Company curbs plan for portable gambling devices

By Steve Green (contact)

Friday, Oct. 23, 2009 | 4:09 p.m.

FortuNet Inc., a Las Vegas company that supplies electronic bingo systems around the country, has shelved plans to offer mobile gambling devices in casinos for non-bingo games like poker, keno and slots.

The company currently offers portable bingo devices for use within bingo halls, but said the economic downturn facing the gaming industry currently makes it impractical to offer mobile gaming systems for games other than bingo.

"Due to the substantially reduced capital budgets of potential casino customers resulting from the current recessionary environment, we do not believe it is an appropriate time to launch the current version of our mobile gaming system for traditional casino games, such as poker, keno and slots," Yuri Itkis, principal shareholder and chief executive officer, said in a statement Wednesday.

"Because we believe that the current version of our mobile gaming system will be technologically obsolete before the gaming market recovers, we have decided to concentrate our resources on developing an upgraded mobile gaming system for traditional casino gaming applications while deploying the current version of our mobile gaming system for bingo applications. Accordingly, we have suspended further costly efforts to obtain Nevada approval for this version and have notified the Nevada Gaming Control Board of this decision. We look forward to resuming our efforts to obtain approval of an upgraded version of our mobile gaming system at the appropriate time," his statement said.

Withdrawal of the application with Nevada regulators will lead to a write off in the third-quarter results of software development costs of $1.685 million, or 15 cents per share, FortuNet said.

In an August regulatory filing, FortuNet further explained why the new gaming system doesn't currently make economic sense.

"In this recessionary economic environment, we believe that casinos have excessive capacity of slot machines and gaming tables on their main casino floors and are therefore not motivated to promote playing of traditional casino games in the auxiliary gaming areas, such as bingo halls, sports books and bars, since such gaming would likely divert revenues from main casino floors rather than generate extra revenue, and yet, would involve additional costs to casinos. During the hard times of economic contraction, we believe that casinos are unlikely to cannibalize the main casino floors for the sake of generating some additional revenues in the auxiliary areas; whereas in times of economic prosperity and expansion, when the main casino floors are more fully utilized, we believe that the extra revenues generated in the auxiliary gaming areas would be welcome," the company said.

For the second quarter ended June 30, FortuNet reported a profit of $584,000 or 5 cents per share vs. a profit of $866,000 or 8 cents in the year-ago quarter. Quarterly revenue was steady year-to-year at nearly $4 million.

Separately, on Sept. 15 the company was notified by the Nasdaq Stock Market that its common stock had not maintained a minimum market value of publicly held shares of $5 million for the previous 30 consecutive trading days, and that it may be removed from the Nasdaq Global Market.

The company has until Dec. 14 to regain compliance. If the company does not regain compliance, it will consider transferring its securities to the Nasdaq Capital Market.

Nasdaq says its Capital Market consists of more than 550 companies that have applied for listing, having met and continued to meet financial and liquidity listing requirements, and that have agreed to meet specific corporate governance standards.

FortuNet has also said that if it's delisted from the main market its stock may be moved to the less-liquid penny stock market.

Its stock closed Friday at $1.36. In the past year it has traded between 98 cents and $5.