NanoTech Entertainment Inc (NTEK)

[recinvestor]

My visit with NTEK at Amusement EXPO 2013.

This will be a comprehensive overview of my visit to NTEK’s booth and the conversations I had with several people from the company including David Foley Sr. Technologist, Philip Foley Sr. VP Media Division, David Swanson VP Operations, and Don Teske Sr. Sales Engineer and Sales Executive of Fun Company. (A side note, Jeffrey Foley CEO and David Foley are brothers, Philip Foley has no relation, just random that he has the same last name)

My purpose for visiting is because I am an investor in the company. My goal was to ask simple questions regarding basic company structure so I could understand what the company is doing and where they are going.

Anyone can say anything, so rather challenge someone on the validity of their statements when inquiring for information, I view behavior and listen to the tone of voice in how one responds to questions in order to make my own judgements. That said, everyone I spoke to seemed at ease and genuinely excited with the idea that they were speaking with an investor of their company. Investors are very important to them and they expressed more than once, sincere gratitude for stopping by their booth.

A quick greeting from David Foley:

So with that all said, below is my overview in layman’s terms. This is only one point of view based on how I perceived everything, so no haters please. Take this for what it's worth.

NTEK Company Structure
NTEK is divided into three categories with a total of 18 employees (from what David told me) ranging from CEO, finance, IR, programmers, creative, and production. The three categories are:
Media
Mobile
Gaming

Media
NTEK feels very strongly that the future of television is going to be IPTV based where people only pay for the content they want to view vs. satellite television where people buy an overall package.

Currently, NTEK has 7 channels licensed with Roku, meaning you can find those 7 channels in the Roku menu and decide to purchase and view that content. NTEK gets paid by way of ad revenue and licensing fees.

NTEK has 3 channels in the works that they will produce the original content for. They are Clubben TV, Ambience Digital Environment, and Inside NanoTek. They were filming a clip for Inside NanoTek with Don Teske of Fun Company and Brian Williams, founding chairman of DNA Association ( http://www.dna-association.com/ ).

I asked about their association with Samsung if any…the answer I received is that they are a registered developer for Samsung, and they have also applied for Samsung’s Incubator Program which provides funding. There was mention of a meeting next week with Samsung. The idea is to try and get nanoflix technology built INTO Samsung’s TV’s.

Mobile
Philip Foley is heading up the mobile division. This side of the company will focus on mobile app development. They are currently working on an app that could be popular among the masses. This side of the company is quiet now, but I would expect to hear more in the coming months.

Gaming
To date, gaming has been focused on redemption type games that you would find in arcades, bars, amusement parks, etc. Redemption type games are those that spit out tickets that one can exchange for prizes.

Pinball has been the main game NTEK has focused on. The new games Jumper and Masher are forthcoming. NTEK provides the programmed electronics, but has another company build the actual cabinets that enclose the electronics. That is where Don Teske of Fun Company comes in. His company is based out of Wisconsin. I spoke to Don who seemed like a good Midwest fellow. Fun Company has done the cabinets for NTEK in the past, but it sounds like from the most recent PR, that they now have a contract and can work more efficiently together with an official established agreement. Fun Company will build all the cabinets for NTEK across North America.

Here are two short video clips of the new Jumper game in action:

As you can see, Jumper is kind of like a game of chicken.

The contract with Electrocoin Sale LTD. is a 3 year contract. This is for Jumper, Masher, and 2 undisclosed games. Electrocoin must order a certain amount per quarter to keep exclusivity rights for the European market. That is all I could get regarding any contract details which are pretty generic and standard.

The gaming regulations in Europe are different than the US. Therefore, the games can be programmed a little differently for the European market. For example, there was mention of “skill with prize” redemption games. In the UK, prizes can be paid in cash something like .40 to the $1. So this lead me to ask whether there were plans to do anything with slot machines. For now, the answer to that was no, simply because it is extremely difficult to get a contract to place machines in a casino due to extreme regulations.

Going back to Pinball…there are about 50 different pinball game varieties for gaming stations like Xbox and Playstation. The problem with using a normal joystick kind of controller is that one does not get the same experience vs. playing an actual pinball machine where you can lift and shake a real pinball machine. Enter NTEK – the new pinball game controller was designed with the idea that it could be bundled in with the appropriate pinball games. The new controller that NTEK has allows the user to have the experience of pulling back the spring loaded blaster that sends the pinball into play, be able to tilt the controller forward as if one was lifting or tilting a real pinball machine, and shake the controller side to side like one would do at a real pinball machine. So basically the controller NTEK designed for Xbox and Playstation pinball games will give the user a much more realistic experience than a standard joystick controller. See the ibox for pictures of this new controller.

Financials
Up until 2011, NTEK was a fully audited current OTCBB stock. Due to the cost of about $50K per audited quarter, they stopped doing audited financials to save money. They plan on putting out audited financials again when the company becomes profitable. The good thing is they are still OTC current. I was told the 1st quarter report will be released on April 15th.

I explained to David Foley that all investors want to see audited financials, which he fully understands is the ultimate “go ahead and invest with confidence signal”, that will bring further transparency and value to shareholders and growth in PPS. It is NTEK’s goal to have audited financials (going back to 2011 - present) as they become a profitable company.

Revenues from electronics are a one-time fee. Approximately $1,000 profit is made from the sale of the electronics for the redemption games. I spoke to David Swanson VP of Operations for NTEK. He is responsible for working with suppliers for the materials that NTEK uses to build the electronics. This is done mostly with the Asian market.

It is my belief that revenues for NTEK are most promising in the area of their Mobile and Media divisions through licensing fees and advertising revenue. I did not ask for specific numbers when it came to licensing fees and ad revenue.

Final comments
Overall, everyone was very friendly. I didn’t feel like they were hustling me in any way. They seemed genuinely excited with what they are doing, and equally excited to have the opportunity to meet the people who invest in, and support their company. They understand without the investors, there is no NTEK, and they were grateful.

It was a rare opportunity to meet face to face with the people behind one of my investments and I am happy to be a current shareholder.
Rec