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

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

OVERVIEW

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

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

As of May 3, 2009, we had bingo systems in service in 40 states, one US territory, various Native American locations and five foreign countries. We had box sales in 10 states and various Native American locations. We are marketing new server-based wireless gaming systems where users play a range of games including bingo, video poker, keno and other slot machine games. The 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 bingo revenue by placing electronic bingo systems in bingo halls under contracts based on (1) a fixed fee per use per session; (2) a fixed weekly fee per terminal; or (3) a percentage of the revenue generated by each terminal. Revenue growth for our bingo systems is affected by player acceptance of electronic bingo as an addition or an alternative to paper bingo. Additionally, our bingo revenue growth is dependent on our ability to expand operations into new markets and our ability to increase our market share in our current markets. Fixed-base bingo terminals generate greater revenue per terminal than portable bingo terminals, but also require a greater initial capital investment.

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

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

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

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

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

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

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

RESULTS OF OPERATIONS

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

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

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

Net Revenue

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

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

Cost of Revenue

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

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

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

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

Operating Expenses

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

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

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

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

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

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

Interest Expense

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

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

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

Net Revenue

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

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

Cost of Revenue

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

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

Gross Profit

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

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

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

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

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

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

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

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

Interest Expense

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

LIQUIDITY AND CAPITAL RESOURCES

We have funded our operations and capital expenditures through cash from operations and other capital sources. As of May 3, 2009, and November 2, 2008, we had a working capital balance of $9.7 million and $9.1 million, respectively. . . .