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

This document includes various "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, which represent our expectations or beliefs concerning future events. Statements containing expressions such as "believes," "anticipates," or "expects," used in our press releases and periodic reports on Forms 10-K and 10-Q filed with the SEC, are intended to identify forward-looking statements. All forward-looking statements involve risks and uncertainties. Although we believe our expectations are based upon reasonable assumptions within the bounds of our knowledge of our business and operations, there can be no assurances that actual results will not differ materially from expected results. We caution that these and similar statements included in this report are further qualified by important factors that could cause actual results to differ materially from those in the forward-looking statements. Such factors include those discussed under the heading "Risk Factors" in our Annual Report on Form 10-K for the 53 weeks ended November 2, 2008, and in this report. Readers are cautioned not to place undue reliance on forward-looking statements, which speak only as of the date thereof. We undertake no obligation to publicly release any revisions to such forward-looking statements to reflect events or circumstances after the date hereof.

OVERVIEW

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

For the first quarter of 2009, our revenue from box business sales equaled 20% of the total revenue, lease revenue from portable bingo systems equaled 62% of total revenue, and lease revenue from fixed-based bingo units equaled 18% of total revenue. For the first quarter of 2008, our revenue from box business sales equaled 27% of the total revenue, lease revenue from portable bingo systems equaled 59% of total revenue, and lease revenue from fixed-based bingo units equaled 14% of total revenue.

As of February 1, 2009, we had bingo systems in service in 40 states, one US territory, various Native American locations and in five foreign countries. We had box sales in 7 states, one US territory, and various Native American locations. We are marketing new server-based wireless gaming systems where users play a range of games including bingo, video poker, keno and other slot machine games. The Mini™ wireless server-based gaming system was installed in Europe during the second quarter of 2008. The Elite ™ server-based gaming system was installed domestically in the third quarter of 2008 and in Europe during the first quarter of fiscal 2009. The European configuration supports wireless bingo and fast action gaming for the European bingo market.

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

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

Our box business generates revenue from the sale of boxes (new and used), software conversion kits, content fees, license fees, participation fees, parts, and services. For the 13 weeks ending February 1, 2009 and the three months ended January 31, 2008, 94.5% and 82.1%, respectively, of our box business sales were derived from the sale of new and used equipment, conversion kits, and parts. In some instances, we recognize recurring participation revenue in lieu of a one-time machine sale. Increasing market share in existing markets and expanding product placement into new markets drives revenue growth.

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

We reported a net loss of $0.7 million for the 13 weeks ended February 1, 2009, compared to a net profit of $0.3 million for the three months ended January 31, 2008. Although we experienced a $2.5 million decline in revenue for the first quarter of 2009 compared to same period of 2008, our gross margin improved slightly from 56.5% in 2008 to 57.0% for 2009. This improvement is the result of planned expense management primarily in our bingo business. General and administrative, sales and marketing, and research and development expenses remained relatively constant year over year for the first quarters, respectively. Interest expense for 2009 includes a $1.0 million non-cash adjustment for the value of the interest swap contract. Primarily as a result of the adjustment for the interest rate swap contract, we recorded a deferred tax benefit of $0.4 million in 2009 which brought our net loss to $0.7 million for the first quarter of 2009 or a loss of $0.06 cents per share.

The stock repurchase program that was approved on September 4, 2007 and authorized spending up to $5.0 million expired as of the close of business on December 31, 2008. As of the expiration date of December 31, 2008, we had acquired 918,943 shares at a cost of approximately $4.7 million pursuant to this program.

On approximately February 6, 2009, we completed our relocation to the new corporate headquarters. Although substantially all the improvements to our new 100,000 square foot facility were completed by the relocation date, we are continuing to incur minor capital improvements which we expect to complete by the end of our second quarter of fiscal 2009.

APPLICATION OF CRITICAL ACCOUNTING POLICIES AND ESTIMATES

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

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

RESULTS OF OPERATIONS

13 Weeks Ended February 1, 2009, compared to the Three Months Ended January 31,
2008

The following table sets forth certain selected unaudited condensed consolidated
financial data for the periods indicated:

                                              13 Weeks Ended February 1, 2009 and Three Months Ended January 31, 2008
                                                                           (In thousands)
                                              Bingo Equipment                                            Box Equipment
                              13 Wks           Three Mths           % Change              13 Wks         Three Mths         % Change
                               Ended             Ended             Favorable/              Ended           Ended           Favorable/
                              2/1/09            1/31/08           (Unfavorable)           2/1/09          1/31/08         (Unfavorable)
Net Revenue                 $    10,152       $     11,068                  (8.3 %)     $     2,554     $      4,116               (37.9 %)
Cost of Revenue                   3,876              4,691                  17.4 %            1,592            1,909                16.6 %
Gross Profit                      6,276              6,377                  (1.6 %)             962            2,207               (56.4 %)
Operating Expenses:
General and
administrative                    1,640              1,867                  12.2 %            1,186              892               (33.0 %)
Sales and marketing               2,294              2,408                   4.7 %              343              129              (165.9 %)
Research and Development            875              1,052                  16.8 %              516              437               (18.1 %)
Total operating expenses          4,809              5,327                   9.7 %            2,045            1,457               (40.4 %)
Income from operations            1,467              1,050                  39.7 %           (1,083 )            750              (244.4 %)
Interest Expense                   (190 )              (10 )             (1800.0 %)          (1,330 )           (704 )             (88.9 %)
Impairment of investments             -               (691 )               100.0 %                -                -                 0.0 %
Other income (expense),
net                                  49                108                  54.6 %                5               15               (66.7 %)
Income (loss) before
income taxes                      1,326                457                 190.2 %           (2,408 )             61             (4047.5 %)
Provision (benefit) for
income taxes                        560                176                (218.2 %)            (959 )             11              8818.2 %
Net income (loss)           $       766       $        281                 172.6 %      $    (1,449 )   $         50             (2998.0 %)

Net Revenue

Bingo net revenue decreased $0.9 million for the 13 weeks ended February 1, 2009, or 8.3% to $10.2 million from $11.1 million compared to the three months ended January 31, 2008. The decrease in bingo net revenue is primarily due to hall closures and price adjustments from the economy and competition, as well as the impact of the currency exchange losses. This was partially offset by an increase due to new business from new products.

Box net revenues decreased $1.6 million for the 13 weeks ended February 1, 2009, or 37.9% to $2.6 million from $4.1 million compared to the three months ended January 31, 2008. The decrease in box revenues is primarily due to lack of sales caused by delayed software programming approvals as well as a weakened demand as a result of the economy.

Cost of Revenue

Bingo cost of revenue decreased 17.4% to $3.9 million, or 38.2% of net revenue for the 13 weeks ended February 1, 2009, from $4.7 million, or 42.4% of net revenue, for the three months ended January 31, 2008. Bingo equipment depreciation decreased by approximately $0.4 million primarily due to certain product becoming fully depreciated, and service labor decreased by $0.3 million due to the implementation of an expense management plan in this area. In addition, amortization of capitalized software decreased $0.1 million as a result of projects becoming fully depreciated.

Box business cost of revenue decreased 16.6% to $1.6 million, or 62.4% of net revenues for the 13 weeks ended February 1, 2009, from $1.9 million or 46.4% of net revenue for the three months ended January 31, 2008. The decrease in cost of revenue is related to the decline in sales. The increase in cost of revenue as a percent of net revenue is related to a decline in software sales, which are at a higher margin.

Gross Profit

Bingo gross profit decreased 1.6% to $6.3 million, or 61.9% of net revenue for the 13 weeks ended February 1, 2009, from $6.4 million, or 57.7% of net revenue, for the three months ended January 31, 2008. The slight decrease in gross profit is directly related to the decline in net revenue, while the increase in gross margin is related to a decrease in cost of revenue as described above.

Box gross profit decreased 56.4% to $1.0 million, or 37.7% of net revenue for the 13 weeks ended February 1, 2009, from $2.2 million or 53.7% of net revenue for the three months ended January 31, 2008 directly related to the decrease in revenue. The decrease in gross margin is primarily due to lower high-margin software sales in 2009.

Operating Expenses

Bingo general and administrative costs decreased 12.2% to $1.6 million or 16.2% of net revenue for the 13 weeks ended February 1, 2009, from $1.9 million, or 16.9% of net revenue for the three months ended January 31, 2008. The decrease is due to lower outside legal fees as the activity on major lawsuits, such as the Trend case, has declined since the first quarter of 2008 as well as higher equipment testing in the prior year due to the testing and licensing costs for an upgrade to a system platform. Box general and administrative costs increased 33.0% to $1.2 million or 46.5% of net revenue in the 13 weeks ended February 1, 2009, from $0.9 million, or 21.7% of net revenue for the three months ended January 31, 2008. The increase is due to higher costs as we expand our product lines and the jurisdictions in which we distribute.

Bingo sales and marketing expenses for the 13 weeks ended February 1, 2009 decreased by $0.1 million or 4.7% over the three months ended January 31, 2008 to $2.3 million. This decrease in bingo sales and marketing expenses is due to lower distributor commissions as net revenues from distributors decreased for the period. Box sales and marketing expenses for the 13 weeks ended February 1, 2009 increased to $0.3 million, from $0.1 million for the three months ended January 31, 2008. This increase is primarily due to higher costs for customers to promote sales of our newer product.

Bingo research and development expenses decreased 16.8% to $0.9 million for the 13 weeks ended February 1, 2009, from $1.1 million for the three months ended January 31, 2008. The decrease is primarily due to higher costs in 2008 related to final development of the Tracker. Box research and development expenses increased by $0.1 million to $0.5 million for the 13 weeks ended February 1, 2009, from $0.4 million for the three months ended January 31, 2008. The increase is primarily due to costs expended for developing new product lines, and new hardware design and software development costs for a major VLT customer.

Interest Expense

Interest expense was $1.5 million for the 13 weeks ended February 1, 2009, compared to $0.7 million for the three months ended January 31, 2008, an increase of $0.8 million. The increase is primarily due to the value adjustment for the interest rate swap contract, offset in part by a lower effective annual borrowing rate (6.79% for the 13 weeks ended February 1, 2009 compared to 9.0% for the three months ended January 31, 2008).

LIQUIDITY AND CAPITAL RESOURCES

We have funded our operations to date primarily through cash from operations and other capital sources. This capital is for operations, research and development, capital expenditures of bingo equipment and associated support equipment, and software. As of February 1, 2009, and November 2, 2008, we had a working capital balance of $9.8 million and $9.1 million, respectively. As of February 1, 2009, our principal source of liquidity included cash and cash equivalents of $5.6 million and a $2.0 million revolving credit facility with no amounts drawn. In addition, we have $1.0 million in restricted cash for use on the construction improvements of the real property purchased in the fourth quarter of 2008. Current liabilities include an accrued liability of $4.0 million in connection with a contingent litigation judgment.

Operating activities provided $2.7 million of cash for the 13 weeks ended February 1, 2009 compared with $4.5 million for the three months ended January 31, 2008. The $2.7 million consisted of a net loss of $0.7 million, adjusted positively by $2.2 million for depreciation, amortization, obsolescence provisions, and loss on disposal of equipment, a $1.0 million adjustment for the interest rate swap, and $0.2 million used by other net changes in operating assets and liabilities. During the three months ended January 31, 2008, the $4.5 million consisted primarily of our net income of $0.3 million adjusted by $2.8 million from depreciation, amortization, obsolescence provisions, and loss on disposal of bingo terminals and related equipment provisions, a $0.7 million impairment of investments, and $0.7 million provided by other net changes in operating assets and liabilities.

We used approximately $2.0 million of cash in investing activities during the 13 weeks ended February 1, 2009 compared to $2.4 million of cash provided during the three months ended January 31, 2008. The $2.0 million consisted of $3.6 million of capital expenditures, offset by use of $1.6 million of restricted cash to fund capital spending on the improvements for our new headquarters. During the three months ended January 31, 2008, the $2.4 million included $3.5 million received from the sale of short-term investments offset by $1.1 million of capital expenditures.

Financing activities used $1.1 million during the 13 weeks ended February 1, 2009 compared to $2.9 million during the three months ended January 31, 2008. The $1.1 million used during the 13 weeks ended February 1, 2009 was for the payments on long-term debt. The $2.9 million used during the three months ended January 31, 2008 included payments on long-term debt of approximately $1.1 million and the purchase of the Company's common stock for approximately $1.8 million.

Our New Credit Facility, as amended, provided a total of $40.0 million of financing, $38.0 million of which is in the form of a term loan and $2.0 million of which is in the form of a revolving line of credit. Proceeds from the New Credit Facility were used to refinance our prior credit facility, acquire real property, and for general corporate purposes. The term loan matures on August 28, 2013 with monthly interest payments beginning September 30, 2008 based upon one-month LIBOR rate plus 2.80% and quarterly principal payments of approximately $1.1 million beginning October 31, 2008 until the loan is repaid in full. The Senior Secured Revolving Credit Facility matures on August 31, 2010, with monthly interest-only payments due on the last day of each month beginning September 30, 2008 with an interest rate of either (i) the higher of the Agent's prime rate or the Federal Funds rate plus 0.50% (a "Base Rate Loan) or (ii) 1, 2, 3, 6, or 12-month LIBOR rate plus 2.5%. With respect to the term loan, we entered into an interest rate swap agreement which exchanged the variable one-month LIBOR rate for a fixed LIBOR rate of 3.99% per annum effective August 22, 2008 through the maturity of the loan. In the event we were unable to raise additional capital if needed, further measures would be necessary, including the delay or reduction of our operations, research and development and other activities. Certain of these measures may require third-party consent or approvals, including our lenders under the New Credit Facility, certain regulatory bodies, and others, and there are no assurances such consent or approvals could be obtained. Management does not believe that these limitations will adversely affect our operations or our ability to acquire necessary capital equipment.

We believe that cash flows from operations, cash, cash equivalents, and amounts available under our New Credit Facility will be sufficient to support our operations, provide for budgeted capital expenditures, and meet liquidity requirements through the remainder of fiscal 2009. Our long-term liquidity requirements depend on many factors, including the rate at which we expand our business and whether we do so internally or through acquisitions. In addition, we may pursue strategic opportunities that could require us to fund our portion of operating expenses of such ventures and may require us to advance additional amounts should any partners in such ventures be unable to meet unanticipated capital requirements or similar funding events. To the extent that the funds generated from the sources described above are insufficient to fund our activities in the long term, we may be required to raise additional funds through public or private financing. No assurance can be given that the additional financing will be available or that, if it is available, it will be on terms acceptable to us.

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

Contractual Obligations

The following table presents information on contractual obligations held as of
February 1, 2009 (in thousands):
                                                           Payments Due by Period
                                             Less than                                           More than 5
                                 Total         1 year        1 - 3 years       3 - 5 years          years
Long-Term Debt Obligations:
 Term Loan Facility             $ 35,765     $    4,471     $      13,413     $      17,881     $           -
 Estimated Interest Payments       8,111          2,314             5,124               673                 -
 Other Notes Payable                 252             46               146                16                44
 Operating Leases                  1,291            797               494                 -                 -
Total                           $ 45,419     $    7,628     $      19,177     $      18,570     $          44

Purchase Commitments

From time to time, we enter into commitments with our vendors to purchase box parts, bingo terminals and support equipment at fixed prices and/or guaranteed quantities. We entered into a construction agreement in September 2008 with a general contractor for $2.7 million for improvements to our new corporate headquarters, which will be funded by amounts in the restricted cash account. As of February 1, 2009, $1.0 million of this commitment was still outstanding. We expect the building improvements to be completed by the end of second quarter in fiscal year 2009.

Various orders for product have been placed throughout fiscal 2008 and the first quarter of 2009, of which $1.6 million was outstanding as of February 1, 2009. All purchases are expected to occur by the end of fiscal 2009.