|San Diego’s internet gaming companies look to be on shaky ground as the industry gears up for consolidation: Question is, will they survive the shakeout?|
Two local companies have no returns and snowballing losses. A third has income but immense losses and is trying to create a role for itself in the Intranet (basically an internal Internet) gambling systems sphere.
Online casinos are appearing in offshore havens such as Antigua, Dominica, St. Kitts and Nevis, Liechtenstein, etc. Increasing numbers of entrants are joining the arena.
'The way Internet gaming is happening right now is going to fail because there are lots of people entering the business, no rules, no licensing,' says Bruce Merati, chief operating officer of Virtgame, the only local publicly held company with profit and some weight. 'These Caribbean countries will give licenses to anybody that will give them some money.'
He estimates the industry is accumulating $5 billion in annual revenues offshore, and there are 2,000 online casinos.
Anticipating an industry crisis, Virtgame broke off actual operation of online casinos in 2000, and since has concentrated on supplying e-gaming software to Nevada casinos where the system is legal.
'We positioned ourselves to be an enabler for land-based casinos and state lotteries to get their system beyond brick and mortar,' says Merati.
The company has negative working capital of $540,703 and needs $1 million more in capital before it creates positive cash flow from operations.
It’s better than the past two years’ nil income of La Jolla's Interspace Enterprises, which is trying to create a cyberlottery, Planetlotto, in Liechtenstein. The company's loss grew $1.7 million last year from $1.3 million and there are already a staggering 100 million shares outstanding.
Escondido's Virtual Gaming Enterprises has had no revenue and a cumulative loss of $2.7 million since its launch in 1997. It’s been delisted from the Bulletin Board and owes its accounting firm money, but continues to develop software, says chief executive Virgil G. Williams