes to Consolidated Condensed Financial Statements (Continued)





Note 6. Commitments (Continued)





As of June 30, 2009, the Company estimates that potential future royalty payments in each fiscal year will be as follows:





Minimum
Commitments201
2010
$
150,000201
2011

300,000201
2012

400,000201
2013

500,000Total
$
1,350,000





Note 7.   Stockholders’ Deficit





Stockholders’ deficit includes the following transactions:





Stock Options:  In 2007 the Company adopted the 2007 Equity Incentive Plan (the “Stock Plan”) to enable the Company to offer key employees, consultants and directors equity interests in the Company, thereby helping to attract, retain and motivate
such persons to exercise their best efforts on behalf of the Company.  Stock options under the Stock plan are granted at the discretion of the Board of Directors (acting as the Company’s Compensation Committee). The maximum aggregate number of shares of common stock issuable under the Stock Plan is 2,500,000.  The exercise price of each option will be determined by the Board of Directors at the time the option is granted, but in no event will be less than 100% of the fair market
value of the common stock at the time of grant.  Options granted will not be exercisable after 10 years from the grant date.





Options granted under the Stock Plan generally vest at 20% per year starting on the first anniversary of the grant date and are fully vested after five years.  The options can be exercised in partial or full amounts upon a change in control and at such other times as specified in the award agreements.





As required by GAAP, stock options granted  are accounted for under SFAS No. 123R, “Share Based Payments”, and its related interpretations.  Accordingly, compensation costs  recognized for the three months ended June 30, 2009 and June 30, 2008 and six months ended June 30, 2009 and June 30,2008 were
$29,296, $25,758, $56,822 and $69,613, respectively.





A summary of option transactions in 2009 is as follows:





WeightedAverageShares

Exercise PriceOutstanding at December 31, 2008



1,813,200


$
1.68Options granted



620,000


$
.28Options exercised



-


$
-Options cancelled



-


$
-Options outstanding at June 30, 2009



2,433,200


$
1.32Options available for grant  under the Stock Plan at June 30, 2009



179,000











15










Lightning Gaming, Inc. and Subsidiaries Notes to Consolidated Condensed Financial Statements (Continued)





Note 7.   Stockholders’ Deficit (Continued)





Included in the options outstanding at December 31, 2008 are options for 115,200 shares granted outside the Stock Plan. The fair value of each option award is estimated on the date of grant using the Black-Scholes option pricing model.  Expected volatility is based upon publicly traded companies with characteristics similar to those
of the Company.  The Company uses historical data to estimate option exercise and employee termination within the valuation model.  The expected term of options granted represents the period of time that options granted are expected to be outstanding.  The risk-free rate for periods within the contractual life of the option is based on the U.S. Treasury yield curve in effect at the time of grant.





Stock-based compensation expense is recognized in the statement of operations based on awards ultimately expected to vest and may be reduced for estimated forfeitures.





The following table summarizes information with respect to stock options outstanding at June 30, 2009:





Options Outstanding

Vested OptionsWeightedAverage
Weighted



Weighted
WeightedRemaining
Average
Aggregate


Average
Average
AggregateContractual
Exercise
Intrinsic


Contractual
Exercise
IntrinsicNumber
Life (Years)
Price
Value

Number
Term (Years)
Price
Value2,433,200
6.5
$1.32
-

856,200
6.1
$1.34
-





The following table summarizes information with respect to stock options outstanding at December 31, 2008:





Options Outstanding

Vested OptionsWeightedAverage
Weighted



Weighted
WeightedRemaining
Average
Aggregate


Average
Average
AggregateContractual
Exercise
Intrinsic


Contractual
Exercise
IntrinsicNumber
Life (Years)
Price
Value

Number
Term (Years)
Price
Value1,813,200
6.4
$1.68
-

810,200
6.3
$1.18
-








As of June 30, 2009, there was approximately $372,000 of total unrecognized compensation cost related to nonvested share-based compensation arrangements granted under the Stock Plan.  The cost is expected to be recognized over a weighted-average period of 3.8 years.





Warrants:  In accordance with the loans obtained by the Company (Note 5), the lenders hold warrants to purchase 7,009,145 shares of the Company’s common stock at any time through June 2013 at prices ranging between $1.10 and $2.00 per share.  The
purchase price is subject to adjustment from time to time pursuant to the provisions of the respective warrant agreements.  The Company accounts for the value of these warrants in the same manner used for stock-based compensation.








16










Lightning Gaming, Inc. and Subsidiaries Notes to Consolidated Condensed Financial Statements (Continued)





Note 7.   Stockholders’ Deficit (Continued)


Warrants (Continued)





The following table is a summary of the Company’s warrant activity for the six months ended June 30, 2009:





WeightedWarrants


AverageOutstanding


Exercise PriceOutstanding at December 31, 2008


7,009,145


$
1.70Warrants granted


-


$
-Warrants exercised


-



-Warrants cancelled


-


$
-Warrants outstanding at June 30, 2009


7,009,145


$
1.70








The following table summarizes information with respect to warrants outstanding at June 30, 2009:





Warrants Outstanding

Vested WarrantsWeightedAverage
Weighted



WeightedRemaining
Average
Aggregate


Average
AggregateContractual
Exercise
Intrinsic


Exercise
IntrinsicNumber
Life (Years)
Price
Value

Number
Price
Value7,009,145
3.0
$1.70
-

7,009,145
$1.70
-





The following table summarizes information with respect to warrants outstanding at December 31, 2008:





Warrants Outstanding

Vested WarrantsWeightedAverage
Weighted



WeightedRemaining
Average
Aggregate


Average
AggregateContractual
Exercise
Intrinsic


Exercise
IntrinsicNumber
Life (Years)
Price
Value

Number
Price
Value7,009,145
3.6
$1.70
-

7,009,145
$1.70
-





The weighted average fair value per share of each  warrant granted for the year ended December 31, 2008 was $0.006.





17










Lightning Gaming, Inc. and Subsidiaries Notes to Consolidated Condensed Financial Statements (Continued)





Note 8.   Income Taxes





The Company accounts for income taxes under the provisions of SFAS   No.109, Accounting for Income Taxes.  SFAS No.109 provides for the recognition and measurement of deferred income tax benefits and liabilities based on the likelihood of their realization in
future years.  A valuation allowance must be established to reduce deferred income tax benefits if it is more likely than not that a portion of the deferred benefits will not be realized.





As of June 30, 2009, the Company has available, for federal and state income tax purposes, net operating loss (“NOL”) carryforwards of approximately $9,700,000, which expire at various times through 2029.  The utilization of the NOL carryforwards is dependent upon the ability of the Company to generate sufficient
taxable income during the carryforward periods.  The NOL carryforwards are also subject to certain limitations on their utilization should changes in Company ownership occur. The Company has not recognized any tax carryforward benefits in the financial statements.





Note 9. Related Party Transactions





During 2006, 2007 and 2008 the Company borrowed $7,500,000 under various loan agreements (the “CI II Loans”) with the Co Investment Fund II LP (“CI II”). CI II is managed by Cross Atlantic Capital Partners Inc. (“Cross Atlantic”) and beneficially owns more than 5% of the Company’s
outstanding common stock. Donald Caldwell, a director of the Company,  is the founder and Chief Executive Officer of Cross Atlantic  and  Frederick Tecce, also a director of the Company, is a  managing director and of counsel of Cross Atlantic.  In connection with the CI II Loans, the Company issued to CI II warrants to purchase 4,401,385 shares of common stock. The aggregate fair market value of the warrants at the respective times the Company issued them was
$791,205. In addition, principal and interest on certain notes in the amount of $1,782,612 at June 30, 2009 are convertible into shares of common stock at the offering price of the next equity offering. During the three months ended June 30, 2009 and 2008 and the six months ended June 30, 2009 and 2008 , interest on the CI II Loans amounted to $150,000, $110,000, $300,000 and $220,000, respectively . During 2009 and 2008, we made no principal payments on the CI II Loans.  As of June 30, 2009,
the aggregate outstanding principal amount of the CI II Loans was $7,500,000.





Mr. Tecce is of counsel to the law firm of Buchanan Ingersoll & Rooney PC, which the Company retained for various legal matters in 2009 and 2008.  During  the three months ended June 30, 2009 and 2008 and the  six months ended June 30, 2009 and 2008,  fees and expenses incurred to that firm
totaled  $600 , $0, $7,600 and  $7,000, respectively.





18












Lightning Gaming, Inc. and Subsidiaries Notes to Consolidated Condensed Financial Statements (Continued)





Note 10.   Subsequent Events





We considered all material events through August 14, 2009 and determined there were no reportable matters.





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





Forward-Looking Statements





Throughout this report we make “forward-looking statements,” as that term is defined in Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”).  Forward-looking
statements include the words “may,” “will,” “could,” “would,” “likely,” “estimate,” “intend,” “plan,” “continue,” “believe,” “expect,” “projections” and “anticipate” or the negative of such terms and similar words and include all discussions about our ongoing or future plans, objectives or expectations.





We intend such forward-looking statements to be covered by the safe-harbor provisions for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995, and are including this statement for purposes of those safe-harbor provisions. We have based
these forward-looking statements on our current expectations and projections about future events.  These forward-looking statements are subject to known and unknown risks, uncertainties and assumptions that may cause our actual results, level of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied by such forward-looking statements.  You should read this report completely and with the
understanding that actual future results may be materially different from what we currently expect.  We do not plan to update forward-looking statements unless applicable law requires us to do so, even though our situation or plans may change in the future.





All future written and oral forward-looking statements attributable to us or any person acting on our behalf are expressly qualified in their entirety by the cautionary statements contained or referred to in this section or elsewhere in this report.  In light of these and other risks, uncertainties and assumptions, the forward-looking
events discussed in this report might not occur.  Factors that might cause our actual results to differ from our expectations, might cause us to modify our plans or objectives, or might affect our ability to meet our expectations include, but are not limited to:  the severe economic downturn that the gaming industry is suffering; the dramatic decline in national and global economic conditions; the tightening of credit in financial markets generally and the particularly severe tightening of
them for the gaming industry, which may adversely affect our ability to raise funds through debt or equity financing or to refinance our long- term debt that will become due in the next twelve months, and may also adversely affect the ability of our customers to purchase our product and services; interest rates; our ability to obtain additional gaming licenses; fuel price increases; legislative/regulatory changes; competition,; changes in generally accepted accounting principles; and fluctuations in forgein currency
exchange rates. Further information concerning our business, including additional factors that could materially affect our financial results, is included herein and in our other filings with the Securities and Exchange Commission (“SEC”).





The information contained in this section has been derived from our financial statements and should be read together with the financial statements and related notes contained elsewhere in this report.





19









Overview





On January 29, 2008, Lightning Gaming, Inc. (the” Company”) acquired Lightning Poker, Inc. (“Lightning Poker”) in a merger (the “Merger”), under which Lightning Poker became a wholly-owned subsidiary of the Company, the stockholders of Lightning Poker became the Company’s stockholders with
the same percentage ownership interests in the Company  as they had in Lightning Poker prior to the Merger, all of the Company's previously outstanding stock was canceled with no obligation on the part of the Company for the payment of any consideration, and the Company ceased being a shell company.





Exchange Act reports for periods ending after the date of the Merger are presented on a consolidated basis, reflecting the Company’s ownership of Lightning Poker.





Lightning Poker was formed to develop and market an electronic poker table that provides a fully automated table gaming experience without a dealer in casinos and card rooms in regulated jurisdictions worldwide.   Lightning Poker's fully automated, electronic poker table (the “System”) is designed to increase revenue
and security while helping to reduce the labor costs associated with poker play.  The System is a fully automated electronic poker table that enables up to ten players to make their wagers and game decisions via individual touch- screen betting stations. It utilizes a software application written in Java, which runs on a Linux-based multi-game table platform. The System achieves the goal of increasing revenue by allowing a larger number of hands to be played per hour, increasing the “rake”
or per- hand fee collected by the operator commensurately.   The elimination of a live dealer also reduces labor costs and permits more tables to be operational in jurisdictions where skilled poker dealers are in short supply. The System has an added benefit of eliminating mistakes by the dealer or the player, and it eliminates the need to tip the dealer.   The System also provides an opportunity to present information about the game to the players via individual player screens
and via the common center monitor.





The System has received Gaming Laboratories Incorporated certification for a casino version of Texas Holdem, Omaha, cash, and single table tournament poker, which the Company needs in order to install the System in certain jurisdictions.





The Company has filed and will continue to file applications for licensure in various gaming jurisdictions. The Company evaluates economic impact of each jurisdiction in determining the priority of filing in a jurisdiction.  The Company has applied for the required gaming regulatory approvals to sell the System in Nevada.  However,
due to the current state of the United States economy, the Company has requested that the investigation of its application be suspended until further notice.  A decision from the Nevada gaming regulatory authorities could take up to 24 months from the start of the investigation of the application, and there is no assurance of obtaining the required approvals to sell the System in Nevada.





Poker is one of several card games in which two or more players strategically bet against each other. Many casinos and “card clubs” operate poker rooms that typically consist of tables at which up to 10 players play any of several types of poker against the other players at the table. A dealer employed by the casino or card club
is responsible for dealing cards, calculating bets, collecting the “rake,” which is the amount the casino or card club charges for each hand of poker, and distributing payouts. Unlike most other games played at a casino, where the casino may win the full amount of a player’s bet, the casino or card club’s revenue from the poker room is limited to the rake.





Accordingly, poker generally generates lower relative profits for the casino operator than slots and other table games. The System is intended to improve the profitability of poker by enhancing the operator’s revenue opportunities while decreasing the labor burden.





The number of Systems installed at any particular location is fluid and may increase or decrease over time. For example, casinos remodel periodically and may expand or contract the amount of floor space allocated to poker. In addition, from time to time certain customers find that they license more Systems from us than demand will support
in their poker rooms, which itself is affected by factors ranging from seasonality (people tend to travel shorter distances in the winter months) to macroeconomic and competitive factors. In other cases, regulatory changes in a particular jurisdiction may result in a temporary delay or removal of Systems. Sometimes, we may elect to redeploy Systems to more productive venues to maximize our return on investment. Frequently we install Systems at new customer sites where we engage in trial periods of varying
lengths with customers to satisfy regulatory requirements as well as to test demand, and educate customers. We view these fluctuations as an expected and normal part of the growth phase of our business and an effective tool for managing our assets.





We have a history of losses since the Company’s inception. We incurred a net loss of $1,423,000 in the six months ended June 30, 2009.





20








Three Months Ended June 30, 2009  Compared to Three  Months Ended June 30, 2008


( All amounts rounded to the nearest $1,000)


Revenues





The Company’s revenues for the three months ended June 30, 2009 were $1,303,000 compared to $292,000 for the comparable prior year period. The increase in revenues was due to the increase in both sales of Systems and parts and license and service fees.





Sales of Systems and parts increased by $794,000 (360%) to $1,014,000 for the three months ended June 30, 2009 as compared to $220,000 for the three months ended June 30, 2008 principally due to the placement of additional Systems at existing international customers.





License and service fees increased by $216,000 (300%) to $288,000 for the three months ended June 30, 2009 as compared to $72,000 for the three months ended June 30, 2008 due to the placement of Systems at new and existing casino customers.





Cost of Products Sold





For the three months ended June 30, 2009, cost of products sold increased $270,000 (270%) to $370,000 as compared to $100,000 for the three months ended June 30, 2008 due to the placement of additional Systems at existing international customers. Gross margins were 64% for the three months ended June 30, 2009 compared with 55% for the
three months ended June 30, 2008. The increase in gross margin for the three months ended June 30, 2009 was principally due to lower selling costs.





Operating Expenses





Operating expenses decreased by $94,000 to $131,000 for the three months ended June 30, 2009, from $225,000 for the three months ended June 30, 2008.  This decrease was primarily the result of lower System design costs due to the maturing of the System design.





Research and Development Expenses





Research and development expenses decreased by $129,000 to $300,000 for the three months ended June 30, 2009, from $429,000 for the three months ended June 30, 2008. Research and development expenses are primarily related to the development of the System.





Selling, General and Administrative Expenses





Selling, general and administrative expenses increased by $9,000 to $555,000 for the three months ended June 30, 2009, from $546,000 for the three months ended June 30, 2008.  This increase was primarily due to higher regulatory fees, compliance costs  and  collection reserves partly offset by the absence of Merger
expenses, lower insurance costs  and lower staffing costs.











21












Depreciation and Amortization





Depreciation and amortization increased by $ 62,000 to $294,000 for the three months ended June 30, 2009 from $232,000 for the three months ended June 30, 2008. This increase was primarily related to the installation of Systems during 2008 and 2009 and the upgrading of Systems in 2009.





Net Interest Expense





Net interest expense increased by $66,000 to $312,000 for the three months ended June 30, 2009 from $246,000 for the three months ended June 30, 2008. This change was the result of the issuance of notes and related warrants during 2008 of $4,000,000, which was partly offset by interest income from the investment of cash balances.





Change in Value of Warrants





In June 2008, the Financial Accounting Standards Board finalized Emerging Issues Task Force (“EITF”) No. 07-5, "Determining Whether an Instrument (or Embedded Feature) is indexed to an Entity's Own Stock". The EITF lays out a procedure to determine if an equity-linked financial
instrument (or embedded feature) is indexed to its own common stock. The EITF is effective for fiscal years beginning after December 15, 2008. The outstanding warrants that were previously classified in equity were reclassified to derivative liabilities on January 1, 2009 as a result of this EITF.  We estimated the fair value of these liabilities as of March 31, 2009 to be $110,000. The fair value of these liabilities was $1,000 at June 30, 2009. The $109,000 change in fair value is reported in our
consolidated statement of operations as a “Change in value of warrants”.





Other Expense





The Company receives payment in Euros  for certain license fees and sales revenues from some international customers. Other expense represents foreign exchange transaction costs of conversion of Euros to US dollars.





Six Months Ended June 30, 2009  Compared to Six  Months Ended June 30, 2008





Revenue





The Company’s revenues for the six months ended June 30, 2009 were $1,987,000 compared to $606,000 for the comparable prior year period. The increase in revenues was due to the sale of Systems in the current period  to international customers and  commencement of new System installations.








22







Cost of Products Sold





For the six months ended June 30, 2009, cost of products sold increased $358,000 to $553,000 from $195,000 for the six months ended June 30, 2008. This increase was due to the sale of  Systems to  international customers. Gross margins were 61% for the six months ended June 30, 2009 compared with 58% for
the six months ended June 30, 2008. The increase in gross margin  was principally due to lower selling costs.





Operating Expenses





Operating expenses decreased by $89,000 to $269,000 for the six months ended June 30, 2009, from $358,000 for the six months ended June 30, 2008.  This decrease was primarily the result of lower System design costs due to the maturing of the System design.





Research and Development Expenses





Research and development expenses decreased by $278,000 to $567,000 for the six months ended June 30, 2009, from $845,000 for the six months ended June 30, 2008. Research and development expenses are primarily related to the development of the System.





Selling, General and Administrative Expenses





Selling, general and administrative expenses decreased by $296,000 to $875,000 for the six months ended June 30, 2009, from $1,171,000 for the six months ended June 30, 2008.  This decrease was primarily the result of the absence of Merger expenses, lower insurance costs  and lower staffing costs partly offset by  higher
regulatory fees, compliance costs  and  collection reserves.





Depreciation and Amortization





Depreciation and amortization increased from $377,000 for the six months ended June 30, 2008 to $525,000 for the six months ended June 30, 2009. This increase was primarily related to the placement of the System under contracts and upgrading of Systems.




Change in Value of Warrants




“Determining whether an Instrument (or Embedded Feature) is indexed to an Entity's Own Stock”.




Net Interest Expense





Net interest expense increased from $451,000 for the six months ended June 30, 2008 to $620,000 for the six months ended June 30, 2009. This change was the result of the issuance of notes payable and related warrants during 2008 of $4,000,000.




Liquidity and Capital Resources





Since our inception, we have funded our startup costs, operating costs and capital expenditures through loans and issuances of common stock.





For the six months ended June 30, 2009, we incurred a net loss of $1,423,000 and used $1,418,000 of cash in operating activities. At June 30, 2009, we had an accumulated deficit of $13,301,000. The generation of cash flow sufficient to meet our cash needs in the future will depend on our ability to obtain the regulatory approvals required
to distribute the System and successfully market it to more casinos and card clubs.





Our current cash requirements are approximately $220,000 to $275,000 per month, principally for salaries, professional services, marketing, office expenses and the purchase of the hardware components for the System.





23







Based on our cash flow projections and anticipated revenues, we believe we will be able to support our operations for the foreseeable future. However, if sales of the System do not meet, or our expenses exceed, our projections, we may need to raise additional funds through an offering of securities or a credit facility and refinance our
long-term debt that matures in the next twelve months. If that becomes necessary, there is no assurance that such financing and refinancing would be available to us, particularly during this economic recession and severe downturn in the gaming industry. If we need additional funding and refinancing and are unable to obtain it, our financial condition would be adversely affected. We have received assurance from a major stockholder to support our operations for 2009 should such support
become necessary.


In addition, our ability to sell or lease the System on a large scale may require additional financing for working capital. There is no assurance that such additional financing would be available at all, or on reasonable terms. Our inability to obtain such financing on terms that allow us to lease the System profitably would hamper
our ability to distribute the System on a large scale.





Off-Balance Sheet Arrangements





As of June 30, 2009, there were no off-balance sheet arrangements.





Going Concern





The Company’s financial statements have been prepared on a going concern basis, which assumes realization of all assets and settlement or payment of all liabilities in the ordinary course of business. We have limited capital resources, net operating losses and negative cash flows from operations since the Company’s inception
and expect these conditions to continue for the foreseeable future. The generation of cash flow sufficient to meet the Company’s cash needs in the future will depend on the Company’s ability to obtain the regulatory approvals required to distribute the System and successfully market it to more casinos and card clubs. The Company believes it will be able to support its operations for the foreseeable future. However, if sales of the System do not meet, or the Company’s expenses exceed, the
Company’s projections, the Company may need to raise additional funds through an offering of securities or a credit facility and refinance our long-term debt that matures in the next twelve months. If that becomes necessary, there is no assurance that the Company would be able to obtain such funding  on reasonable terms and feasible terms. If the Company needs additional funding and is unable to obtain it, the Company’s financial condition would be adversely affected. In that
event, the Company would have to postpone or discontinue planned operations and projects. The Company’s continuance as a going concern is dependent upon these factors, among others. The financial statements do not include any adjustments that might result from the outcome of this uncertainty. The Company has received assurance from a major stockholder to support its operations for 2009 should such support become necessary.





Item 3. Quantitative and Qualitative Disclosures about Market Risk.





Not applicable.




Item 4T. Controls and Procedures





We maintain disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) that are designed to ensure that information required to be disclosed in our reports filed or submitted under the Exchange Act are recorded, processed, summarized and reported within the time periods specified in the SEC’s rules
and forms, and 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.  In designing and evaluating our disclosure controls and procedures, our management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control
objectives, and management  is required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures.  As of June 30, 2009, we conducted an evaluation, under the supervision and with the participation of our management including our CEO and CFO, of the effectiveness of our disclosure controls and procedures.  Based on that evaluation, our CEO and CFO have concluded that as of June 30, 2009, our disclosure controls and procedures were effective
at the reasonable assurance level.





There were no changes in our internal control over financial reporting during our quarter ended June 30, 2009 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.





24








PART II - OTHER INFORMATION








Item 1.     Legal Proceedings.


None




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


None





Item 3.     Defaults upon Senior Securities


None





Item 4.     Submission of Matters to a Vote of Security Holders




The Annual Meeting of our stockholders was held on May 21, 2009 to elect our three -member  board of directors.  The voting results were as follows:





Election of Directors

For

WithheldBrian Haveson

2,685,814

0Donald Caldwell

2,685,814

0Frederick Tecce

2,685,814

0








Item 5.     Other Information


None





Item 6.      Exhibits


EXHIBIT NUMBER

EXHIBIT DESCRIPTION





31.1

Certification of Principal Executive Officer pursuant to Exchange Act Rule 13a-14(a)31.2

Certification of Principal Financial Officer pursuant to Exchange Act Rule 13a-14(a)32.1

Certification of Principal Executive Officer and Principal Financial Officer pursuant to Exchange Act Rule 13a-14(b) and 18 U.S.C. 1350








25













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.








Date:  August 14, 2009
Lightning Gaming, Inc.By:   /s/ Brian Haveson
Brian Haveson
President, Chief Executive Officer and Director














26