The Unabridged History of Winners and Losers

[Tatari Gami]

Global Penny Stocks Special Research Report: WINR.
August 26, 1997.
http://www.pennystock.com/winners.html
George T. Schlieben, Publisher SPECIAL RESEARCH REPORT
August 26, 1997
©1999. GLOBAL PENNY STOCKS, PO Box 372, Yardley PA 19067. Information contained herein is based on sources we believe to be reliable but we do not guarantee its accuracy. Prices and opinions concerning the composition of market sectors included in this report reflect the judgments as of this date and are subject to change without notice. This report is for information purposes only and is not intended as an offer to sell or a solicitation to buy securities. Global Penny Stocks or persons associated with it may own securities of the issue described herein and may make purchases or sales while this report is in circulation. The publisher, George Schlieben, received a fee of $3,500 from the company or its investor relations agency to write this report. The publisher WILL NOT take a postion in a recommended security featured in this report.

WINNERS INTERNET NETWORK, INC.

Price: (OTC: BB: WINR) $4.78 E.P.S.
Yearly Range: $4.78 - $3.00 1998E $.19
Shares Outstanding: 10.5 million 1999E $.31
Estimated Float: 1 million 2000E $.40
Market Cap: $50 million
Book Value Per Share: 17.8¢
Estimated Growth Rate: 50% - 100% BALANCE SHEET
Dividend: Nil Net Working Capital $187,000
Return on Equity: Nil Current Ratio 1.1/1
Marginable: Nil Long Term Liabilities $1,950,000
Average Daily Volume: 7,500 Shareholders Equity $187,000
Location: St. Augustine, FL Suitability: Speculation
Recommendation: BUY
One-Year Target: $8.00 to $10.00
Two-Year Target: $9.00 to $12.00

INVESTMENT CONCLUSION

Internet gaming is still in its embryonic state. There presently are over 55 internet casinos, and more are being added weekly. The current annual "take" on net gaming is pegged at around $100 million; a substantial sum, and, depending upon whom you ask, is estimated to reach $10 billion by year 2002. This is still a wide-open market, and, in many respects, is reminiscent of the old gaming frontier towns of the American Wild West. And, therein, has been net gaming's major drawback.

Not one of the 55 plus web gaming sites possess true creditability, because they do not have any payoff structure and cannot provide players with true security. Also, there is no true firewall that prevents a player from a "non-legal" country to gaining access to a web gaming site.

Today, a player goes to a web gaming site and enters a charge card number, or wires funds to the site operator. The player hopes, and perhaps prays, that he/she is dealing with a scrupulous and creditable net casino, but there are no guarantees! Doesn't give one the warm fuzzies, does it?

Soon, however, a company will be offering a solution to all these detriments. This company is WINNERS INTERNET NETWORK, INC. (OTC BULLETIN BOARD: WINR).

Headed by a CEO with extensive offshore gaming connections, Winners owns the exclusive rights to proprietary technology that offers to web gaming operators a new software and banking system ensuring creditability and that provides them with a payoff structure. This should revolutionize internet gaming, since it is expected that this system will become the standard for the industry. So readily should this technology be accepted by the web gaming industry that the company anticipates to grow 50% to 80% annually for the next five years.

Accordingly, we rate the shares of Winners Internet Network, Inc. a BUY with SPECULATION. It is rare when a company has the rights to technology that could revolutionize an entire industry, particularly one that promises to be as vast and worldwide as web gaming. Also, it is seldom when a company such as Winners, has the confidence to give multi-year projections on earnings. In the first year, the company anticipates 19¢ per share earnings; 31¢ in year two; 40¢ in year three; 66¢ in year four; and over $1.00 a share in the fifth year. These projections are based on the current activity in web gaming, and do not take into account the industry potential for extraordinary growth. Based on these projections, and the proprietary technology, we give the stock a one-year target of $8.00 to $10 and a two-year target of $9.00 to $12.

COMPANY BACKGROUND

Winners Internet Network, Inc. assumed its present identity on July 21, 1997. To effect public trading of its shares, the company was backed into a shell corporation previously named Comstock Empire International, Inc. Winners owns and controls The Davki Agency, Inc., which has an exclusive right to a software program that provides a means of payout for customers of Internet casinos and sportsbooks.

Although Winners is a recent start-up, it is a pioneer company, and, like a pioneer, stands to reap huge rewards, since it has no known competition. Because of this fact, the company has positioned itself to profit from most wager transactions made over the internet, and the market appears limitless.

Presently, there does not exist in the web gaming industry a uniform payoff structure to playing customers who enter video casinos, and, with few exceptions, web gaming sites have been unable to design and format a system that will ensure complete creditability. Web gaming is an exploding industry, but, without these glitches, it could become even more explosive. If a person wishes to gamble on the internet, they are given a menu of nearly 60 web gaming sites from which to choose. Most players have no real confidence in many of these sites because they have no real guarantees they will ever see their money again, or be paid their winnings, if any.

What all web gaming sites need is something akin to the Good Housekeeping Seal of Approval. Enter Winners, who, through their 100%-owned The Davki Agency, feels it has overcome the confidence gap by developing a Global Gaming Payout System which could revolutionize both the video casino and the international sportsbook method of payoff. This system, which will link to the international banking community, also will ensure compliance with all existing laws and provide an audit structure for governments. It also provides an audit function to guarantee governments receipt of their percentage of profits.

Winners feels it has set the stage to offer "the only secure payout system". The company has signed an exclusive 10-year agreement with Global Gaming Link Systems (GGLS), the designer of the proprietary software; this agreement is renewable. Winners developed the system concept and GGLS wrote the software. As part of the accord, GGLS will also represent Winners in establishing the worldwide system of gaming and sportsbook payoffs.

GGLS has contracted with a Liechtenstein company to provide the management and accounting services to guarantee not only the accuracy of payments, but confidentiality to the customers. It is believed that the method of payment cannot be duplicated. The Liechtenstein company has been able to provide the unique services of a highly regarded software company that provides services for many banking and government institutions.

The central bank, through which the gaming transactions will be made, is purported to be an extremely respected European financial institution. Its name, and that of the Liechtenstein company, must be kept confidential until final details of the payout systems are announced, which should be within the next several months.

Not only should the system establish the only legal and foolproof payout structure, it should also add light years to players confidence in casino gaming. A player will send his/her money to the bank, which guarantees its safety, and also guarantees that players will receive their winnings, if any. Players are issued pin numbers, and within the next six to nine months, the bank should also be offering debit cards, also a first for internet gaming. The bank will list on its web pages the web gaming sites that are enrolled in the Winners system. Players will be paid in the currency of their country.

The Winners system should also end the money laundering that is now rampant throughout web gaming. Safegaurds are already established to prevent this from continuing, and it is believed that the Winners system will be the model used throughout the net casino industry. Likewise, the company will ensure that all illegal betting will not be serviced. For instance, if it is illegal to gamble in New York City, no payouts will be made to Big Apple residents, thereby giving added creditability to offshore gaming operations.

Winners does not foresee major hurdles in selling their system to legitimate web gaming sites. Besides giving a site respectability with "The Winners Seal of Assurance" (or something like that), and providing a payout structure, the company's system will also save gaming operators significant amounts of overhead. No longer will operators need to employ legions of workers to cut thousands of checks weekly. The proprietary software will be able to interface through the existing software now being used by all internet casinos, so as to enable the casinos to be totally serviced for all payouts. Winners has been informed by hands-on operators that it is virtually impossible for a self-user to match the payout systems that Winners/GGLS offers.

So, how does Winners make money from this? Transaction fees. The company will receive 0.5% of al system transactions. For example, if there is a $100,000 payout, $500 goes to Winners. If total annual transactions amount to $10 billion, and that could be the case in five or six years, Winners would get $50 million.

Another potential source of revenue for Winners is through Master Licenses. Presently, there are three Master Licenses available - The Internet Casino, The Internet Sportsbook, and The Call-In Sportsbook. The Master License would allow the Licensee to sell to other casino/sportsbook operations and to participate in the transaction fees and a portion of the license renewal. The basic cost for a Master License is $110,000. The Sub-Licensee would acquire the yearly rights for the Master License at an annual fee of $40,000, or more, according to the size of the License. One half of the proceeds will be paid to GGLS and Winners will receive 25% of those proceeds. In addition, the Licensee will participate in the transaction fee based on a flat amount of a handle percentage.

A new age in internet gaming is about to unfold, and Winners is on the cutting edge of proprietary technology that will allow this infant industry to gain quick creditability. It should set the industry trend for payouts and attain worldwide acceptance.

Could Winners become the Microsoft of the gaming industry?

The company's address is Winners Internet Network, Inc., 15 Eight Street, St. Augustine, FL 32084. Phone: [phone] or 904-471-4242; fax: [phone].

COMPETITION/RISKS

Presently, there is no known competition to the proprietary software for which Winners has exclusive rights. However, there is always the possibility that another company (ies) could develop a superior or similar product, therefore, severely impeding the company's operations.

Changes in government regulations toward gaming could affect Winners' operations. United States citizens, as well as those in many other countries, are mostly barred from internet gaming. Should those offshore governments that now allow net gaming negatively alter their regulations toward the industry, the market for new customers would be greatly reduced and could severely change Winners revenue projections, growth, and operations.

Should the web gaming industry not utilize the Winners system, or the industry's response to the system not be accepted as anticipated, Winners may not be able to continue operations.

Should any of the companies with whom Winners has alliances falter or fail to perform their functions, Winners could be severely affected.

Since this is a start-up company, an investment in it must be considered highly speculative, and investors should be prepared to lose a portion, or all, of their investment.

For the company to fulfill its objectives, it may need more capital. This funding may have to be raised through secondary stock offerings, as has current funding been raised. As these new shares enter the market, they could cause downward pressure on stock price.

MANAGEMENT

David Skinner, Jr., Chairman, President, Treasurer, also manages Skinner, Varney & Assocs., a tax and business consulting firm. Since 1995, Mr. Skinner has also been affiliated with the Grand Holiday Casino of Aruba, where he set up and now monitors the payout structure for an the international Sportsbook; he is also responsible for financial transactions between customers and foreign banks. From 1995 to 1997, he was instrumental in the daily operations of Enterprise Distributors, Inc., a maker of video gaming devices. Since 1996, Mr. Skinner has also served as President of the publicly-traded Caribbean Palace, Inc. (Club Casablanca), of Myrtle Beach, SC, which offers fine dining, a sports lounge, and legalized gaming devices.

Sandra Varney, Vice President, Secretary. As with Mr. Skinner, she too is affiliated with Skinner, Varney & Associates and serves as its Executive Vice President, where her duties include liaison with international and regional master franchises, marketing, and overseeing day-to-day operations.

Kimberly Stein, Executive Vice President. From 1996 to the present, Ms. Stein has been Vice President of the Davki Agency, where she has been the liaison with the European market in the development of the proprietary software, and instrumental in establishing a network of financial institutions for implementing the business plan. She has held accounting and technology posts with H&M Air Charter and the Holiday Inn Corp.

Charles Scott, Technical Vice President. From 1995 to the present, Mr. Scott has been affiliated with Skinner & Associates. In this position, he has designed and implemented secure internet and intranet to multiple sportsbooks in Curacao. He has a B.S. in Computer Information Systems from Florida State University, and is quite knowledgeable about most computer systems and software applications.

Also, of note, is that David Skinner, Sr., the President's father, is serving as a consultant to Winners. Mr. Skinner was once the Assistant Chief of the IRS Criminal Division in Jacksonville, Florida.

INVESTMENT CASE AND OUTLOOK

Management Expertise. When investing in a start-up company, such as Winners, an investor first needs to closely scrutinize management, since management will assuredly make or break this sort of enterprise. Without sounding overly trite, Winners has winning management. Not only does management possess the backgrounds in gaming, accounting, and hi-tech that are paramount to achieving its goals, it also appears to be very well-connected to offshore gaming operations and European financial institutions. Within the next few months, the

Historical and Pro Forma Financial Information 1998E 1999E 2000E 2001E
Revenues 5,000,000 7,980,000 14,930,000 24,480,000
Direct Costs 2,960,000 4,670,000 10,720,000 17,470,000
NET INCOME (LOSS) 2,040,000 3,310,000 4,210,000 7,470,000
Net gain (loss) per share 0.19 .31 .40 .66
Average # of shares outstanding 10,500,000 10,500,000 10,500,000 10,500,000

company will reveal the complete details of its payout system. We also suspect that management has its ducks in order, and will announce its first customers at that time, or shortly thereafter.
Proprietary and Revolutionary Technology. The second thing investors should do when considering an investment in a start-up is to ask, "What makes this company unique? What sets it apart from the herd?" The proprietary software for which Winners has exclusive rights promises to revolutionize an entire industry by bringing to web casinos a payout structure, creditability, much-needed respectability, and player confidence. Presently, net gaming lacks all of these requisites, and, if the industry hopes to maximize its full potential, it will need the technology being offered by Winners and its allied companies.

Legitimacy For Net Gaming. This is a point that cannot be over-emphasized. When players currently enter the world of net gaming they feel as if they are sitting down in a saloon and playing poker with Doc Holiday and Wyatt Earp. By combining the technology for a payout structure along with the services of a highly regarded software company and a highly respected European financial institution, Winners should help to allay many of the apprehensions that players now have about net gaming.

Potential Governmental Backing. This could be a key factor in determining how expeditiously Winners markets its payout structure to the net gaming industry. Web gaming sites are primarily hosted by offshore governments that fret about money laundering, compliance with their laws, illegal betting, and receiving their tax revenues. The Winners systems should provide the needed safeguards to ease all these governmental concerns. Once the various governments recognize this, it is very possible they could enact regulations requiring gaming site operators to utilize the Winners system.

Cost Savings for Web Gaming Operators. Another determinant in selling the payout structure is the potentially immense cost savings for web gaming operators. A single operator may now need to employ up to ten or twenty people to cut thousands of checks weekly. With the Winners system, this enormous overhead could be eliminated, thereby, adding tens of thousands of dollars to a site operator's bottom line, and enhancing the marketability of the company's payout structure.

Revenue/Earnings Potential. Winners will garner 0.5% of all wagers made on web gaming sites that implement its payout structure. Although a half a percentage point at first seems minuscule, it can translate into millions of dollars in revenue and earnings for Winners, particularly when one considers that a single web gaming site can transact thousands of wagers daily with bets ranging from several hundred to several thousands of dollars. The box above shows what Winners is projecting from revenue and earnings for its first four years. The company anticipates a 300% increase in earnings during this period. Given the anticipated industry response to the Winners system, coupled with possible governmental backing and the support of a major banking institution, it is quite possible that the company has been modest in its projections.

The Microsoft of the Gaming Industry? Too often, a small company mentions Microsoft when describing itself. However, if Winners does indeed prove that they have the only legal and foolproof system for a payout structure for the web gaming industry, then the Microsoft analogy will be justified.

Is the stock's current price of almost $5.00 warranted, since it gives the company a market cap of $50 million? That question will be better answered once Winners announces the details of its system and reveals its initial customers. Taking into account the backgrounds of management, we are inclined to believe that Winners should make a fast start out of the gate. We give the company the benefit of the doubt and give its stock price a one-year target of $8.00 to $10; two-year target of $9.00 to $12.

For additional information, contact Columbia Financial Group at 888-301-6271.

This report prepared by:

George T. Schlieben, Publisher
Global Penny Stocks
Box 372
Yardley, PA, 19067
http://www.pennystock.com