FortuNet reports loss on software development write-off

By Steve Green (contact)

Friday, Nov. 13, 2009 | 1:34 p.m.

FortuNet Inc., a Las Vegas company supplying electronic bingo systems around the nation, has reported a loss for the third quarter ended Sept. 30.

Quarterly sales of $3.947 million were up slightly, 0.6 percent, FortuNet said Thursday.

But because of a noncash write-off of software development costs of $1.685 million disclosed Oct. 21, the company lost about $735,000 or 7 cents per share in the quarter. A tax benefit of $446,000 associated with the writeoff cushioned its affect on earnings.

The loss compares to a profit in the year-earlier quarter of about $612,000 or 5 cents per share.

FortuNet wrote off the software costs as it withdrew its 2006 application with the Nevada Gaming Commission for a mobile gaming system allowing players in casinos to remotely play traditional casino games such as poker, keno and slots. FortuNet continues to supply wireless bingo systems.

The application for wireless traditional casino games was withdrawn because the recession in the gaming industry reduced sales prospects and because of concerns the system would be technologically obsolete.

"Instead of continuing a costly pursuit of approval of the current version of our mobile gaming system for traditional casino games, we decided to refocus our resources on deployment of our current version of mobile gaming system in the field of bingo, while developing an upgraded version of our mobile gaming system for potential future applications in the field of traditional casino games," FortuNet said. "When, and if, we succeed in development of the upgrade and the economic environment turns around, we are planning to re-submit the upgraded system for review by the Nevada Gaming Commission."

And despite the increase in revenue in the quarter, FortuNet said the recession hitting the gaming industry has hurt its bingo results as well.

"The recent deterioration in the worldwide economic environment has materially negatively impacted the gaming market, including the bingo segment and the potential mobile gaming market," the company said. "Over the course of several of the most recent fiscal quarters, attendance at gaming establishments and the per-player revenues reported at gaming establishments have significantly decreased. The abrupt and sudden worsening of the economic environment has already negatively impacted and is likely to continue to negatively impact our bingo revenues."