I've already explained why I did not post my report yet. I had forwarded a copy to Chris to review the accuracy of my information and was waiting his approval. I have not yet heard from him so i will go ahead and post for you anxious investors.
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I had a great 3 hour visit with GGNC Tuesday afternoon. There are a number of thoughts running through my mind about the current state of events as well as future prospects. Many of you forwarded on questions which I addressed with GGNC, most of which I have answers for. I thought the best way to communicate all I now know and understand would be to 1) give you a brief overview of the meeting, 2) list their answers to your questions, 3) summarize my visit and conclusion.
Let me first say that this is all my opinion of my visit with GGNC. You are all free to either visit directly or over the phone with them. My opinions come from my perception, which comes from the entirety of my visit. I will be happy to clarify or expand on my opinion if anyone wishes. If you don't like my opinion then too bad. I'm happy to here your reasons but please don't waste my time with your opinion if your opinion is based on baseless facts and conjecture. Let's talk facts, and form opinions from these.
Here we go.
I arrived at 1:30 P.M. at their corp. offices. The meeting lasted until 4:30 P.M. Present in the meeting were Chris Sargent (IR) and Dennis ?. James Chu came in to introduce himself and I visited with him briefly. They were all cordial, informative, open, honest, and eager to help me understand where GGNC came from, where they are now, and where they intend on being soon.
These guys are relatively young - mid 30's, and are entrepreneurial at heart. The office building is in the 15th floor of the Hong Kong Bank building. They have humble surroundings (two offices) which suffice the administrative needs they currently have. The bulk of their internet business is managed from the Carribean with 27 full time GGNC employees. James Chu, Chris Sargent, and Dennis work out of the Vancouver office to more or less keep a North American presence here. All the software development is contracted out. I feel these guys are straight shooters. They did not attempt to dodge a single question. I felt very informed and up to speed with all aspects of GGNC's operations.
I arrived with a print out of all relevant PR's, and a print out of all your questions.
Insider Share Counts and activity
The share count - outstanding, in the float, restricted insider etc. ?
Aprox 14,000,000 outstanding and (forgot - I will call tomorrow) in the float. Restricted insider is aprox. (did not ask - will call tomorrow)
Insider buying and selling? None Chris was aware of. The only one who would be able to sell would be James Chu. The other shareholders have a 9 month window before they can exersize their options.
PR firm payment which is probably in shares and not disclosed anywhere - how does this work?
They are currently contracted for 45,000 shares per month for a total of three months. They may renew their agreement but will wait and make a decision down the road. If they have the visibility they need to sustain a higher share price then they will not need the PR firm. This firm organizes and pays for all radio advertising spots.
Share information from the transfer agent - how can we get this information regularly?
You really can't get it from the transfer agent. They plan on having statements prepared quarterly beginning early 1999 after closing out Q1.
Does management have to file any forms when they sell their shares into the float?
Not as regulated by the SEC. Mr. Chu has a restricted agreement with the inside shareholders which helps him control what they can do.
Do they file before or after the fact?
Not at all. Once they are listed the rules do change.
Do they not file if the quantity of shares is below a certain level, and what is that level?
Does not apply - see above.
Were can we view these filings and updates regularly?
As soon as they have audited statements available - early 1999 after closing out Q1.
Financial Information
How do they plan on financing their ambitious plans?
By selling stock which they have already done. With the current income cash flow, and the stock recently sold, they now have enough capital to meet their short term needs. As they execute their business plan, and continue making money the hope is an appreciation in share price - thus making further expansion plans easier. They will be able to raise a significant amount of capital by selling fewer shares. The proposed share sales are in line with what the PR firm has stated. One step at a time.
When will they release audited financial statements?
Early 1999 after Q1 closes out.
When do they plan to become fully reporting?
Absolutely. They must first complete their audited financials, and then submit them (early 1999). Both events will happen in rather rapid succession. They are currently looking for a CFO to expedite this process.
What are their plans for getting onto NASDAQ?
After reporting they can apply for NASDAQ. They intend to do so and do not see any obstacles which will be in their way at that time.
Monthly burn rate?
Aprox. $50,000.
Cash in the bank - would be nice to know where it came from, any Reg S or
convertible debt?, low cost shares now in the float?
Lots of cash in the bank - lots!
Timing of 144 stock release?
Sorry - forgot to ask this.
Basis for projection - definition of terms and percentages?
Projections are based on current volume and growth expected. Online gambling is still relatively new to the internet regardless of what country your in. Online wagering will grow as will their exposure. They are currently among the top 5 hits in the country without consumer advertising. They have earmarked $150,000 for consumer advertising to begin VERY soon. This includes but is not limited to internet banner links, print media in publications such as Pro Football Weekly and Basketball News, 30 minute infomercials on cable T.V. etc etc. I saw all these forms of advertising getting ready for press - they looked very nice.
Cost of development of a software package? (like a Japanese site)
Translation costs aprox. $4-$10,000 per sight. They would like to add several languages and are aligning themselves with local country PR people to facilitate the word in each market.
Who are the financial resources of the company? A multi-millionare behind the scene?
James Chu started the company
How much will they spend to buy the secondary company?
Price and name are unavailable but we should be hearing news soon. The private company is owned by U.S citizens and they have a great business going but just want out. GGNC has the finances and ability to come in and take over operations - they are already in the Caribbean.
Other acquisitions in the works? Yes and no. They have a tremendous amount of vision in this area but want to make sure they succeed with their current undertakings. As this thing picks up speed and they can build investor confidence with a great track record then they can move into other visionary avenues.
When will the current one be a done deal? Could not tell - James Chu leaves for the Carribbean in a couple days!
How will they purchase the new company - dollars, stock, both?
Likely a combination of both - could not give specifics.
Financial condition of new acquisition - contribution of EPS?
Very healthy. Yes - could not give specifics.
When will they report their next earnings?
December update after December closes. Currently December membership has grown significantly - with all the Xmas holidays coming up they did not know what effect this would have on the casino.
PR philosophy
Please explain?
They've got a great story to tell and they love to tell it.
Why so many PR's?
There are a lot of things going on, all real, no hype, they want to be sure investors feel close to their accomplishments.
Why the duplication of PR's?
They've got a great story to tell and they love to tell it.
PR Updates
How's the Hebei China resort deal coming along? Is it a done deal?
The Chinese resort is in the works. They are not opening a resort themselves but have a facility available for use by another casino to run and manage. Conversations are ongoing with several companies. Could not tell me more. James Chu heads off to China after his stop over in the Carribbean.
An update on the Sportsbook and the Chinese site?
Watch for information. Chinese site is ready - sportsbook will follow very soon.
Any dates on when the multi-theme sites will be up?
No dates yet but work is under way.
Internet retailing - doesn't it seem a bit over zealous to branch out to much to soon? Focus on strengths?
They made it very clear that they do recognize their strengths. This is a clear side line item but one that has tremendous potential. They do not wish to be an on-line Walmart - more so a specialized retailer centering on their theme sites.
General
How are they going to advertise in Asia for their website and games?
Same way as the U.S. - advertise!
Has the advertising been underway for the Chinese site? Any magazine clips would be helpful
Not yet - as soon as the sight is linked then the advertising can begin. No need to advertise if they can't go use the sight.
How are they going to handle a sudden increase in network traffic?
Add more computers. They seemed very well educated about the limitations and needs of an expanding network.
If they are going to handle 500mil wagering a year, their network has to be bulletproof.
Absolutely - we talked about secure money transactions, wiring funds etc.
Since they incorporated in Dominica, do they have to abide by US laws?
Certainly U.S. SEC laws apply. If gambling becomes a problem because of future U.S. regulation then no problem - their focus currently is on global internet gaming.
They have said they are working on so many projects, we are a bit lost.
Get a list of 1.What is currently up and running and bringing in revenue?
CyberBetz
2. What they are now working on (people have actually been hired and are working on it) and when will it be producing revenue?
Dog Racing - soon
Horse Racing - soon
Sports Betting - soon
Chinese Casino Link (other languages added soon) - soon
Carribbean acquisition - soon
Theme Casinos - after above mention items accomplished
Cybermall - after above mentioned items accomplished
3. What are they planning, but no work has actually commenced yet?
Listed above
What 'web' stats are they tracking as good indicators of future business? What are the
estimated projections of those 'web' stats?
They showed me data stream after data stream of information they track. Her e are some of the categories which were graphed out.
First Pages logged on to
Last Page logged on to
Top revenue generating games
Top games played at time intervals during day
Total daily hits
Number of hits per day by day
Avg. time on line per member
Avg. dollar wagered.
Etc.
Etc.
Etc.
Number of employees? How many mgt., programmers, office administration, etc.
30 total - 3 in Vancouver - 27 in Caribbean, no programmers (contracted out)
List of officers and directors?
Currently James Chu - will be adding other directors shortly
Are these full time employees and do they hold roles in other companies?
Chris and Dennis are full time. James has a minority role in another company before GGNC was in existence but primary focus is GGNC.
Compensation of officers and directors?
Salary + stock option (not excersizable for 1 year)
Stock option plans for employees?
Yes
Size of facility? Own of lease?
Did not ask about size of Carribean - it is leased out. Vancouver is a couple offices rented
Debt / Equity Ratio?
Could not give specifics - good
Current Ratio?
Could not give specifics - good
Conclusion
There is tremendous amount of activity going on with these guys. Their follow through has been consistent. They are innovative, pioneering, risk takers with financial prudence, and ready to answer questions. If substantive PR's detailing real progress is what investors are waiting for then I don't think we will be waiting too long. This is however a process and we must be patient. As they accomplish goal after goal, as they provide us audited financials - then become reporting, then file for NASDAQ, as they open their Dog racing, Horse racing, Sports Betting site, their Chinese sight etc. etc. they will only build our confidence which will lead to stability. Fortunately we now have the luxury of deciding whether this is worth 2-$3 now rather than at the $10+ level. If half these event happen - their will be enough to command a significantly higher price.
Too many Pennies are a fraud and a scam - they go no where. If you want a needle in a hay stack I think it's right here. My bet is on GGNC but I've also had the luxury are shaking their hand and asking them questions. If you the average online investor you have not picked up the phone and called them yet. If your a day trader you don't need to - if your long you will want to ease your mind by getting to know them a bit.
The ups and downs will always occure - IMO we will see far more ups than downs - and for quite a while. |
