Question & Answer with Tropika's VP finance David Prue
Over the last couple of days I have had the opportunity to correspond with Mr. Prue. He has been more than cooperative and deserves mucho kudos for being so attentive in this regard...
The following is a list of questions that I felt were important as part of my DD on Tropika... I think that you will find both the questions and answers very informative...
Enjoy, Cussy, the Windsurfer...
***********Q&A***************
Dear Mr. Prue, let me start off by saying that one of my largest concerns is the base or location of the gambling licences. As you are probably well aware, last year the U.S. Senate had approved the Kyl bill as an amendment to the Commerce, Justice, and State appropriation bill rather than as a free-standing piece of legislation.
The Kyl bill is aimed at prohibiting Internet gaming and penalizes bettors, casino operators and others associated with Internet gaming in the United States, although the U.S. Department of Justice, in expressing reservations about the bill, has questioned whether it will be possible to implement all of its provisions. I know that at least Antigua, Curacao and Dominica are all sovereign jurisdictions and they dispute the authority of the United States to preclude them from granting gaming licenses to their resident businesses. Several Australian states are also in the process of licensing Internet gaming and do not consider themselves bound by a U.S. ban. The government of Dominica announced a couple of months ago that it intends to operate its own Internet casino.
1)A) In Which country or countries are Tropika's licences based?
**********ANSWER***********
Licenses/Servers: Multiple jurisdictions available for activation to allow us to move from one place to another as desired. Dominica, Antigua in place, application in process for Queensland. With RCMP and INTERPOL background checks on all officers, obtaining a license has proven to be a simple task.
*********QUESTION***********
Further...A number of groups are lobbying to have the Kyl provision dropped from the combined Senate and House appropriations bills, including the Coalition for Constitutional Liberties and the American Civil Liberties Union. Antigua has joined with the Internet gaming industry in mounting a major objection to the Kyl bill.
B) Where does Tropika stand on this issue?
Has Tropika looked into participating with other lobbyist groups and/or has Tropika done anything about this issue in the United States or Canada (refer to next question)?
C) What similar activity is going on in Canada if any, and do you anticipate any conflicts in the future in regard to this activity or future activity?
**********ANSWER***********
Kyl: The manner in which the proposal was passed is called "Christmas treeing" in other words, a bunch of unrelated stuff is hung off the paper clip of one bill. Now illegal in the US.
In order for the senate to pass such a law, they must knowingly challenge the sovereign rights of many nations. You are correct re: Antigua, Dominica, Australia etc. totals 40 I believe.
Canadian government seems to be taking a more passive, wait and see approach.
We do not consider the potential legislation in the U.S. as a primary concern for the following reasons:
1) The US has granted a license to a southern hotel to operate an Intranet casino within its hotel. They have now set a precedent.
2) I believe that the underlying issue is taxation and not morality. Most of the complaints come from states with land based gaming interests and these are the states with the most to lose. I find it very interesting that you can enter any American land based casino and lose as much money as you can get your hands on and this is not a problem. However, it is a problem to go to fairplaycasino and only be able to loss $1,500.00. in any one week provided you have 3 credit cards.
3) The US government would need to ban Internet casinos from search engines and directories. You can reach the same service by going through a US provider to an overseas provider and then accessing the casinos. I would rather seem them attack child pornography, as is the stated preference of the Justice department.
4) We are targeting more and more of our marketing focus on European clients in order to diversify our client base. This is resulting in a steady shift in our client base.
5) The most important: We do not intent to rely on casinos for all our revenues and are progressing towards shifting gaming from 100% to less than 50% of our total revenues. This will take about 16 months and will be done through broader e-commerce initiatives such as RC securities, just one of several initiatives we are moving forward with.
Lobby: We prefer to stay away from the spot light but will enter the ring very aggressively if we need to.
***********QUESTION***********
Share Structure:
2) How many shares as of today are there FULLY DILUTED?
************ANSWER************
Shares: Fully diluted is about 46 million +/-. Short on time to track down exact figure at this moment but some of that is long term directors/officers options. See annual report for performance criteria. We only get the options if the stock reaches specific trading price. If we don't get the job done, we don't get the options.
***********QUESTION***********
3) What is the float like? Who, if anyone, owns a significant percentage of the common shares? How "tightly" are these shares held?
************ANSWER************
Float: 31 million +/- While not tightly held, this float will provide good liquidity in the market.
Holdings: See annual report on our web site. We know the location of a huge percentage of that stock and would call them friendly. It is up to those folks to identify their holdings.
***********QUESTION***********
4) I noticed that in your literature (website) Tropika stated:
"site construction orders are flourishing. Over the next six months, Tropika expects to deliver nine more operational Internet gaming sites to its clients. The opening of these new sites promises an exponential increase in revenues and cash flow for the company, while offering the opportunity to further market and refine Tropika's e-commerce platform."
A) What is the progress of the above? Have any of these "9" sites been inked?
***********ANSWER***********
CyberDealer sites
5 "inked", 1 operational (Jetset) three more to be operational in very near term.
***********QUESTION***********
B) What kind of revenue do you expect or have you received from these sites ?
C) Does Tropika handle the financial transactions for these sites? wire transfers, winnings payments? etc. In other words, how closely is Tropika or will Tropika be linked to the sold "Turn Key Sites"?
***********ANSWER***********
TPIL receives 50% of revenues after credit card fees, a fixed marketing payment ($35m) and a customer service centre fee ($10m) per month.
Tropika does provide every single aspect of casino operations including full payment processes.
It is important to appreciate that Tropika itself does not operate casinos or enter license agreements. All aspects of the gaming business are conducted by wholly owned subsidiaries in many jurisdictions, each one handling a component. Some of this fragmentation is done to take advantage of reciprocal tax arrangements with Revenue Canada, some to isolate liability and some to ensure privacy.
***********QUESTION***********
5) In regards to RC Securities...(RCS)...
A) What stage of development is RCS at?
B) Is there more info available to the public on RCS? Would RCS offer
any services that an independent investor (namely myself) would benefit from?
C) What is their commission schedule like?
D) Do you have any clients lined up already? Will RCS be able to handle institutional accounts?
Is RCS insured by any organization such as the FDIC or a member of any exchange such as NYSE?
E) Do they offer US Dollar accounts with international ATM Cards and or Credit cards? Does either Revenue Canada or the IRS (states) have
access to information on these accounts?
***********ANSWER**********
RC Securities
Sorry: No additional information to be released at this time beyond information contained in the most recent press release. Will follow in near future and this is a very exciting initiative, I am having lots of fun with this one.
Only comment is re taxation departments: We have gone to great lengths to ensure the identity of the CyberDealer license holders are protected against prying eyes. RC clients will be no different. With out protection and trust one can not function in the international financial community.
***********QUESTION***********
6) Are there any press releases that are forthcoming? In regard to?
***********ANSWER*************
No comment was given for this question... This is understandable considering his "inside" status which places certain restrictions on what he is legally allowed to comment on...
***********QUESTION***********
7) I understand you have hired a PR firm to establish your presence to the investment community in Canada...
A) Can you tell me what they have accomplished to date, and what their near future goals are?
***********ANSWER***********
PR Firm:
Firstly, the firm is called Ciris International and they are mandated to provide the tools, direction and opportunities to position the company image, in the marketplace, as desired by the company. They do not get paid in stock, have lists of people they call to sell stock to or have stock related targets. They are not "smile & dial guys" and you should not expect to see a stock rise as an immediate result.
The result will be that we are visiting brokers and individual investors and promoting our company rather than someone else selling stock through a promotion and walking away. Ciris is giving us the tools and contacts to make those presentations and they should be around for at least 2 years.
***********QUESTION***********
B) Has Tropika filed its FORM-20F disclosure document with the Securities Exchange Commission. (Similar to a US Domestic Form 10 filing, the 20F document provides a foreign company the means to disclose its business to the US investment community in an orderly and acceptable manner.) Or is Tropika not interested in the US investment community at this point?
***********ANSWER***********
FORM-20F
I have no answer on this one, sorry. As I have said, the public market is very new to me and this form is brand new to me. In any event, I would not be involved in such filings or decisions on a day to day basis. I must speak to John Ashbee who is unavailable until Wednesday. I will revert on this as it strikes me as a very important opportunity that we may potentially be missing.
***********QUESTION***********
8) Given that many firms are not allowed to purchase stocks trading under 1.00, $2.00, $5.00, (for the purpose of institutional trading)
A) Has there been ANY TALK of a stock consolidation... If so, what are we talking?
***********ANSWER***********
Consolidation
We have been under extreme pressure from shareholders to hire an IR firm and this is good time to address that.
The big hurdle we faced when seeking investor relations support was the insistence that we needed to consolidate the stock. We completely and firmly believe that this is not the case. It has been difficult dealing with demands for stock support and knowing full well the response to a consolidation.
European investors look for up to 100% more stock outstanding than we have and even US investors do not find the numbers high. It is a unique Canadian mind set that I don't share. We have only ever issued stock because we had to and not to ourselves.
I am the only officer in the history of the company to buy stock in the open market.
The underlying issue is that we will NOT consolidate stock to underwrite a stock promotion. Consolidation is not on the agenda and barring any unforeseen problems or opportunities it will not be discussed in the short or medium term.
***********QUESTION***********
B) What about trying to get a TSE listing? Or a bulletin board (BB-OTC) listing so
that US investors can participate easily?
*************ANSWER***********
We have discussed other exchange listings and we will welcome to opportunity to advance the company however not at this moment as we must continue to focus on creating a strong foundation.
The human resources are stretched as thin as they can be, look at my title: VP Finance, Administration and Operations and shareholder relations. We will not be taking on more overheads until the cash flow is stronger. The management team currently draws a nominal salary in order to put as much capital resources into marketing as possible.
Once we have more human resources, we intend to turn our attention to new listings etc but one can not forget that the stock side of the company is useless without a good operational side.
I know that this is a bit rambling but the questions you have asked are not cut and dry answers.
As indicated, you are free to post this information and you are of course welcome to call any time you wish. We have not touched on the non-gaming initiatives but will get to all of those another time.
David Prue
David, thank you for taking the time to answer these questions.
Hope to talk to you soon...
Cussy, the Windsurfer:)
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