***MUST READ*** GOOD NEWS
12.03.07Forward Guidance For Q1 Of 2008Posted in Announcements at 3:28 am by mel
Mr. Garr Winters, Esprit’s outgoing CEO, announced “I’d like to take the opportunity to share our vision moving forward, regarding the Company’s North American as well as China based operations.As you can imagine, the last 6 months have been extremely busy for us. We’ve just returned from China this past weekend, and this is our first opportunity to lay out some of the plans following the recently announced merger with Hebei Haorizi Company Ltd. (Haorizi, or Good Life).
The merger with Haorizi represents an incredible opportunity for rapid and sustained growth for our shareholders. CEO Dongmei Jia has done a remarkable job building a retail chain of 1,600 stores within Hebei Province in less than a decade. Working on a franchise retail business model, Haorizi has developed a very sophisticated web-enabled operational environment.
We’d like to put the Haorizi chain store success into context of the overall Chinese economy as well as political policies for economic development”.
Overview of Haorizi:
Nearly half of the Chinese labour force works in the agricultural sector. However, agriculture represents only 12.5% of the GDP (Gross Domestic Product). Outside of the major cities such as Beijing and Shanghai, retail shopping concepts that we take for granted are very new to China.
In 1998, Ms. Dongmei Jia and other investors launched Haorizi, in conjunction with the Hebei Province Supply and Market Association. Haorizi has thrived well beyond expectations, and has become an award winning example of the type of retail concept that the Government is working very hard to encourage.
In February 2005, The Ministry of Commerce of the People’s Republic of China (MOFCOM) launched the Universal Rural Retailing Network Project to gradually push ahead the establishment of chain store businesses across the country. Economic research studies have shown that the replacement of traditional family shops with chain stores brings significant economic benefits to local economies.
In terms of products and services, their is a similar political mandate to provide improved access to key infrastructure services such as mail; Internet access; banking services etc.
This alignment of Haorizi’s corporate objectives with key economic development policies provides tremendous positive momentum to continue rapid expansion of the chain into neighbouring Provinces as Haorizi looks for Geographic expansion outside of the Hebei Province.
Haorizi has established a business model that is designed to support very rapid expansion of their operations. Working on a franchise system, the Company is freed from the daily operational issues of running corporately owned stores. Haorizi provides franchisees with a complete turnkey retail system, and represents these franchisees as a buying group to generate significant economies of scale on the supply side of retail operations.
On the supply side, Haorizi is using advanced web-enabled purchasing systems to optimize logistics, and push efficiencies of modern IT capabilities down the line on both the supply side and retail side of the business. These modern practices reduce costs and improve operational efficiencies across the board.
In short, Haorizi’s success is based on retail best practices stemming from modern electronic management of retail operations. Its success is based on its Information Technologies and supply side buying operations. As the Company continues its expansion, it will build out more logistics centers to support expanded geographic operations.
Business Plans call for a total of 4,000 franchised stores (an increase of 250%) and a total of 8 logistics centers (up from 3) by the end of 2008. Within Hebei Province alone, the Company estimates market demand for another 6,600 stores.
It will also be expanding into new product and service areas that are in strong demand, and for which there is significant political desire to deploy more aggressively throughout China.
These corporate and political objectives are the reason that Haorizi saw an excellent fit with Esprit, and embraced the merger. Esprit has developed significant web-enabled business processes that can be adapted to Haorizi’s operations.
Additionally, Esprit has developed a number of products and services that will fit extremely well with Haorizi’s plans to expand its product and service capabilities through its vast network of retail stores. This includes the sophisticated online small loan (payday Loan) facility, ATM operations and Check 21 services among others
As we continue to move forward together, we will be making ongoing announcements regarding the technology transfers and utilization of different product and service areas, as well as the prioritization of their implementation.
Uplisting:
In order to execute the reverse merger with Haorizi, it was necessary to set up a Special Purpose Company (SPC), as previously announced, due to the Chinese regulatory environment. The regulations related to SPCs mandates that the Company can only begin trading as a Pink Sheet company, and preclude uplisting to an OTCBB or major exchange.
One of the final objectives for Esprit this year was to uplist to either a fully reporting Pink Sheet or OTCBB, based on results related to potential deals in China. With the merger with Haorizi management believes it is in the best interests of our shareholders to become a fully reporting Pink Sheet company.
To that extent, management has negotiated and signed a preliminary Letter of Intent with an existing fully reporting Pink Sheet Company to achieve this objective in as short and cost-effective manner as possible.
It is anticipated that this transaction will take the form of a ‘purchase of assets’ ideally for a combination of stock and cash. The intent is to complete this transaction before December 31st, in concert with the finalization of the paperwork for the merger with Haorizi. Current shareholders of EFGO and Haorizi would receive shares in the new Company “pari passu” in line with the previously disclosed parameters.
A new ticker symbol and name change to Good Life China will immediately follow the transaction.
It should be noted that the shares Haorizi receives will be restricted shares under Rule 144, and thus will not be part of the float in the open market.
If the merger and uplisting can be completed simultaneously, the transactions will be vastly simplified. Current EFGO shareholders will receive shares in the new Company on a pari-passu basis. Management will be providing ongoing updates on these developments as they become available.
One of the objectives of this approach is to minimize the number of days during which trading of EFGO is suspended due to ticker symbol and name changes.
Once the Company merges with the fully reporting entity, we will immediately apply for a name change to Good Life China and a new Ticker symbol.
It should be noted that Esprit considered using one of the IFGX division shell companies for this type of transaction. However, these shells are not currently trading, and have not been assigned ticker symbols. The time frame to complete the process to get them listed and trading is too long for this to be considered a viable option.
North American Operations:
At this time, the plan calls for the North American operations to continue on as a separate division. These operations will be monitored as profit centers, and on the assumption that they continue to operate profitably, the division will continue to roll out its expansion plans in line with previous announcements.
In the 1st quarter of 2008 EFGO plans to reposition the IFGX division to return it to a B2B sub prime lender and factoring business including invoice discounting. Although IFGX has provided us with great results in its short lifespan as a company broker, new legislation recently came into effect that limits the number of transactions that IFGX would be allowed to execute to a maximum of 2 per year, every other year.
Esprit will also be looking to sell off certain non performing assets such as our www.iefranchise.com portal the www.cashnext.com www.loanconsultant.com and various dormant domain names. Additionally, if the uplisting proceeds as desired, EFGO will becomes a shell company, and can also be sold to third parties.
It is the intention of EFGO management to use the proceeds from these asset dispositions to buy back shares of EFGO and retire them to treasury.
Company Valuation:
Although it is a little early in the game, some considerations regarding the Company valuation and market capitalization are in order.
With a current run rate of over $100 million USD, and the Company running well ahead of its original projections of $2.3 million USD, to which the net income from North America needs to be added, we feel confident that the market will view the stock as being significantly undervalued.
This is especially true if the Company comes anywhere near its projected growth rate to 4,000 store locations by the close of 2008.
We will be providing more guidance on the updated financial projections for the year as soon as possible.
Short or “Oversold” Positions:
There has been widespread speculation that there is a significant short position out on the stock. While it is impossible to prove on a definitive basis, it is our understanding that any short position, if it exists, will need to be covered before the stock begins trading under a new ticker symbol. The transfer agents will require a full accounting of all stocks held and certification of ownership prior to issuing stock under the new ticker symbol. Obviously, this will put substantial pressure on any holders who have profited by overselling the EFGO stock. If the short sellers do not cover their position, they will be facing a failure to deliver, and the very significant consequences that entails.
Forward Guidance from Haorizi:
We also wish to advise our shareholders that Goodlife China and Ms. Dongmai Jai will issue a forward guidance on the Goodlife China operation shortly and we will follow that up with a revenue guidance for both China and North American operations and an update on our up listing plans to become a fully reporting pink sheet company, together with updates on any new Corporate Governance and privacy policies.
Additional news and details will be posted as they become available at; www.goodlifechina.com (English investor relations site) and www.haorizi.com (Chinese corporate site).
