Virtgame Gets the Nod in Nevada

Citing previous misinformation in the media and SEC regulations that prohibit executives from speculating about stock prices, company officials with Virtgame Corp. aren't commenting on an interactive gambling license it was awarded by Nevada gaming regulators on Thursday. Their lawyer, however, is.

Virtgame's legal counsel, Anthony Cabot, conducted a conference call Friday, during which he told investors and analysts that the company was granted a "restricted" license allowing it to sell and distribute a closed-loop sports betting system accessible via electronic terminals and PCs.

Cabot said a version of the kiosk-based system is already in place at various Coast Resort Inc. properties. Coast operates Suncoast, Barbary Coast, Gold Coast and the Orleans casinos--all located in the Las Vegas area.

Virtgame is hoping to apply the terminal system's core technology to an intrastate sports betting system that would enable sports bettors to lay down action on games with Strip-based sports books from the comfort of their homes.

For now, the system enables the gambler to bet on horse races or sporting events while at a sports book without having to fuss with waiting in line. A bettor can be stationed at a chair or table at a sports book and tap into the system using a computer terminal.

The system facilitates horse racing and sports betting, but could also be used to conduct additional games of chance. The company doesn't have immediate plans for expanding to additional types of betting, but Cabot said more gaming options could be added if regulators are pleased with the initial launch.

"There could be no down time, then, for the sports book visitor," Cabot explained. "They could have five, 10 or 30 minutes before the next race or next game starts. They could go and play virtual blackjack, craps or the slots right there on the terminal without ever leaving their seat in the sports book."

The Nevada Gaming Commission granted final approval for the system at its monthly meeting on Thursday. The Gaming Control Board gave its initial approval to Virtgame earlier this month,

The license is good for 18 months.

Virtgame CEO Bruce Merati told IGN a few weeks ago that he hopes to see agreements with operators throughout Nevada for the closed-loop system signed by early 2003.

The PC version of the Virtgame system would enable bettors located in Nevada to log onto their computers and place bets with sports books. Both systems, Cabot said, require the user to establish an account with the sports book. All deposits and withdrawals must be made in person at the land-based facility.

Merati told the commission at its meeting that the system is not Internet-based, so any information stored on it is not susceptible to hackers on the Internet. The system is much safer, he said, than anything that is Web-based.

The commission's approval was a bit of a formality making the board's initial approval official, but it wasn't entirely smooth sailing for Virtgame; The Associated Press reported that regulators are concerned with the financial stability of the company.

Merati told the commission that investors have pumped about $15 million into the company, but regulators were leery because the company's current stock share value only represents a market cap of $8 million.

Cabot said Friday that the company intends to raise another $5 million in the next two months, which a representative from McMahan Securities, the investment house raising the capital, said should be enough capital to keep Virtgame operating for the next 12 months, "if not more."

Michael Shillin, the managing director of Investment Banking for McMahan, said he is confident the money can be raised in two months now that Virtgame has been issued a license. A company the size of Virtgame's usually wouldn't attract the attention of McMahan, he added, but the ability to get into the gaming market in the most lucrative and highly-respected area of Nevada made it worthwhile.

Cabot is optimistic Virtgame will be extended an unrestricted license when its 18-month term is up.

Merati and his team got into hot water with regulators earlier this month when press reports and information on Virtgame's Web site erroneously reported that the company had been granted a license for its system, when it fact they had only received initial approval from the Control Board.

Commission Chairman Peter Bernhard told Merati at the meeting to be "absolutely, precisely accurate" in public statements about Virtgame. Regulators would be "extremely upset," Bernhard said, if more misleading information was released to the public via Virtgame's own doing.

Virtgame got its start in 1996 as an online casino operator based in Antigua. The company closed its casino operations in 2000 to concentrate solely on software development.