I'd like to thank Paul, for taking time out of his weekend to answer the investor/shareholder questions submitted by members of the Spooz IHub board. Very much appreciated!! Allie
Allie,
I wish to express my sincere thanks through you to the Investor’s Hub board for submitting their questions in this fashion. It allows me to focus on priorities and makes me more effective during my hours at the office. The list of questions is rather lengthy, but it is much more efficient for me to respond in this way. Again, thanks to our loyal shareholders for their intelligent questions and their patience in waiting for my responses.
I will answer as many of the questions as I can without providing sensitive strategic information the company deems confidential. My answers appear below in red.
There are many things to come at Spooz and shortly you might fully understand the nature of the value we are bringing to our shareholders. I am hopeful that some of this value will soon be reflected in the price of Spooz stock.
Again, thank you all and keep the faith.
Best Regards,
Paul D. Strickland, Jr.
CEO
29 S. LaSalle St.
Suite 1250
Chicago, IL
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From: Allie
Sent: Saturday, October 27, 2007 3:11 AM
To: Paul Strickland
Subject: Ihub questions.
Hi Paul,
Below is a rather large list of questions from investors on the Ihub board.
Hopefully you'll have the time over the next few days to look them over and reply to as many of them, as possible.
Thank you very much for your time. Allie
wordplay:
Can Spooz delineate the terms of the Trungdale contract. Is the $17,500 a retainer fee plus cost for work product?
According to the terms of the contract with Trungale, they are to provide us with a long list of services. Almost all of these services are targeted marketing toward the retail market, not professional traders. Because we are not launching until January to the retail public, Trungale has been placed on hold and are not providing us any services at this time. Services are anticipated to begin again in December 2007 as we approach launch.
What work has Trungdale done for Spooz since August through October?
There have been no services rendered by Trungale during that period.
What is the cost for that work?
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Gbathat:
1. Is the later release of the auto spreader a strategic business move or is it due to development/testing delays?
It is anticipated that the autospreader will be ready for the market at the time provided at the ValueRich Expo. I believe that was May. There have been no development/testing delays as I don’t believe we ever mentioned the auto spreader until October 18 to the public. The fact is that while the Spooz Auto Spreader will not be ready for market until Q2 2008, SpoozToolz will allow someone with adequate skills to build one as a template. Spooz will provide a platform for the free exchange of templates to accomplish many trading functions such as, as an example, trading treasury swaps, or stock baskets against an index futures contract, or delta neutral options positions, etc. We anticipate having hundreds of templates, no thousands.
2. Are software demos still occurring at Spooz? If so, about how many traders come per week? Are most of them new, or are they attendees of previous demos looking to learn more?
We are still having demos at Spooz, but not necessarily to individual traders. Most of the recent demos have been to clearing providers and institutions. The attendees are looking to form strategic partnerships with Spooz for the distribution of SpoozToolz. Please don’t ask who they as I can not divulge this information for obvious reasons. We will put out joint press releases as deals are consummated.
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Diabolic:
When will the IPO or RTO happen? End of October? Does it depend on Kauderer now?
I am not at liberty to divulge the timing of this information, however, I can tell you that much more information will be available by the end of October. It is dependant upon a number of factors including The Kauderer Group, FINRA (formerly the NASD) and others. Check for press releases as they will be coming soon.
How much capital are you going to raise for 141 Capital?
The Kauderer group has told us that they will be raising $3 million.
What is the total market cap expected for 141 Capital?
This information will be made available in a Disclosure Statement which will be made available shortly to the public.
Will Spooz own more or less 40% of the total Outstanding Shares? aka 120 million shares of a total 250 million shares maybe?
This information will be made available in a Disclosure Statement which will be made available shortly to the public.
How much money is going to be invested into SWARM through 141 Capital (not research and development but trading capital)?
The $3 million coming into 141 Capital is both working and trading capital. It will be professionally managed in such a way as to generate a compliance track record. 141 may develop investment products for either or both the public and for institutions.
Will part of the profits be reinvested into this trading capital?
This has not been determined.
3. Can members of the IHub board be of more help the company in any way? i.e., with IR, etc.
Stay active, ask the right questions, continue to perform due diligence, and keep the quality up. You are all doing a fine job and I believe the board is a very valuable asset to Spooz and will be to 141.
4. If Spooz had a theme song, what would it be?*
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The Seeker:
Regarding the revenue projections $180 million which is much lower than unofficial $450 million dollars that was being floated around earlier. What was included in the make up of those numbers? Can you list what was included?
First, let me provide you with my definition of a revenue projection. A projection is merely a snapshot of management’s best guess of future events given the information available at a specific point in time. Are projections accurate? Some are. For example, analysts project quarterly revenues for large companies all the time. They consider historical company information, the economy, new technologies, fundamental changes in the industry, mergers and acquisitions, etc. The difference between analysts projecting for larger companies and Spooz’s projections is that much more information is available for large companies. They have a historical record. This affects accuracy tremendously. The truth is that we simply don’t know what the future will bring in terms of rapid market acceptance, acquisition of market share and product oriented revenue traction. We believe we have positioned Spooz in the best possible way, given the resources we have had available to us, to achieve extremely rapid growth, but there are so many unknown factors that projections can be relegated to the category of “best guess.” Again, we believe we have the right people, a disruptive product in a large growth market, and the resources to achieve very rapid growth, but despite our best efforts to identify and mitigate risks, there are many unknowns.
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Boca Bobby:
Is the share structure of the two companies impacted in any way? I mean I know we currently have about 1.5B shares. When listing our American company on a foreign exchange, is there a whole new share structure on the given exchange?
Are the revenues from are American company to be split between the shares listed on the American exchange with the shares listed on the foreign exchange? Or, are there just the 1.5B shares that get fought for over several different exchanges?
These matters are currently being managed by the Kauderer Group. We do not know the structure or the timing, however, we do know that The Kauderer Group has sent representatives to Europe, where they are at present, to gather information. As soon as we have a full explanation we will supply it to you.
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mtncabin:
What advantages does Spooz see in pursuing an International presence at this time given that this presence will require more resources than just a U.S. presence and the U.S. markets appear to support the attainment of the revenue projections presented at the EXPO?
We have associations in other places besides the U.S. These friends can make things happen in other markets. The more I learn about business the more the old adage, “its not what … its who,” makes sense at this level.
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MIKE FLETCHER:
How does 141 generate their revenue? Is their revenue generated by simply charging a fee to manage investor's money or does 141 actually realize 100% of trading profits as revenue?
141 Capital is intending to produce revenue in two ways. First, it will trade for its own account using SWARM and other systems already developed or to be developed. Very soon, the personnel acquired to operate trading and development at 141 will be revealed to all, but I can assure you that these people have great backgrounds. One must understand that 141 will continually develop proprietary trading systems because markets change and we would be foolish to base an effort of this magnitude on any single system, no matter how good it is. Remember that no system works under all market conditions, or at least, I have never seen one that does.
The second way 141 will make money is through managing accounts based upon a revenue sharing formula. There is a fundamental difference between the derivatives markets and the securities markets due to incentive regulations. When one manages a securities portfolio for a client, a Registered Investment Advisor (RIA) is not permitted to share in the profits from trading activity. This is why money managers charge a fee that is generally tied to a percentage of the assets under management. This fee can be charged monthly, quarterly, etc.
For derivatives, Commodity Trading Advisors (CTA) and Commodity Pool Operators can share in the profits and charge a management fee. 141 will constantly develop investment products and charge participants a management fee (average management fees are about 2% per annum, but some CTAs charge as much as 2% per quarter) and an incentive fee (average incentive fees are about 20% of new profits charged monthly or quarterly but I have seen these fees as high as 70% in some circumstances). Generally speaking, CTAs manage individual accounts that can be quite large. 141 intends manage some of these large accounts. CPOs manage a pool of funds where investment capital may be as little as $3,000.
IdiotFromFresno
1) What is the current share structure and will the company need to issue additional shares before product release?
I do not have access to the exact number this weekend as I am not writing this from my office, but we have a number of options available to us. Those who are have been exposed to creative financing techniques might understand how it may be possible for Spooz to self finance under certain conditions, however, that being said, there are generally only two ways to raise money (we won’t discuss hybrids here); 1) debt, and 2) equity. When you raise equity dollars, you pay stock for cash which has a duel affect, it is dilutionary and it adds value. The correct question to ask with respect to financing is, “Are the terms equitable for shareholders with respect to added value?” I hope this answers your question but I really can’t comment further at this time.
2) Can we get weekly updates (from 141) on the swarm trading progress? It would be nice to know how swarm has performed over the last few volatile weeks.
SWARM is not currently being traded because 141 is currently being set-up and staffed. As per compliance regulations, 141 Capital is required to report trading results and those published trading results are subject to audit by the National Futures Association, which means, they will be audited, especially considering the fact that 141 Capital will be a public company.
2) Will the 50 million funding have any negative impact on current investors?
What $50 million funding? If there were a $50 million funding I believe it would be very positive for investors but the true story is in the answer to your question 1.
goleafsgo
1. You mentioned one customer, can he elaborate on who or how many subscriptions this customer may or already has brought to the table.
Not at this time, it is a fluid, evolving situation.
2. In terms of shareholder expectations, is the remaining 2007 year going to be relatively quite or are there plans to make a number of PR's prior to 2008.
There will be additional news coming during the rest of 2007. The reason there has not been much of late is due to the formation and public listing of 141 Capital, Inc. Although 141 will be a totally separate company, with a separate management team and different geographic location, its formation has been time consuming. Rest assured, however, Spooz’s development team has been devoting 100% of its time to SpoozToolz and its attending modules.
Birdito:
Are you currently working on any other SWARM spin-offs? (i.e non-derivative uses)
No, thank you, we have our hands quite full at the moment.
How are things progressing with Fractalz3? When I spoke with Daryl last, he mentioned it wouldn't be ready for market until summer 2008; any new news in that regard?
We do have plans to release Fractalz3 as a SpoozToolz module in Q2 of 2008. There is not much remaining in terms of development for Fractalz3, however, it is not a priority for us at this time. SpoozToolz, SpoozChartz, the Custom Pricing Module and the Auto-spreader are at the top of the priority list.
You've been quoted on the IHUB board as having said "I could sell 4000 Stv2 licenses myself, with no marketing, next year". If that is the case, why the low-ball estimate at the expo.
Because investors who fund micro-cap companies totally disregard inflated projections and discount management’s projections.
Is there any chance that Spooz will turn a profit before June of next year (2008)?
Ahhhhhhhhh……but of course.
What new operating costs are you anticipating in the next year?
I don’t have those details, but in answer to your question, yes. Any growth stage company that is achieving its milestones has an ever increasing appitite for capital. The objective is manage it so that it produces more than it eats.
How many new staff are you planning to add?
I believe we will grow to 27 employees by end of 2008, but this is conditional on many, many unknown factors and assumptions. Again, these are projections.
Jcrom…
The website had stated for some time that STv2 was available to select professional trading firms. Now it no longer states that, but simply states STv2 will be available soon. But we have been hearing roughly the same thing for a couple years now. Was STv2 in fact tried by any trading firms other than SPOOZ? For several years now we shareholders have been lead to the foot of the mountain with fanfare and high hopes, only to have the cold water of more delays splashed on us. Is there any developmental schedule SPOOZ is adhering to, or is this just a shot in the dark? The brief interlude involving the development of SWARM and the subsequent formation of 141 is promising, but it seems STv2 has gone backward in the interim. When can we expect to see SpoozToolz commercially available to the trading public?
In January 2008, probably toward the end of the month.
Also, I noticed a few months back that SPOOZ filed another REGDEX. Can we expect equity financing in the near future and further dilution?
I believe this question has been answered, but again, Spooz has a number of options available to it regarding financing. I can say nothing further on this matter.
