Roth Presentation Transcript 2/16/09
KEVIN DONOVAN
Thank you very much. Well, good afternoon. My name is Kevin Donovan. As you had mentioned, the newly-appointed CEO as of two weeks for Electronic Game Card. Our ticker symbol is EGMI. We are – our acronym also for our company is EGC. This is my first public presentation as the CEO for EGC, so please bear with me. I appreciate your patience.
However, it is my great privilege to have this opportunity with EGC to lead this team and this effort with Lord Steinberg, the Chairman of EGC. My vast[?] network has been built for about 25 years in the areas of sports, entertainment, promotional marketing, in the world of the Olympics, and the aspects of marketing and global agencies. And so what I bring to this team, with Miss Anna Houssels, is the ability to take this network and bring it into a very, very small credit-card sized platform in terms of our gaming card platform. And the ability to extend this network into these areas is very exciting for me because of the technology.
So, on this particular slide you’ll notice in the lower right hand corner, Thomas the Tank. Thomas the Tank [Tank Engine, man!] is a new product for the company which is based on both the visual aspect of learning and also the audio aspect of learning in a credit-card-size format. And so children have the ability to listen and learn and interact with a very, very low-cost toy and game item for the market. And especially in these times, these economic times, this provides a category-buster for us in the industry.
So, an overview of EGC. Our initial core technology powers a hand-held game the size of a credit card, as I had mentioned, weighs less than half an ounce. The product is rich in functionality, it’s totally customizable, it can be skinned in graphics to meet any particular brand, distribution partner, and their look and feel. Its electronic software library currently totals 30 games but we’re growing up to 50 games.
The three key vertical markets that we’re focusing on. Number one is our core existing market of gaming. The second is the largest market share opportunity in terms of promotions. And then the third being in the aspect of education.
I, as well as Anna, Lord Steinberg, and our board members including Eugene Christiansen, a master in the gaming and gambling market for over 25 years, along with Lee Cole our previous CEO, our interim CEO. We have significant contacts in these three areas so we counterbalance and complement everyone.
Lee Cole and his team have done a tremendous job over the course of the last three years in turning this company around from bankruptcy to steady profitable growth over seven sequential quarters. So it is our job in the new management team is to continually grow it, build on the momentum, add the new areas, and be very vigilant in terms of our cost control and operational management of our new growth.
Here’s a quick snapshot of our company. Essentially we create, we manufacture, and we distribute recreational electronic software and related chip-based products. Lee Cole led this reorganization in 2006 and it took him only one year to bring the company to profitability. The latest news in terms of our executive team, Chairman Lord Leonard Steinberg, an industry leader of nearly fifty years with Stanley Leisure Plc. He recently sold it for close to $2 billion U.S. dollar, and he is an extremely wealthy, wise, intelligent, and great man to work with. His network in Europe is providing us already, even just in the last two weeks, with some amazing relationships at the very highest level in the gaming industry.
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We are currently in the phase of launching the American Indian relationship with Sovereign, which we recently announced. And it’s a five-year contract that pays us a guaranteed minimum total of $10.25 million. And 1 million in 2009. And why this becomes important, because of the Indian gaming market in terms of having the ability to have this essentially terminal [?] in your pocket and the ability to drive promotions to that property as well as their on-line activity for their loyal customer base. So we’re very excited about that relationship, and continually working with them to grow into new areas and new avenues to increase their traffic and volume.
We’re also moving our headquarters here to Orange County California. I live in Laguna Niguel. Laguna Niguel as well as Irvine California we feel is the Silicon Valley of Southern California. Great technology talents, great resources, great public companies here and a great overall atmosphere to grow the next generation of our organization.
As you can see by this slide that we feel internally that we’re personally undervalued as a company. But as you’ll learn through this presentation, as well as all of us in our management team are available after this conference to answer any questions that you have. Hopefully you’ll be able to judge and you’ll be able to help us grow with your recommendations.
So our company growth strategy. New areas. And I just want to highlight a few. The company has never ventured into the quick service restaurant category in terms of promotions. And you can only imagine what a very low-cost affordable item that provides both on the children’s side as well the educational side for points of driving additional points for other types of prize offerings within QSRs is an enormous opportunity for us. And we happen to be talking to one of the largest QSRs already even within our first two weeks of us being on board.
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We have new geographic locations throughout the world now with our network. In the U.S., which has been virtually untapped for Electronic Game Card over the past three years and since its inception. As well as in Eastern Europe, and Miss Houssels in Australia, and Southeast Asia. So we intend to grow in those markets now as new financial growth for us.
We also will use this device in terms of the loyalty membership rewards programs. And in this day and age in a depressed economy where consumers are starting to cash in their points, they also want more. So if you think about the hotel, the travel, the casino, American Express, even Jenny Craig and Weight Watchers. A great variety line-up of clients that for the most part we have the network and the ability with our technology to grow in terms of a convenience factor as a platform in their pockets to provide additional points, additional education, whether it’s in their purse or whether they’re sharing it with friends.
So to quickly review the current verticals. In Gaming. A very large market. Roughly half of the addressable market represents the opportunity in lottery alone out of the $577million. This segment represented a very small percentage of our business in 2008 and predominantly via the royalty we received from Sci Games. Significant growth is expected through 2009 via Sovereign Indian Gaming, which I had mentioned previously, and the guaranteed 1 million in first year royalty revenue.
Our Executive Chairman Lord Steinberg is actively working to leverage his global relationships. He maintains a perpetual Presidents role at Stanley Betting, which controls 1,500 betting parlors throughout East and Western Europe, and opportunities in Romania, Poland, Croatia. All of these are prime markets with large volume opportunities and distribution partners.
I would like to highlight briefly our meetings recently to kick off on February 1st when Anna and I were there with the Board and with Lord Steinberg in London. It happened to be the first day of the worst winter storm in London - you may have read about it here – in 18 years. But we had some phenomenal meetings that started off right away with that week and with Camelot. And Camelot controls the UK lottery, as well as they have their plans of extending the Camelot brand across the globe. This is their third term. They’re in their ten-year session now moving forward as of 2-1/2 weeks ago, and they also have an extension of another five years. So meeting with all of their top executives from the Chairman to the CEO, their marketing managers.
As well as we also met with Coral, the Gala Coral Group and their Chairman and marketing executives. They control casinos and betting shops and also bingo.
We met with Atari UK who was fascinated with the product and if you think about the origins of Atari – them starting the gaming business and the gaming factor. They were truly fascinated of how we can insert across six of their various verticals just within their brand alone for distribution.
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Promotions. Promotions vertical market currently represents the majority of our revenues to date. And I kind of started talking about where this market can go for us based on our laser-sharp focus and strategies with QSRs, in the sports industry from my previous network across all teams that are looking for a low-cost, high-value item within the stadiums as well as within collectability, as well as something to do that’s interactive to gain points and also gain additional prizes.
Within the sports, we will be addressing the NFL in New York with their head of technology and innovations for consumer products. Major League Baseball, the NBA, NASCAR to your own personalized driver and the points. All of these sports are statistics-driven, large following of fan-based driven, and they will be skinned in and around those teams as we draw from licenses and their distribution channels. As well as in the European soccer market, there are several teams that are trying to go out in the market, gain additional market share, and provide a value of extended play patterns. So we’re talking with those groups as well.
Within the area of education, the company is developing a range of proprietary educational, knowledge, and fun-based games, and including collectable character trading cards. So if you think about an item that is essentially a $10 price range and below, we really can be the category-buster of that category and still gaining a very high margin net profit on each card.
So let me give you an example. 4Kids Entertainment has one of the largest trading card games available on the market, called Chaotic. And Chaotic is sold at Wal-Mart, over 52 million units in a little bit more than a year. So the current game play pattern is you buy these cards with random number generators preprinted on the cards and you have a base game board. So our game can be inserted into those trading card packs, which actually would enhance the game play. So now you have a go-to-market strategy that accelerates much quicker of changing that game play for these young teens in that demo area and also providing the additional value of the game play and fun without adding another major cost to that game. And it still fits in the same size as those trading card packs, and evolving that industry in a much quicker way.
We have also great phone calls and conference calls with some of the largest companies in education today with bases of over 120,000 schools, book fairs and libraries, major publishing companies in the educational field, which also include the likes of having the #1 kids magazine in the U.S., printed 10 times a year. So please stay tuned for some of these upcoming – the evolutions of those announcements in the field of education as well as the Thomas the Tank card.
So the addressable markets. So within the addressable markets area, this gives a solid breakdown of our goals, where we’re going to go, how we’re going to reach them in five years time.
Our Board of Directors and our leadership team – we’re very, very proud of this team because they are well-seasoned veterans in all the key categories and they’re really a great group of people to work with.
On our revenue from 2006 to 2008 per quarter, you’ll definitely see the upward trend here and also on our earnings to the right. And we look towards sequential growth and increased percentage over what we’ve done in the last three years.
So in summary, Electronic Game Card has successfully turned around its operation, has a great future ahead as we look towards the new products, the new network, and the ability to accretively grow the company in terms of acquiring companies, technologies, and licensing of bringing them into this gaming platform.
So we’re around here. And I really appreciate your time and attention this afternoon. And I hope you have a great time at Roth Capital. And thank you very much.
