[midas]

Is this Company for real?

PokerTek rides gambling wave
by Kate Gibson Posted 03:56 EST, 5, Aug 2005

Seeking to cash in on the poker craze, gambling technology company PokerTek Inc. has unveiled plans to raise about $23.3 million in an initial public offering.

Under the company's plan, which it filed late Thursday, Aug. 4, with the Securities and Exchange Commission in the form of a preliminary prospectus, Matthews, N.C.-based PokerTek would offer 2 million shares. The deal, which Minneapolis investment bank Feltl and Co. underwrote, priced shares in the offering at $10 to $12 each, according to the filing. John Feltl, a principal at the underwriter, owns roughly 30,500 shares of PokerTek's stock.

PokerTek's effort follows a similar move earlier this summer by British online poker company Partygaming plc. The Gibraltar-based company in early June announced plans for an IPO that could value it at up to $10 billion.

To date, PokerTek has been a money-loser, although it hopes to cash in on the boom in poker. The company leases electronic poker tables to tribal casinos and card clubs, hoping to offer them the ability to cut out the labor cost of hiring live dealers.

PokerTek has struck only one deal, with the Seminole American Indian tribe of Florida, which operates six casinos in three cities or towns in the Sunshine state. At the end of July, the company took in its first operating revenue of $12,000 from the Seminole tribe for their use of two PokerPro system tables in July.

PokerTek has operated in the red since it was formed under the name National Card Club Corp. in August 2003. The company, which took the name PokerTek in July 2004 after merging with an affiliated company, had a net loss of nearly $926,000 in the fiscal year ending Dec. 31, 2004, according to the IPO filing. The company incurred a net loss of nearly $1.6 million in the six months that ended June 30, 2005. As of June 30, PokerTek had run up a deficit of $2.57 million.

Assuming the sale of 2 million shares in its proposed IPO, the company's three founders — CEO George White, James Crawford and Lee Lomax — would collectively hold a 49% stake in the company, which had a book value of $2.5 million as of June 30, 2005, according to the filing.

Since its start, the company has run on loans from its principals and WPT Enterprises Inc., the West Hollywood, Calif.-based operator of the World Poker Tour. WPT hosts gaming events that have gained popularity on cable television. Its executive director, Lyle Berman, also serves as chairman of the PokerTek board.

For counsel, PokerTek retained Robert Donlon and Elizabeth Derrick of Womble Carlyle Sandridge & Rice PLLC. William Mower and Alan Gilbert of Maslon Edelman Borman & Brand LLP were underwriter's counsel.

PokerTek said it will apply for a listing on Nasdaq under the ticker PTKE.