Hello,
Talked to Art Rosenberg at some length today. We covered a lot of different subjects including the price drop, becoming operational, potential revenues, needed financing, etc.
Price Drop
As we talked about the price drop of the vteh stock, Art painted a picture that I found very helpful - a context. Here vteh is, coming off of a high of around 18. First, he felt that the price that vteh has been up to, 18, was "exaggerated" given the startup status and non operationability of the company.
Second, since last fall they had been trying to obtain a NASDAQ listing. One of the requirements is that vteh would need at least 5,000,000 dollars worth of tangible assets. In order to meet that requirement, vteh arranged a 16,000,000 dollar financing and had the cash in escrow awaiting SEC approval for the deal.
Funny thing happened, however. The Feds were getting more and more nervous about internet gaming and it appeared that the SEC was reflecting the mood of those in the legislative branch. The SEC just could not find a way to approve the financing; they found one after another of uncrossed t's and undotted i's delaying the approval of the financing aggreement.
This went on for sometime and the longer it went on the more vulnerable vteh became to the power of the short position. SEC approval of the financing deal was critical for the NASDAQ listing and for providing the cash flow needed to keep the developmental work going with the subcontractors.
Well, as time went on, we know what happened. The shorters were able to crack the base of support at 14 and then at 11. As 11 broke it cashed big time until about 7 to 8 where many big time vteh investors tried to buy hard to hold the price.
Unfortunately, these big boys bought using margins and their buying didn't hold the price for more than a day. As the price crashed even more, those big boys were forced to try to cover their margins and word is many couldn't. Brokerages representing these people then went ahead and sold cheap just to unload the stock and suddenly we have a stock that is under 1. The big boys - some lost their homes.
Vteh lost the short term opportunity of getting onto the Nasdaq and lost a great deal of credibility even though they feel they really didn't play a role in the price drop.
Response To the Price Drop
I asked Art directly about the reason vteh has not responded publicly in more detail about the causes of the price drop and what would be done to turn things around.
He said that they had thought through several alternatives and decided that their best strategy would to put out a general statment of what happened and then quietly try to support the stock price while continuing their financing targets and preparing for becoming operational.
They felt that any thing else might sound suspicious given the fact that they are not operational. For those of you who might not understand what I mean here - If I say "trust me", your red flags will go up automatically. If I say "watch and decide", one is much less wary of the situation.
Organizational Arrangement
Vteh is outsourcing the bulk of the work being done to develop the systems, market the product, and administer the operations. This was chosen as the best alternative for keeping overhead costs low and due to the "only needs to be done once" nature of a lot of the work.
Cash Flow Sources
Cash flow for vteh is generated through financing arrangements done periodically. Since no sales revenue is being generated, financing is the only option.
Of course, Barry Bampton is the chief architect of vteh's financing needs. As Art put it, it is Barry's job to promote and sound super optimistic. It is the his primary function to generate the financing alternatives and close them.
Art also indicated that Barry has spent millions supporting the company's cash flow and supporting the price of the stock with his own money. However, nothing could really be done to stock the crash. It was interesting to see how much Art actually defended Barry - he was very emphatic in his defense of Bampton.
Steps Before Becoming Operational
Art said that the key to moving the stock price up is becoming operational. He emphasized this fact. Conservatively, he is saying that becoming operational is within a 120 day period. He said he hopes it will not be that long, but he does not want to create expectations that if not meant would further hurt the credibility of the company.
The steps to becoming operational seem to be contingent on another financing deal of up to 4,000,000 dollars. This will provide the cash flow needed to fund being operational. The software, hardware, marketing plan, operational plan, etc. are not considered constraints to starting up the operation.
Software
Vteh has a license with Casino World Holding for the software they will be using. However, vteh is not thinking that CWH will be the exclusive provider of the gaming software. Others could be used as well.
Hardware and System Integration
Vteh is using Itrysis (formerly Kaniksu) as the hardware and systems integrator for the system as many of you already know.
Marketting
The Pete Marwick Co has developed the marketting plan for the company and will be used to assist in executing that plan. One aspect of the marketting, the United Airlines video, has been very successful and in fact has facilitated a lot of stock sales.
The target markets are Europe, the Middle East, and Asia. Servers will be located regionally to serve internet users in these regions.
Art is also working to warm up the US. He is one of the founders of a internet gaming lobbying effort. This group is working hard to insure that a legal environment that does not constrain internet gaming is created in this country.
Art has also been on CNBC concerning internet gaming and gambling addiction.
Projected Revenue
Once operational, Art seems to feel that their plan for 1,000,000 dollars in revenue during the first quarter of operations is entirely realistic. Each quarter, he feels, will show a steady increase in revenue obviously as the market is penetrated.
He did not have his complete plan in front of him so I was unable to get a feel about their near and long term projections. This would be a good area to study more.
Once operational, he feels that the need for financing will no longer apply. He is quite confident that significant income is nearly a sure thing.
Overall
Art sounded like one of those guys who puts up with a bunch of ...... all day long from disheartened and angry investors when are conversation started. He was somewhat defensive, critical of the SI thread, etc. As our conversation moved forward, I could tell he was relaxing and enjoying the chance to answer a series of straightforward questions.
He emphasized over and over again that vteh is a real company and its going to make a ton of money. In addition, he has his own personal interest in getting the stock price up - his options are well above where the current price is.
For me, I liked talking to a real person and appreciated the time he took to talk. I was impressed. He is totally aware that this conversation was to be written up and placed on SI, Waaco, and Stockman if they are interested and he had no problem with that at all.
Finally, do I believe? This isn't really the right question. The appropriate first question is whether I want to wait to see whether the words match the deeds. Startups are never predictable.
Am I less angry and frustrated? My response to the second question is similar to what somebody said a few posts ago - to buy a stock with no operations and no revenue and no EPS while it sits in the teens is really pretty foolish. Yea, I'm angry and frustrated with myself for not doing enough DD at the teen level.
Don |
