**EFGO** President Message out:
To all of our shareholders, and stakeholders,
I would like to take the time to review and update where we are as a Company, and provide a big picture perspective on our business development strategies and achievements. My last update was in early February, and it seems like light years ago. We have continued our efforts at diversification, and identified new markets we believe have a strong potential to grow our top-line revenue. We have acquired two financial services companies, and made significant inroads into expanding our international markets – particularly China.
Corporate News:
There is a lot of big news on the corporate affairs front. In addition to our busy acquisition activity, we are very excited about the upcoming categorizations of issuers trading on the Pink Sheets. Listed companies will now be categorized by the quality of the public disclosure of activities to the marketplace. As we have previously announced, we have submitted or are in the process of submitting all of the required information to qualify as a ‘Pink Checkmark’ company – the highest level available to Companies that do not meet the very strict NASDAQ Capital Market requirements and stock price requirements.
Pink Checkmark Listing:
As noted by Pink Sheets; disclosure requirements are stringent. A Pink Checkmark Company must either be registered with the SEC pursuant to 12(g) of the Exchange Act and current in all electronic filings posted on the SEC’s EDGAR system, OR if not registered with the SEC, must meet Pink Sheets Guidelines for Providing Adequate Current Information, confirmed by a quarterly letter from an attorney, all of which must be posted on the Pink Sheets News Service and displayed on pinksheets.com. Disclosure is deemed to be current if it is posted within 120 days of the fiscal year ended (annual reports) and within 60 days of the quarter ended (quarterly reports) and interim material events should be disclosed on a timely basis.
We view this as a watershed event for both the Pink Sheets and our Company. The Pink Sheets have aggressively been reinforcing disclosure requirements to provide greater credibility to the stocks traded on the Pink Sheets. We are excited about this significant new measure. We believe that investors will effectively be warned away from shell companies that have no real operations, and whose business prospects are completely reliant upon raising significant capital before any business operations can begin.We believe this categorization process will significantly differentiate Pink Checkmark companies, and provide greater assurance and confidence for Pink Sheets investors. As such, we anticipate that investment dollars will increasingly flow to higher tier companies, and provide greater credibility for investor awareness activities regarding these companies.Additionally, as most of our investors are aware, Esprit has been trading on an unsolicited bid basis. It is remarkable, therefore, that our stock has maintained excellent liquidity. This new categorization process will see us jump from an unsolicited bid basis to a Pink Checkmark company, a very significant difference in credibility for potential investors who have not followed the stock in the past.This is an excellent opportunity to broaden our shareholder base. As we believe we will start to see revenue generated from some of our new initiatives in the third and fourth quarter, we hope to see positive momentum in our valuation by the market.We will be releasing our second quarter results in the near future, and anticipate that we will be in the black for the second straight quarter. We do not anticipate reporting significant increases in revenue from new operations as yet, but we believe we are on track in terms of our previous guidance that these new revenues will start to come on-stream in the third and fourth quarter of this year.
Frankfurt Exchange: Our listing on the Frankfurt Exchange also merits our attention as a business measure designed to help broaden our shareholder base. We are currently in the process of putting together an investor awareness campaign in Germany to achieve this. There have been some misconceptions regarding a minimum trading price required for the stock to trade on the German Bourse. However, the reality is that there are no minimum stock price requirements, and we are ready to launch the campaign within the next few weeks to increase investor awareness of the fundamental strengths of our Company’s operations.
Acquisitions:
Esprit has been aggressive in identifying new opportunities for growth in line with our core competencies. This has led to two significant acquisitions in the past few months.
Esprit acquired Global Vision on April 16th, as it was an excellent fit into our core competencies of internet-enabled sub-prime financial and business solutions. We were specifically interested in its intellectual properties, processes and services which included Check 21 processing, electronic funds management and international transfer capabilities and pre-paid cards.
Esprit merged the electronic fund management systems of Global into our new AEFM division and in a strategic and a prudent move then sold Global Vision off as a shell company to private interests.
Importantly, Esprit retained a 23.67% interest in Global.
Subsequently, we were introduced to Robert Xu, founder of International Express Payment (Jiangxi) Corp. A June trip to China to conduct due diligence identified a number of excellent business opportunities that Esprit will pursue aggressively. Foremost was the acquisition of IexPay’s sister Company, Check 21 China, founded by Robert Xu and Peter He. This was very much in tune with our business model and a perfect fit for Esprit. Check 21 China’s focus is on rolling out ‘Check 21′ services to its client base of Chinese banks. This is a service that can be rolled out and begin delivering revenue in a relatively short time-frame. To date, a total of approximately 30 banks have expressed interest in ‘Check 21′ services.
‘Check 21′ service is particularly attractive for international financial transactions paid by U.S. denominated checks, and shortens the time frame required to clear these check from a typical 30-45 days to 3-4 business days.
Esprit decided to acquire Check 21 China, a transaction that was completed this past month. Our acquisition of Check 21 China is a huge accomplishment. We are very excited about the opportunity that this acquisition presents in terms of developing our business in China. The Check 21 business is just hitting a momentous growth phase in China and a number of other developing markets. We have an outstanding team working in this industry and foresee a very significant growth in our business.
In addition, while management felt that IexPay represented a compelling business opportunity, it was decided that we did not have the resources to acquire the Company and provide the funding necessary for it to grow to the next level. However, Esprit was able to arrange a reverse merger of IexPay into Global Vision Holding, Inc., which will be completed shortly. With this acquisition, not only was IexPay delivered into friendly hands but Esprit now can benefit from the upside business potential of IexPay.
On July 5th, Esprit provided a $250,000 debenture financing of GVHL. This initial bridge financing further cements our relationship and Esprit will be able to share expenses and resources with Global as both companies develop the respective businesses in China. This is a win-win for both companies. They share a very similar client base, and Robert Xu can continue to development business opportunities on behalf of both companies simultaneously. Negotiated cost sharing arrangements give Esprit use of two business offices (one outside Beijing and a second in Jiangxi province) with a staff of dedicated software engineers and a local office management capability. Travel expenses are also being shared between the two companies.
Importantly, the stock warrants attached to the debenture provide an upside opportunity to participate more fully in the company’s success in the longer term. We expect that there will be dilution of our position as Global raises the needed capital to develop operations and acquire a critical mass of Banking and Merchant clients on one hand, and a consumer base on the other. The stock warrants provide an avenue to increase our stake in Global under very favorable terms should business accomplishments merit conversion from debenture to equity.
Ongoing Operations:
In terms of ongoing operations, I am delighted to say that we are on track with almost all of our announcements made in the last few months.
PayDay Loan Operations:
Cash Now has shown steady and continuous growth. The Company is working on a couple of new business prospects that would make meaningful contributions to our sales revenue for the last quarter of the year. We caution that these are not ‘done deals’, and it’s not ‘done’ until the checks clear. We will keep shareholders advised with appropriate information as these opportunities develop.
The Cash Now Payday Loan software which we began testing from May 28th in Beta mode is now 80% complete. We expect to go live with the new platform towards the end of the third quarter this year and look forward to this upgrade. The new software will also allow us to add new language and currency modules without extensive reprogramming to the core system. This will help further our objectives of expanding into new international markets in line with our previous announcements.
Advanced Electronic Funds Management
Our Advanced Electronic Funds Management division is showing great promise. With the acquisition of Check 21 China, we have established a first mover advantage in the Chinese market. While Check 21 is being increasingly adopted in the United States, it is quite a new concept internationally.
There is very significant latent demand for this service and we have received an overwhelming response from Chinese banks for our service. Check 21 China will help revolutionize the way dollar-denominated cheques are processed and cleared. From the current 2-3 weeks of time frame for a typical U.S. denominated check to clear, Check 21 will accelerate the process tremendously, with funds being cleared within 2-3 days. With Robert Xu as our consultant, we expect to grow our business substantially in this market.
Check 21 China represents an opportunity for the company to deliver revenue for the latter part of the current year. This is a scalable business model that with revenue directly variable to as we continue to expand the customer base of participating banks and merchants, and other international markets.
We are now currently developing our website for Advanced Electronic Funds Management and expect to launch it in the third quarter.
Forex Division:
On the Foreign Exchange division, we are making steady progress. We have had some management changes recently. Due to health reasons, Richard Sciacchetano, head of our Forex division, has not been able to head the division on a full-time basis. He will however, continue as a consultant and an advisor in a reduced capacity as he continues to recuperate. In the meantime, Peter Presland has taken over the management of the Forex division in his stead, and we continue to move forward.
As recently announced, we have obtained acceptance as a member in the National Futures Association, the industry-wide, self-regulatory organization for the U.S. futures industry. It is the premier independent provider of efficient and innovative regulatory programs that safeguard the integrity of the derivatives markets. This is an important step forward for our Forex trading division.
We are also still on track to achieve our series 3 license in the near term. These accomplishments will significantly improve our scope of operations within the Forex market. Once we have our licence, we will be in a position to develop a wider range of operational activities and initiate a more aggressive marketing approach to drive the business forward.
Structured Debt Resolution:
This division will offer services that allow banks, financial institutions and other creditors to invite defaulted clients to negotiate a settlement online, in a neutral and non-confrontational manner, bypassing traditional collection calls and mail delivered notices of default. We have mapped out a staged development process for developing this division. Initially, much of the software capabilities will be built on our new PayDay loan platform. This will provide us with an entrée into the market.
We envision a second stage development process that will add considerable functionality to the software, and will be a major upgrade requiring a substantial commitment of development and marketing funds. We plan to be in a position to make a ‘go/no go’ decision by the year-end or early in the first quarter of 2008. This decision will be based on an assessment of our product portfolio and opportunity costs at the time.
Looking Forward:
Those who have been following our progress this year will recognize that we have been quick and aggressive to seize on opportunities that fit our core competencies, and we will continue to allocate funds based to the best potential ROI business opportunities for our investors.
China is a huge opportunity, and we are devoting a lot of time and attention to take full advantage of the window of opportunity that has been provided by Robert Xu and his team.
While we are focusing on consolidating our core business, we are not ignoring various other business opportunities which will further strengthen our base as a provider of internet-enabled financial and business solutions.
2007 has been shaping up to be a watershed year for EFGO. Our team is excited and pulling long hours to keep things on track. I have to thank them all for their continued hard work and dedication, as well as their belief in Esprit as we move forward to reach new business milestones along our path to becoming a much bigger company!
