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Non-Tech : Internet Casinos, Sports & Racebook Offerings

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To: THOMAS GOODRICH who wrote ()	11/25/1998 8:56:00 PM
From: THOMAS GOODRICH	Read Replies (2) of 17

This is not intended to be an all-inclusive list of things to be on the lookout for when doing due diligence on offerings which can be structured as private placements and partnerships both general and limited. Rather, some general guidelines. 1. Read Placement Memorandums carefully and scrutinize risk factors. This information should not simply be construed as boilerplate legalize. 2. Check out the principals. What if any is their business experience and knowledge of the Internet gaming business? Are any under indictment for ANY reason? 3. Be aware of how much you are paying for commissions to ISO's. The range is typically 40%, but, can reach 80% with incentives! Any offerings exceeding 20% exclusive of incentives should be rejected. Sales agents typically receive substantial unit interest for marginal sales. 4. Determine the jurisdiction of the offering. Be particularly cautious of offerings in the State of Colorado with liberal Blue Sky Laws. Some entities select certain venues to skirt securities laws. DO NOT under any circumstances invest if you have reason to believe or are aware that United States laws are being broken or if you are being told that you as a United States citizen will not have to pay federal taxes. 5. Consider the amount of the total raise. Be especially cautious with capitalizations that exceed 1 million dollars. Turn-key software packages and licensing should fall within the range of a few hundred thousand dollars maximum. 6. Be wary of projects named after existing land-based casino/hotel properties or tradenamed businesses, i.e. AOL Casino, Atlantis, Harrahs, MGM, etc. Regardless of where these Internet sites are domiciled they are likely to be attacked if a trademark has been violated. (America Online recently sued AOL Casino for infringing on their tradename) 7. Do not subscribe with the expectation of a short-term buyout at astronomical valuations. The theory being, licensed operators will not be interested in paying a premium when they already have a customer base and name recognition. 8. Watch out for hype introductory letters that state Casinos of the South Pacific (COSP.COM) garnered 43,000 gamers during their initial 6 months of operation or where 3 million was wagered over a period of a few days. Your project will not likely come close to that target for at least 2 years assuming it gets launched and prospers. 9. Demo the software package before investing if possible. Look for leaders such as Cyberoad, Starnet and Playstar. Starnet is perhaps the largest and most notable in this industry. Financial processing is typically provided by banking affiliates of these companies. 10. Verify that licensure has been granted by asking for a copy. Lastly, visit Rolling Good Times Online at rgtonline.com for late breaking developments in the gaming industry. TG

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