Good day, ladies and gentlemen, and welcome to the Third Quarter 2008 Lakes Entertainment Incorporated Earnings Conference Call. My name is [Amisya] and I will be your coordinator for today. At this time all participants are in a listen-only mode. We’ll facilitate a question-and-answer session towards the end of this conference. (Operator Instructions). I'd now like to turn the presentation over to your host for today's call, Mr. Tim Cope, President and Financial Officer. Please proceed sir.

Thanks [Amisya], good afternoon, and welcome to Lakes Entertainment third quarter 2008 earnings conference call. On the call with me is Lyle Berman, Lakes' Chairman of the Board and Chief Executive Officer. As we begin with our prepared remarks, I would like to remind everyone that this call may contain forward-looking statements within the meaning of the Federal Securities law, including statements concerning business strategies and their intended results, similar statements concerning anticipated future events and expectations that are not historical facts. These forward-looking statements are made pursuant to the Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995. These statements do not guarantee future performance and therefore undue reliance should not be placed upon them. Lyle will begin a discussion today with the general overview and update our casino projects. I will then discuss the third quarter financial results and recent business events and then we'll conduct a question and answer. Lyle?

Thank you Tim, and welcome everyone to Lakes' third quarter 2008 earnings call. Let's start the call right away talking about the recent election in Ohio. As you can imagine, we are very disappointed that our My Ohio Now Casino Resort Initiative was not approved by the voters in the State of Ohio in Tuesday's election. The total cost of our efforts in Ohio will be approximately $29 million. However, during the referendum process we never lost sight of our core operations and the development projects which continue to proceed as planned. We believe that our company is well positioned for growth, given the upcoming opening of the Red Hawk Casino as well as the projects we have in various stages of development. Before talking about our current operations and developments, I just wanted to briefly mention the current economic environment. Obviously, we here at Lakes are concerned about what has occurred in the financial markets over the past few months and we're keeping very close tabs our operations and especially our cost structure as we prepare to enter to 2009. It's very difficult to forecast our business in the short term due to the volatile economic conditions. But we want to stress that our fundamental business remains strong and we believe that we will whether any storm that comes our way, especially once the Red Hawk Casino opens. I would also like to emphasize that while we are always evaluating potential new opportunities, our current focuses is on the successful opening of Red Hawk, the management of our other casino operations and the successful development of our remaining projects under contract. Speaking of which, let's start off with our operations and development discussion with the latest from the new Red Hawk Casino in Shingle Springs California which is the…

Thank you, Lyle. Now I'll discuss the third quarter results for Lakes Entertainment. Lakes Entertainment reported consolidated third quarter 2008 revenues of $11.2 million, a 60% increase from the prior year period. Lakes' revenue increased $5.8 million, primarily due to a full quarter of contribution of management fees from the Four Winds Casino Resort, which opened to the public on August 2, 2007. Also, contributing to the increase in Lakes' third quarter 2008 revenues was an adjustment resulting from an approved compact amendment between the Pokagon Band and the state of Michigan that reduced the Four Winds Casino Resort gaming tax. This amendment caused a one time addition of revenue approximately $1.8 million to Lakes. Revenue related to WPTE decreased to $2.8 million for the third quarter of 2008 from $4.4 million in the prior year period. The decrease was caused by decline in domestic television license fee income from the World Poker Tour television program, which was due to lower per episode license fees under the Gaming Show Network agreement in effect during the 2008 period, as compared to the Travel Channel agreement, which was in effect during the 2007 period. Consolidated, selling, general & administrative expenses were up $3.3 million from the prior year period to $13.3 million, due to development costs associated with the proposed Ohio Casino Resort project. For the third quarter of 2008, Lakes' selling, general & administrative expenses were $8.9 million, and consisted primarily of the development of cost associated with a lot with the Ohio Casino Resort initiative of $4.7 million. Payroll and related expenses of $2.5 million including share based compensation, travel expenses of $0.8 million and professional fees of $0.5 million. Other costs and expenses incurred in the third quarter of 2008 included an increase in amortization of intangible assets of…

Thank you, Tim. For the remainder of 2008, Lakes remains focused on successfully managing our current operations and opening the Red Hawk casino at the end of the fourth quarter of this year. With that, I will turn the call over to the operator for questions.

(Operator Instructions) Your first question comes from the line of Justin Sebastiano with Morgan Joseph. Please proceed.

Thanks, hi, guys. Do you expect a quarter-over-quarter gain of your Four Winds management revenue in the fourth quarter?

The answer is yes. We do expect that.

Okay, and what type of impact do you think the blue chip expansion that's supposed to open I guess in the first quarter, what type of impact do you think that will have on the Four Winds EBITDA?

Well, actually, we think it’s very good, we wish they would open sooner because it would increase our EBITDA. The fact is they're not increasing their gaming capacity, what they are -- is adding a hotel, and remember this is all drive in business. So people who drive in typically like to go see the big dog in the neighborhood and that's us. So we think it incrementally will bring business to us, and shouldn't take anything away from us because they really haven't changed the casino at all.

Okay, and then -- I'm sorry if I missed this, but how much did you spend on the Ohio lobbying effort in the fourth quarter, I guess October and the first couple of days in November?

Yeah, I can talk you through that a little bit. We've funded -- as of the end of the quarter, we funded approximately $18 million and of which about $10.5 million of that was expensed in that quarter, in the third quarter. We have about an additional $10 million to fund, which gets us up to approximately the $29 million I mentioned, or Lyle mentioned.

Okay, so about $10 million in 4Q we should be looking at?

Yes.

Okay. And I apologize, if you could kind of walk me through this a little bit. Here the ARS, you've got the $26.8 million is the par and then the fair value has declined $2.5 million from that number, is that correct?

That's right.

Do you have about 24.3 of market value, and how much is, do you have pulled down from the UBS credit line?

A little over $18 million

And that's the entire Credit line.

Right, so, that's 75% of the market value, what happens if the market value continues to decline and what you have borrowed is actually more than that 75%? Do you have to pay back or how did that get remedied?

At this point in time they indicated to us that we don't have to pay that back until such a time it's sold at par in '010.

So if the market value falls below the 75% threshold, you don't need to pay back to bring your borrowing back down below that 75%? Is that correct?

That's what they told us.

That's correct.

Okay, and lastly, thanks for taking these many questions. Tim, I think I missed what you said about your SG&A expectations for '09.

For '09. Obviously we think they're going to be flat, if not slightly lower.

Okay, thanks a lot, guys.

Your next question comes from the line of Todd Eilers with Roth Capital. Please proceed.

Hi, guys thanks for taking my call. Just a couple of follow ups in Michigan at the Pokagon tribe. Can you guys, I guess the tribe has recently part of the new compact negotiated with the state you mentioned includes a reduction in the share the tax rate. I think I've also seen that it also included some satellite casino opportunities. Can you talk about that opportunity a little bit? I'm assuming that you guys would be able to manage those satellite casinos and can you may be talk about the opportunity there?

Well, it's clearly an opportunity, the tribe has the right to open up two independent satellite operations, and they're not insignificant because each one can be built up to 1,000 machines. This is obviously a new settlement with the tribe. At this point the tribe has not focused on it, I don't think they have any immediate plans to do it. We do have an exclusive management contract for the whole area. So anything that they did, we would be involved in to the extent of our contract, which is five years and perhaps could be extended if we started something earlier.

Okay, great. And then with respect to the tax reduction for the tribe, the $1.8 million gain I'm assuming that was kind of the cumulative effect of the reduction since the opening of the casino. Is that correct?

That's correct but it was about a year and maybe two months, a little -- about a year so that's a permanent increase, so to speak, for us.

Okay, but then going forward it should be just the 2% reduction and the tax rate would effect forward --

That's correct which would – should give us that same incremental as we picked up the one time, which was $1.8 million, so it should be incremental for the entire management contract.

Okay. With respect to Tim, the taxes in the quarter, it looked like there was a large amount of taxes or larger than we were modeling in, can you talk about what that was?

This is a result of the WPTE dividend that we declared, and it relates to the reduction in our deferred tax asset on the balance sheet. If you know there's a corresponding reduction there and historically what we’ve done as we have capital losses that we would expect to have covered with the capital gains from the sale of the WPTE or the value related to WPTE stock. Now that we declared that dividend and know what the market value of that is, we made the adjustment of capital gains versus our capital losses. So we reduced our tax asset by that amount, and then reciprocal that goes to the provision. So, it's a one-time provision of a tax expense of about $1.9 million.

But it did not use up any cash.

No, it's a non-cash issue.

Okay. And then how about expectations going forward for taxes? Obviously I think with the opening of the Red Hawk Casino and Pokagon continuing to do well, I assumed that you guys would be GAAP profitable, free cash flow positive in early '09. At what point do you guys start paying corporate taxes, and what kind of tax rate should we be modeling in?

I think you should be modeling in about the 40% tax rate, and we should be in a taxable position, tax income position for '09 but we do have NOLs carry forward that will offset some of that.

Okay. And then just one final question if I may on with respect to Shingle Springs and the Red Hawk opening there, should we expect similar pre-opening expenses to be shared between you and the tribe for the first year?

No, that related only to the Pokagon contract.

Okay, perfect. Alright, thanks, guys.

Your next question comes from the line of Chris Krueger with Northland Securities, please proceed.

Hi, good afternoon, a little bit more on SG&A. I just want to make sure I'm reading the numbers correctly. Excluding World Poker and Ohio, SG&A would have been about $4.2 million, is that correct?

That's right.

Okay, and then if I am looking out to '09, would a run rate around that level of $4 to $5 million per quarter be appropriate or what do you think we should be modeling there?

I think that's appropriate and that’s a good estimate.

4 to 5 per quarter. Okay. And net interest expense as well, now its a different debt same it's happening just in recent weeks or months. Can you just give us a simple what an interest expense number to look for like in the first quarter, for instance?

I guess it’s really, I don't have a calculator here but I think it's as easy as taking the $8 million, we've drawn two of it, so we have $2 million outstanding debt at the 8.95% they are -- we'll borrow another $5 million against that. Even in worst case you took $8 million at 8.95% and used that run rate for '09, I think that would be good.

However, this is remember, we have interest income coming from the ARSs.

Okay. Some of the stuff you're borrowing against that?

We get interest on the $26.2 million of ARSs. We pay interest on the $18.3 million loan, so we have a net gain of interest on the $8 million and that pretty much would offset our borrowing, Ur net interest should be close to zero.

Okay, very good, and then as far as the overall gaming environment, I know a lot of companies have like the economy have had concerns there. I guess Four Winds, would it be fair to say since you're only 15 months into it that you're still getting more efficient and kind of growing through a tough gaming environment?

I think it's fair to say we're going today through a tough gaming environment. I think in the last 15 months we have ironed out virtually all of our -- we'll call it lack of efficiency. So I think we're running as we like to say a lean, mean, fighting machine. That being said and our results are very good but certainly they would be better if we were in a better economic climate. So we think we're weathering the storm very well both from an expense side as well as revenue per customer side.

Okay, alright, that's all I got. Thanks guys.

Your next question comes from the line of Clint Morrison with Feltl & Company. Please proceed. Clint Morrison - Feltl & Company: Tim, I just want to clarify because I'm pretty sure you said that there was a $4.7 million of Ohio expense in this quarter, and if the total is 29 we're going to recognize about $25 million of expense in Q4, is that correct?

It will be about 15, I think? Right? Clint Morrison - Feltl & Company: Okay. So some of this was recognized in Q2, Obviously.

Let me just talk you through that again. I want to make sure because there wasn’t sure with just in that fair answer there.

Yeah, the funding –

We funded approximately $18 million as of September 28, Okay. Clint Morrison - Feltl & Company: It was funded meaning?

Funded means cash outlay. Clint Morrison - Feltl & Company: Okay.

And of that, about $10.5 million has been expensed, alright, for the nine months, and then have funded an additional $10 million so that gets us up to about $28 million has been funded have to spend another million dollars roughly during the fourth quarter.

Clint, the reason that we pay in advance is typically when you do any kind of campaign like this, the people who you book ads with require the money up front. So, that’s why we had, when we said we used cash we funded more in the fourth and third quarter but we hadn't expensed it because the ads didn't run. Clint Morrison - Feltl & Company: Great, okay, I just wanted to clarify, so we basically - so we've got another $10 million of expense or we've got $18 million of expense that's going to be recognized.

That's right, correct. Clint Morrison - Feltl & Company: And relative to sort of the balance sheet that we're looking at now, we've got another $10 million cash draw for that?

That's correct. Clint Morrison - Feltl & Company: Okay, because that was my question and outside of that, the rest of the company ought to be generating cash for the most part because it sure sounds like Four Winds is covering your operating expense.

That's correct. Clint Morrison - Feltl & Company: Okay. So and then back to Four Winds, I think this is the tail end of where you've had to share in the sort of the pre-opening expense. How much of that was recognized that extra expense was recognized in this quarter? Roughly like [300,000 or 400,000] or something?

It’d be just one month of approximately $1 million or probably have about [300,000]. Clint Morrison - Feltl & Company: Okay. So, We'll get by definition, all things being equal, we'll get a pick up going into the next quarter.

Right. Clint Morrison - Feltl & Company: Okay. And okay, that takes care of me for the moment. I'll go back into queue. Thanks.

Your next question comes from the line of [Calvin Orey] of [Orey Capital], please proceed.

Good afternoon, just regarding that WPTE dividend you're issuing to shareholders, could you just sell the stock and at least get cash for it instead of dividend in and out?

I don’t believe, we thought that dividend in and out was the best value for our shareholders. They are really it was --

You get nothing for it now, you could have gotten a couple of million bucks at least.

Again, I will repeat that we think it was the best value for the shareholders to get that stock.

What was the thinking behind it?

Well, we looked at selling it, we did look at it. We talked to a number of people there was very little market for it. Again we're talking today where it’s very little value, it was very little value when we did it, too. It was like $0.49 or $0.50 but we thought it was a better, we still think that World Poker Tour is viable; and if it goes up, we would like to see our shareholders share in that.

Okay. Alright, thanks, that's all I have for now.

(Operator Instructions). And your next question comes from the line of Brett Hendrickson with [MaComas] Capital. Please proceed.

Hey, Lyle, you answered my question, thanks.

Good.

And your next question comes from the line of Alex Lieblong with Key Colony. 35:46 Please proceed.

Hey, Lyle.

Hello.

If you had to look out in the future, how long is it going to take you to get your balance sheet in for you -- where you have the ability when the market throws ’07, whatever, so that you could participate?

Well, we believe that Red Hawk Casino is going to open and do very, very well. Once that opens and does very well, both the Red Hawk bonds should come back to be trading close to par and our debt, which the Shingle Springs Band owes us approximately of $70 million should become a fairly liquid asset, and assuming we have a need for capital, we clearly would plan to monetize that. So I would say probably six months after Red Hawk opens, assuming what I just said happens, I think our balance sheet and we sell the Red Hawk security. I think we'll have a very good looking balance sheet, will be cash flowing and we’ll be -- that just positive cash flow, but we will be earning GAAP accounting earnings as well.

Okay. Thank you.

Your next question is a follow-up from the line of Clint Morrison with Feltl & Company. Clint Morrison - Feltl & Company: Along the lines of that $70 million, Lyle. Once the casino opens, they will have to start in effect paying back on that so besides the management fee, what kind of cash flow would come out of that note -- quarterly basis?

About $15 million the first year, the $70 million is amortized over seven years, so it's approximately $10 million a year for seven years and then of course the interest goes down each year so the first year it should be about $5 million of interest and of course every year it would go down by one seventh. Clint Morrison - Feltl & Company: Okay, so $3 million to $4 million bucks a quarter and assuming you guys do open in December, the timing, when would you kind of get your first check from Red Hawk?

I think we get our first check from Red Hawk probably in the second week of February or the third week of February. Clint Morrison - Feltl & Company: And you paid on a monthly basis?

Monthly checks, right.

Yes, the monthly checks, lagging at three weeks after closing the books each month.

Yep, Clint Morrison - Feltl & Company: I got you. And the based on what you have said you've indicated you need to fund another $10 million of cash, but it looks like you've only got that $8 million credit line, another $2 million are we kind of tight on cash? Is there any chance that we need to go out and borrow more or?

I think you misunderstood, we have at this point borrowed $2 million and we certainly have the additional $6 million as a contingency, by probability, we don't think we need any more money between now and the end the year, but clearly until we cash flow from Shingle Spring from Red Hawk we don't believe we need any more additional borrowing other than the $8 million. Clint Morrison - Feltl & Company: Okay, so that already factors in the $10 million funding for Ohio?

That’s already, that money is already out the door. Clint Morrison - Feltl & Company: Okay.

We have no more -- Clint Morrison - Feltl & Company: Reflected in the numbers we see as of the end of the quarter?

Right, we have no more -- essentially no more funding obligation for Ohio, everything was prepaid. Clint Morrison - Feltl & Company: Okay, so as of this point in time you’ve got no more funding for Ohio when you still got $6 million available on that credit line?

And some money in the bank. Clint Morrison - Feltl & Company: And some money in the bank. Very good, thank you.

Your next question is a follow up from the line of Todd Eilers with Roth Capital.

Hi guys. Tim, just a question on the dividend from the World Poker Tour stock. Would you guys report a partial quarter in 4Q and if so would you report it as discontinued OPs through the fourth quarter?

Yes, it will be like a footnote as discontinued operations and it will not be consolidated balance sheet anymore.

Okay. Perfect. Thanks.

Your next question is a follow-up from the line of Justin Sebastiano with Morgan Joseph.

Thanks, just on the Shingle Springs notes, when that does open and we assume it does get close to par, will you think about selling it pretty much immediately or do you need to have something in the pipeline in order to use that cash to reinvest it or are you happy with just getting your prime plus 200 or whatever it is?

The answer is no, we would not be happy with prime plus 200 because I mean that’s what the note is at, prime plus 200. If we sold it without a use for the funds, we would have it in the bank at 2% or 3%, so we want to have a use of the money before we would sell it but one of the highest and best use for our funds if our stock stays as depressed as it is right now, we would use that money probably to start a shared buyback.

Okay, so we can assume that you will probably want to sell those notes as quick as possible?

Assuming we can get close to par, yes.

Right, okay. Thanks.

Your next question comes from the line of Steven Silk with C. Silk & Sons. please proceed. Steven Silk - C. Silk & Sons: Good afternoon, and thanks for taking my call. Lyle, you had touched upon the -- there was a question asked about the distribution the WPT to your shareholders so they can maximize the value. I'm also interested, what avenues could you look at to maximize it for Lakes, was there you looking at an outright sale of the company?

Yes, we did. We looked at it rather extensively, and at the end the day we had a number of tire kickers but we had no taker. Steven Silk - C. Silk & Sons: Okay, and how about was there a consideration given to buying the remaining shares?

Yes, we looked at that, too. That was certainly the other possibility. Quite frankly, it's not really a good product for Lakes to own because of gaming licenses there's just too many restrictions our side. Steven Silk - C. Silk & Sons: Just thinking out loud that perhaps if you had purchased the remaining shares outstanding, that you could have just sold the assets and been able to use the cash that WPTE had and monetize it to the value of Lakes going forward?

We did look at that option, I can just say we thought it what we did was the better way to go. Steven Silk - C. Silk & Sons: Okay, and if I may, this maybe out of line, you are the Chairman of WPTE, and you'll be disposing of 60% of the shares and probably about 8 million shares not including what you're going to get, since you thought the best use of Lakes' capital when the bonds start paying off is to buy shares back, would you look at repurchasing shares at WPTE, right now it has a market capital of about $4 million and they have $20 million in cash?

There's no question World Poker Tour will be looking at that opportunity. Steven Silk - C. Silk & Sons: Okay. I appreciate your taking the time to answer my questions.

There are no further questions at this time, sir.

Well, I want to thank everybody for taking the time to listen to our third quarter report. We hope that our fourth quarter's a little bit better, although from our operations standpoint things were very good, and I guess I'll reiterate we were incredibly disappointed with Ohio. But we will be very focused as we were in the past but even more so I guess on our operations to date. Thank you very much.

Thank you for your participation in today's conference. This concludes the presentation. You may now disconnect. Good day.