Lakes Entertainment reports results

8 May 2008

MINNEAPOLIS, Minnesota -- (PRESS RELEASE) -- Lakes Entertainment, Inc. (NASDAQ: LACO) today announced results for the first quarter ended March 30, 2008.

Lyle Berman, Chief Executive Officer of Lakes, stated, "We continue to work to improve our product at the Four Winds Casino Resort, and believe we are well positioned going into the anticipated strong spring and summer months. We are proud to be associated with all of our tribal partners and look forward to the start of the Ioway Casino Resort in Oklahoma and the Jamul Casino project outside of San Diego. In addition, as recently announced, we look forward to working together with Myohionow.com, LLC to pursue the possible development of a casino resort project in Ohio."

Further commenting on first quarter results, Tim Cope, President and Chief Financial Officer of Lakes, stated, "Although the Four Winds Casino Resort was adversely impacted by severe weather conditions during January and the beginning of February, we saw significant improvement in results during the latter part of the first quarter at this property. In Oklahoma, the Cimarron Casino continued to show strong results. In addition, we are very pleased with the progress of construction of the Red Hawk Casino for the Shingle Springs Tribe in California, which continues to be on schedule and within budget. This project is expected to open in late 2008."

First Quarter Results

Lakes Entertainment reported consolidated first quarter 2008 revenues of $9.6 million, up 92.3% from the prior-year period. Lakes' revenue increased $4.1 million, primarily due to a full quarter contribution of management fees from the Four Winds Casino Resort, which is owned by the Pokagon Band of Potawatomi Indians ("Pokagon Band"), compared to no contribution from that property in the first quarter of 2007. Revenue related to WPTE increased to $5.0 million for the first quarter of 2008, compared to $4.5 million in the prior-year period. This increase was due to an increase in hosting and sponsorship revenues, primarily driven by international television sponsorship revenues that did not exist in the prior-year period.

Consolidated selling, general and administrative expenses were up $1.2 million from the prior-year period to $10.9 million due to $1.6 million in development costs associated with the proposed Ohio casino resort project. For the first quarter of 2008, Lakes' selling, general and administrative expenses were $5.5 million and consisted primarily of payroll and related expenses of $2.2 million, including share-based compensation, the development costs associated with the Ohio casino resort project of $1.6 million and professional fees of $0.6 million.

Other costs and expenses in the first quarter of 2008 included amortization of intangible assets of approximately $1.7 million associated with the casino project with the Pokagon Band which commenced upon the opening of the Four Winds Casino Resort in August 2007.

Net realized and unrealized gains and losses on notes receivable relate primarily to the Company's notes receivable from Indian tribes, which are adjusted to estimated fair value, based upon the current status of the related tribal casino projects and evolving market conditions. In the first quarter of 2008, net unrealized losses on notes receivable were $2.0 million, compared to net unrealized gains of $0.2 million in the prior-year period. Net unrealized losses in the current year quarter were due primarily to a decrease in projected interest rates, due to current market conditions, for the notes receivable related to the Red Hawk Casino project with the Shingle Springs Band of Miwok Indians and the notes receivable related to the casino project with the Jamul Indian Village.

The operating loss for the first quarter of 2008 was $7.8 million, compared to an operating loss of $7.3 million in the first quarter of 2007, while net loss applicable to common shareholders for the first quarter of 2008 was $6.9 million, compared to a net loss applicable to common shareholders of $9.8 million in the first quarter of 2007. The larger net loss in the prior-year period resulted primarily from a loss on extinguishment of debt of $3.8 million. Loss applicable to common shareholders per fully diluted share was $0.28 and $0.43 for the first quarters of 2008 and 2007, respectively.

Liquidity and Balance Sheet

As of March 30, 2008, the Company had $8.6 million in cash and cash equivalents, $8.5 million in short-term investments in marketable securities, and $38.8 million in long-term investments in marketable securities. Of these amounts, $3.6 million in cash and cash equivalents related to Lakes and $25.5 million in long-term investments related to Lakes. All other amounts related to WPTE. All of Lakes' long-term investments in marketable securities and $11.3 million of WPTE's long-term investments in marketable securities were auction rate securities ("ARS"). As a result of current liquidity issues surrounding the Company's ARS discussed below, the Company's ARS were reclassified from short-term to long-term investments in marketable securities as of March 30, 2008. The types of ARS that the Company owns are backed by student loans, the majority of which are guaranteed under the Federal Family Education Loan Program ("FFELP"), and all have credit ratings of AAA or Aaa. Neither Lakes nor WPTE own any other type of ARS. None of our investments in ARS qualify, or have ever been classified in our financial statements, as cash or cash equivalents.

Historically, these types of ARS investments have been highly liquid using an auction process that resets the applicable interest rate at predetermined intervals, typically every 7 to 35 days, to provide liquidity at par. However, as a result of the recent liquidity issues experienced in the global credit and capital markets, the auctions for all of the Company's ARS began failing in February 2008, when sell orders exceeded buy orders. The failures of these auctions do not affect the value of the collateral underlying the ARS, and the Company will continue to earn and receive interest on its ARS at contractually set rates. However, the Company will not be able to liquidate its ARS until the issuer calls the security, a successful auction occurs, a buyer is found outside of the auction process or the security matures. During April of 2008, the Company received account statements dated March 30, 2008, from the firms managing its ARS which estimated the fair value of the Company's ARS. The Company analyzed these statements and has concluded that a temporary decline in estimated fair value of $2.4 million related to the Company's ARS has occurred as a result of the current lack of liquidity. This consolidated decline in fair value includes $1.3 million related to Lakes and $1.1 million related to WPTE. Since the Company considers the decline in the estimated fair market values of its ARS to be temporary, the related unrealized loss is included in accumulated other comprehensive loss in the shareholders' equity section of the Company's balance sheet as of March 30, 2008.

Lakes entered into a client agreement with UBS Financial Services Inc. effective April 11, 2008, for the purpose of borrowing and/or obtaining credit in a principal amount not to exceed $11.0 million (the "Margin Account Agreement"). Lakes has made an initial draw under the Margin Account Agreement in the principal amount of $3.0 million to be used for working capital purposes. The Company will be required to seek additional sources of financing to fund additional costs it plans to incur between August and November of this year associated with the recently announced Ohio casino resort project. These costs are dependent on various factors including polling numbers, market studies and media efforts. Lakes is currently exploring several financing alternatives and expects to be able to obtain funding as necessary. WPTE does not believe that any lack of liquidity during the next 12 months relating to its ARS will have an impact on its ability to fund its operations.

Lakes also had $77.9 million in notes receivable from Indian tribes adjusted to their estimated fair value as of March 30, 2008. The corresponding face value of these notes, including accrued interest, was $119.4 million. As of March 30, 2008, the Company had no interest-bearing long-term debt, and had $6.7 million in long-term contract acquisition costs payable.