A very good day to you, ladies and gentlemen, and welcome to your First Quarter 2012 Lakes Entertainment Incorporated Earnings Conference call, hosted by Tim Cope and Lyle Berman. My name is Chris, and I'll be your conference coordinator for today. [Operator Instructions] At this stage, I would like to turn the call over to Tim Cope to begin. Please go ahead.

Thank you, Chris. Good afternoon, and welcome to Lakes Entertainment's First Quarter 2012 Earnings Conference Call. On the call with me is Lyle Berman, Lakes' Chairman of the Board and Chief Executive Officer. As we begin our prepared remarks, I would like to remind everyone that this call may contain forward-looking statements, including statements concerning business strategies and their intended results and similar statements concerning anticipated future events. These statements are subject to risks and uncertainties, including those risks described in our filings with the SEC, and actual results may differ materially. Lyle will begin our discussion today with a general overview and update on our casino projects. I'll then discuss the first quarter financial results, recent business events, and then we'll conduct a question-and-answer session. Now I will turn the call over to Mr. Lyle Berman.

Thank you, Tim, and welcome, everyone, to Lakes' First Quarter 2012 Earnings Call. As we recently announced, we are pleased to report that the Maryland Video Lottery Facility Location Commission awarded Evitts Resort, a subsidiary of Lakes, the video lottery operation license for the Rocky Gap Lodge & Golf Resort in Cumberland, Maryland. The unanimous decision to award the license to Evitts was made April 26, and is contingent on certain approvals by the Maryland State Board of Public Works, as well as Evitts obtaining construction financing. We've agreed to buyout our partner in the project, resulting in Lakes wholly owning Evitts Resort. We are currently working through the buyout process, and expect it to be finalized within the second quarter. Our proposal for this project includes purchasing the existing 4-diamond Rocky Gap Lodge & Golf Resort, which includes a 215-room hotel, convention center spa, 2 restaurants and the only Jack Nicklaus Gulf Course in Maryland. We also plan to expand parking, and initially construct approximately 50,000 square feet of new space. This new space is currently planned to open in the third quarter of 2013, with a minimum of 850 video lottery terminals, a new restaurant and live entertainment bar. As we previously reported during March, we terminated our development and financing agreement with the Jamul Indian Village. Lakes had an agreement with the Jamul Indian Village to develop a gaming facility on its reservation located outside of San Diego. Although we believe that the Jamul Casino project continues to have great merit, due to our corporate strategic objectives, we determined that we would not continue to move forward with the project. The Jamul tribe remains obligated to repay all of the advances, including accrued interest, but it is not contemplated that the Jamul tribe will have sufficient funds…

Thank you, Lyle. Net earnings for the first quarter of 2012 were $1.8 million compared to net earnings of $1.4 million in the first quarter of 2011. Loss from operations was $1.6 million for the first quarter of 2012 compared to earnings from operations of $1.2 million for the first quarter of 2011. Basic and diluted earnings were $0.07 per share for the first quarter of 2012 compared to earnings of $0.05 per share for the first quarter of 2011. Lakes reported first quarter 2012 revenues of $2 million compared to prior year first quarter revenues of $5.9 million. The elimination of revenues from the management of the Four Winds Casino Resort in New Buffalo, Michigan is a result of the buyout of the management agreement for that property during the second quarter of 2011 was the primary reason for the decrease in revenues during the first quarter of 2012 compared to the first quarter of 2011. The decrease was partially offset by an increase in fees earned from the management of the Red Hawk Casino during the first quarter of 2012 compared to the first quarter of 2011. For the first quarter of 2012, selling, general and administrative expenses decreased in comparison to the first quarter of 2011 by approximately $0.4 million to $2.3 million. This decline resulted primarily from decreases in travel and related expenses due to the termination of the company's aircraft lease during the fourth quarter of 2011, as well as decreases in payroll and related expenses. These decreases were partially offset by an increase in professional fees related to the Rocky Gap project in Maryland. Impairments and other losses were $0.9 million during the first quarters of 2012 and 2011. The current quarter impairments and other losses were the result of the March 2012 termination…

[Operator Instructions] And our first question today is from the line of Steven Chang from Rudgear Capital.

Can I ask on the Red Hawk property, do you regularly get paid either your management fee or your -- or are there any regular repayments on the note receivable? And if not, how much do margins or revenue need to improve at Red Hawk so that you would start to see repayment?

A couple of answers to that question. Regarding the notes payable, if you recall, a year ago, we agreed, in conjunction with the tribe, to defer the receipt of any principal payments on the Lakes' notes until the beginning of 2014, which is after the FF&E notes are paid. So currently, we are not getting any note payments on our principal. We do, however, each month get interest paid. Current cash interest is paid each month to Lakes. And as far as the management fees are concerned, we earn management fees on a monthly basis, depending again on the net income calculation, and we are paid on management fees as allowed to the waterfall process. So each month stands alone on the waterfall calculation.

And a bigger picture question. Obviously, every casino project has risks, and is it fair to say that for Red Hawk and for the project with the Jamul tribe that those were particularly difficult because they were planned years ago before the recession? So when we look at future projects, there's unlikely -- you can plan the economics of future projects around the current environment. Would that be a fair way of looking at the -- how past projects compared to future projects?

I think -- this is Mr. Berman talking. I think that's a fair statement. Certainly, in the Red Hawk case, the economy of Sacramento is one of the -- was and is one of the worst in the country. And our benchmark of success there was the success that Thunder Valley had before the recession, and we know that their numbers have gone down substantially as well. With Jamul, the same is true. But of course, we haven't even opened yet because of a bunch of difficulties. So by the time that opens, if and when it ever does, the economy might be different.

We have no further questions at this time. [Operator Instructions] We have another question from Steven Chang.

On the last call, I know you mentioned the future projects would most likely be casinos that you own and operate yourself rather than with a partner or as a passive investment. How does that change the prospects of future casinos?

I think what we said was -- I don't think we said we wouldn't do things with partners. What we said is that we are primarily in the past have been focused on Native American gaming, and we don't see much opportunity in that space in the future. Almost every tribe that has a good location and has all the rights to open a casino has already done so. The ones that are available now are typically tribes that need federal recognition or land in trust and they cost a great deal of money and probably take 5 to 10 years if ever to develop, and we don't see that as our modus operandi. So we are looking for other opportunities with or without partners. For example, in Maryland, we saw an opportunity that fit us and we started with a partner, but then decided the partner -- that we would buy the partner out and would do it on our own. We could may or may not bring in a partner in the future there. So we're not objecting to partners, but we are saying we're focusing on things that we can own and operate.

With Maryland, would you -- is there capital you need to commit before construction begins? Or would you be...

Yes, yes, absolutely. We're talking about a project that's in the neighborhood of $60 million to $65 million total investment, and I believe we are -- at least, we -- I think we've stated to the commission that we plan to finance about $40 million of it and we would commit about $20 million of our own capital unless we have partners and/or unless we can borrow more and put up less.

In the tax rate, the gaming tax rate at 50% is obviously higher than what's the tax rate in Ohio. Does that change the upside you have in -- with that property?

It clearly changes the upside. However, it's not quite 50% because in this case, the state of Maryland buys all of the slot machines. So we don't put out any capital for that. And they have certain responsibilities for maintenance and improvement on those same machines. So that is one benefit. Number two, because we aren't in a location that has direct competition right next door, you can assume that the marketing cost will be somewhat less than you would find in a market where your competitors are next door to each other. So there are some offsets, but clearly, you have to run leaner and meaner in a market that has a 50% tax. As you know, originally, it was 67% in this location and nobody even applied for the license. It wasn't until 50% that they got a little applicants. However, the rest of Maryland is still 67%.

We have no further questions at this time.

Thank you, everyone, for listening in, and we look forward to talking to you with more -- hopefully more good news at the next conference call. Thank you. Bye now.

Thank you very much, Tim. Thank you very much, Lyle. Ladies and gentlemen, that does now conclude your conference call for today, and you may now disconnect your lines. Have a great day. Thank you very much for joining.