Received this letter from the company ,, has some positive news in it.
(It was scanned so please excuse the OCR error)
6080 Greenwood Plaza Boulevard Greenwood Village, Co orado 801 1 1
February 3, 1998 Tel, (303) 771-2077
Fax (303) 771-4708
Joe Paku
New York, New York 1001 7
Tel:
Dear Mr. Paku:
Sub@ Racom ftstemoh Inc.
It was a pleasure speaking with you yesterday. Please find enclosed investor package and prospectus as discussed. Allow me to summarize Racom Systems, Inc below.
Racom is an emerging growth company with 1996 revenues of $2.4M and an historical annual growth rate ranging from 100-200%. The company designs, develops, manufactures and sells contactless smart cards, a new form of payment, access and data storage media used to replace cash, checks, tokens, and conventional identification. In simple terms, smart cards are computers used to store value (money) or data (ID, personal), embedded in portable media such as a credit card. Since smart cards significantly reduce transaction costs and increase customer convenience, banking associations such as Visa and MasterCard are ambitiously exploring ways to capture a percentage of the 15 billion daily retail transactions with smart cards. While Racom's primary market, the smart card market, is growing at a +50% annual growth rate, we estimate the potential growth of the contactless smart card to be much higher due to its broad application in other markets such as access control and industrial automation.
Using proprietary radio frequency and memory technology, Racom invented contactless "readAAfdte"i smart cards and has won automatic fare collection ("AFC") contracts in Los Angeles, Chicago, Manchester, Macau (China) and Winston-Salem to replace fare collection systems based on the use of cash, tickets and tokens. One year ago, Racom hired the former president of New York's mass transit authority to form a consortium which would provide a turn-key AFC solution to transportation properties nationwide. The consortium, 'Tran$cash", includes Perot Systems, General Signal's GFI and TTI, a well known back-end processing systems house. Today, Tran$cash is addressing opportunities in New York, Washington, Cleveland, Denver and the Bay Area. Over 4 billion transactions take place in the US public transit market representing a total potential revenue stream of $300 million for Racom.
Racom has over 100 customers and has shipped over 1,000 systems for a variety of markets, including recreation and leisure (swimming pools, sports facilities, gambling), industrial automation (waste management, process control), access control (facilities management, parking, bicycle locks), health care (portable database) and general retail
I.e., the ability to after data on the cetrd using a symmet&W r@e technology
payment systems'. By way of example, Racom contactless cards are the only payment media for 15,000 workers on the world's largest public works project, Hong Kong's new Chok Lap Kok airport. The cards are used to purchase food in cafeterias, beer in bars and goods in Circle K stores. No cash is allowed on the Airport Island .2
Another significant revenue source for Racom is licensing and royalties. Racom's ferroelectric memory technology is coveted by smart card microchip suppliers worldwide. Last year, Racom signed a contract with Fuiftsu, the world's second largest computer manufacturer, to use its technology in Fulitsu's smart cards. The year before, Racom signed a comparable deal with Rohm, a $3B Japanese semiconductor company. Similar contracts are expected with other major smart card microchip suppliers this year. Racom's goal is to license its technology to the majority smart card microchip suppliers, who are expected to deliver as many as 3.6B units annually by the year 2000. This output could represent as much as $1 OOM in annual revenues to Racom.
To sustain growth, Racom offered 1.5M Units (1 share/l warrant per warrant) over Nasdaq on March 12, 1997 through a consortium of regional underwriters including Spencer Edwards, Neidiger Tucker, Joseph Charles and WB McKee.
We are enthusiastic about 1998 and believe that Racom will play a significant role in this market. Please feel free to call me or Marty Cohen, Racom's investor relations consultant, should you have any questions. You may also wish to visit Racom's web site at www.racom.com.
Sincerely,
Corporate Relations
Enclosures: Investor Relations Package
C: Marty Cohen
PO Box 969
Rockwall, Texas 75087
Phone: 972-771-6783
Fax: 972-771-4541
More often referred to as "Electronic Purse' or 'Stored VEdue, that Is storing value In electronic form in your crodh rather ffm In your bank demand deposit, for coridlctng @ons.
For more lnfottnaton about Racom prodLiM and seraces, please see our web sfte at racom.com
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