From CATHAYONLINE.COM: There are 9,165,000 shares issued and approximately 2 million in the float.
Explain your business plan and why you think it will be successful. What are your goals for each market niche?
CATHAYONLINE has a multi-faceted business plan, one involving more immediate revenue and another that concentrates in "gaining market share" for significant future growth in many areas. Let's look at each one in some depth.
Lottery Kiosks: CATHAYONLINE's goal here is to take advantage of a largely untapped lottery market. Currently only 6% of Chinese have tried lotteries compared to 85% in the U.S., and there is real growth potential, witnessed by the US $1.3 billion in welfare lottery cards sold in China in the last nine months alone. Our six month goal is to acquire approximately 50 operational kiosks, and the second phase of the Company's plan calls for the acquisitions of 150 additional operating Lottery Kiosks in the second half of the Company's fiscal year. When this phase is completed, the total annualized net income (EBITDA) is projected between US $1.75 million and US $2.25 million.
ISP: The recent announcement of our acquisition of Sichuan Torch and its 28 professional employees and the joint announcement with USA.NET has provided us with a major boost in China. Near term plans call for Sichuan Torch to greatly expand both their reach and their services, with many that we believe has never been offered by other ISP's. These include turnkey systems for corporate users, Internet fax/phone, system integration, use of an "Electronic Mall", trial accounts, dedicated lines, virtual Web and domain names, on-site training and seminars, Internet consultation and 24-hour support.
Currently our ISP provider operates solely in the capital city of Chengdu (Population: 9.8 million) but will expand into the remaining areas of the province of Sichuan (Population: 100 million). As the center of business and technology development in Western China, Chengdu exists as the logical starting point in a virtually untapped market of the Internet usage in China.
As one of the most important centers of politics, economics, technology, and culture in China, it also holds a strategic position in China's economic development plan.
The significance of the alliance with USA.NET is discussed in more depth below. We believe their highly-rated email and advanced messaging services will help us gain important market share, especially when the services are translated into Chinese.
So, in a nutshell, market share is the key to fueling long term growth, but we have the Lottery kiosk program to bring in significant revenues in this current year.
How does the strategic alliance with USA.NET benefit shareholders of CATHAYONLINE?
We are aligning ourselves with the leader in web based e-mail and advanced messaging services which will enable the Company to gain a strong foothold and become a leader in China in this area. CATHAYONLINE will market their product under the name "TorchMail". USA.NET has received many awards and will give CATHAYONLINE an instant advantage over all competitors. For more information on USA.NET and their products, please see usa.net or go directly to: usa.net
Initially the service will be available in the English version. Early in the year 2000, the full services will be available in Chinese.
How does the strategic alliance with USA.NET benefit USA.NET and why did they select CATHAYONLINE as a partner?
They researched us as we did them, and in our face to face meetings, we believe they were impressed by our business plan and decided that CATHAYONLINE has an excellent opportunity to make strong inroads into the Chinese e-mail and advanced messaging service market. Obviously this means more revenues for them and a toe-hold in a dynamically growing country.
What is the significance of the acquisition of TorchMail.com? Tell us about them.
TorchMail provides us the branded name "Torch", the name of the technology initiative within China, and gives us a strong and immediate inroad for marketing e-mail and advanced messaging within the People's Republic of China. They came to us with the concept, having identified the need for a web based e-mail and messaging service in China. They were particularly excited by the opportunity to develop this service in the language of the Chinese people. If we look at the micro picture, the city of Chengdu, with its 9.9 M people, means a potential of 1 million internet users within the next 4 years (based upon there being 450,000 researchers, 200,000 university students in addition to corporations, government offices and private individuals). There are only 1.8 million phone lines, including those used by offices and facsimile machines, 1 million cellular phones and several hundred thousand pagers. The macro picture across the People's Republic of China is not that different. Thus, it was seen that the Internet would be competing with other equipment for the telephone lines. However, with USA.NET's advanced web-based messaging and TorchMail we have created a way to make the Internet compliment other methods of communication. That we feel is a big plus.
Compared to competitors in your niche, can you offer any insight into what the current fair market value of CATHAYONLINE is and why?
Our job isn't to guess the value of the stock but to create value for the investors and let them decide where it should be priced.
That value, at the moment, is based on three areas:
Web-based email and advanced messaging services;
Internet Service Providers;
Lottery ticket sales.
As to the first, web based e-mail and advanced messaging services, there are few companies involved in this field and we believe that USA.NET's products to be superior to others that exist.
Addressing point #2, we feel we have acquired a very high quality ISP in Sichuan Torch, with 28 highly trained personnel, headed by President, Mr. Owen Li, who holds a Master of Science in Computer Science from the University of British Columbia, Canada, and nearly 20 years of technical and managerial experience in the telecommunications industry. Sichuan Torch has enacted a marketing strategy that will allow The Company to offer a multitude of value-added services never before seen in the province, as already discussed. The Company will expand existing operations within Chengdu city and into the province's 12 additional major municipalities as well.
We have projected that the Company will acquire approximately 50 operational Lottery Kiosks in the next six months, which, when fully operational, are expected to generate in excess of US $450,000 net annualized income (Earning Before Interest Taxes & Depreciation - EBITDA).
The second phase of the Company's plan calls for the acquisitions of 150 additional operating Lottery Kiosks in the second half of the Company's fiscal year. When this phase is completed, the total annualized net income (EBITDA) is projected between US $1.75 million and US $2.25 million.
We believe that building upon each of these areas will help in enhancing shareholder value.
Tell us the risks and rewards of investing in China, and how you plan on maximizing the reward and minimizing the risks?
The risks are numerous, from political and economic, to currency and competition. We do feel we understand how to operate in this volatile environment pretty well however. Some of the key factors in mitigating many of the risks is to develop a highly qualified team and to studiously work with partners in China, developing strong relationships and working with one's competition. The rewards? 1.3 billion people says it all.
Strategis Group and BDA China estimates that Internet users in
China will grow 319% this year to 6.7M and reach 33M users in 2003. But isn't China still a poor country where revenues from email services and particularly from E-Commerce will grow slowly?
China's standard of living has grown quite steadily in the past few years, and the Chinese government has shown a commitment to advancing technology. They have also shown a reasonable desire to open up their economy to foreign investment as well. Many companies, including Dell looked at the potential a few years ago, and decided to make a significant commitment to China. Remember, with a population of 1.3 Billion people, 33 million Internet users are only the beginning. The key word is "Potential", and we feel it is the right place to be.
You mention Dell, what is the significance of Dell's entry in China a couple years ago?
Dell sees the growth in the technology sector in the People's Republic of China, and with their focus on sales via the Internet, this seems to validate our belief in the importance of the Internet in China
When will you be a reporting and what is the SEC deadline for you? Your name change from KYOM to CATHAYONLINE has me confused. Please update us on where you are.
"Securities quoted on the OTC/BB as of January 4, 1999 will be phased into compliance with the new Eligibility Requirement based upon the following schedule. Please be advised that we will use the issue symbol as it appeared in the OTC/BB quotation system on January 4, 1999 to determine where a particular issue falls in the schedule. Subsequent symbol changes will not be considered in determining an issuer's phase-in date. This schedule is subject to change at the discretion of the NASD."
According to this we have until the 1st of January 2000 to meet the requirements. The Company's fiscal year end was June 30th and our audit is currently underway.
Do you plan on needing additional financing to fund your growth?
CATHAYONLINE will seek appropriate financings in the best interests of the Company in order to expand operations and enhance growth. The bottom line is enhancing the value of the company and shareholder value.
What are your goals to get onto NASDAQ and would you consider a reverse split to do so, or do you believe your stock reach the $4.00 qualification level based on fundamentals? If you are not planning on a reverse split, then how will you increase the value of your stock?
Our goal is certainly to qualify for NASDAQ, our first step is becoming a reporting company and we have no plans to do a reverse split. We hope that our investor base grows dramatically as we continue making progress in all of our market niches. Real revenues in the Kiosk sector are not that far off, but in the meantime, we plan on doing much more to increase awareness of CATHAYONLINE in the investment community. We have recently completed a successful brokerage tour and plan next on increasing awareness via publications and trade journals. Furthermore, some Micro-Cap mutual funds have expressed interest in CATHAYONLINE.
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