The Unabridged History of Winners and Losers

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Stockreporter begins coverage of Winners Internet Network Inc. (WINR) with a strong buy recommendation and a conservative year 2000 price target of $12 per share.
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Stockreporter > WINR > 01/31/2000
Stockreporter begins coverage of Winners Internet Network, Inc. (WINR) with a strong buy recommendation and a conservative year 2000 price target of $12 per share
COMPANY OVERVIEW
Winners Internet Network, Inc. (WINR - www.winr.net) is a profitable online financial processing company that provides safe, secure and confidential online financial transactions for its vendors. WINR develops and owns proprietary software and technology that enables this secure processing of financial data over the Internet and is linked to established banking structures. The Company posted $0.01 EPS in the first quarter, $0.03 EPS in the second quarter and $0.07 EPS for the first nine months of the year.

WINR was a pioneer in establishing the first ever Worldwide Gaming Payout Structure. The Company provides management and accounting services to guarantee accuracy of payouts and confidentiality to customers. This system is not limited to Internet gaming, but useful for all vendors – regardless of their product. It provides a database that will quickly adapt to all types of Internet commerce and strengthens WINR’s ability to fast pace itself for rapid corporate expansion with an emphasis on software development.

To this end, the Company is expanding beyond use of its software and processing system in Internet gaming payout structures for legally licensed Internet casinos and sports books. WINR is diversifying its business to develop e-commerce operations that will utilize its financial processing system and capitalize upon its established banking relationships. Stockreporter believes that this corporate shift towards the lucrative e-commerce sector will create substantial new revenue channels for Winners Internet Network and will therefore drive new interest in WINR stock, leading to strong profit opportunities for investors taking an early position in the Company’s shares.

A superior management team and prudent operating structure support the Company’s diversification strategy and ensure the profitable success of its expanding operations. Investors should note a number of factors related to Winners Internet Network’s current and future business focus that make WINR a dynamic investment opportunity over the short, medium and long term.

Winners Internet Network commenced operations in mid-December 1998 and currently utilizes its proprietary financial processing software to handle transaction processing for 10 casino websites, 7 sports books, 1 lottery, and 1 shopping mall
WINR has a joint venture with CyberLink Monetary Systems, EST for a new Internet Network, known as The Plus Network, which will use the Company’s software for transaction processing and will provide financial transaction e-commerce throughout the world in all major currencies
The Company has established affiliations with the Cyberlink Trust and Cyberlink Monetary Systems to provide Banking Trustee Management Services
Winners Internet Network has agreed to provide its proprietary software for Secure Internet Processing in coordination with the WINR/CMS foundation for a new Financial Internet Network, known as The SecureNet-Plus Network
WINR is the owner of the SecureNet Processing Company, which is based in Europe.
BUSINESS SUMMARY
WINR initially signed a 10-year renewable agreement with a prestigious company in Lichtenstein (known throughout the world as one of the most safe and confidential centers for financial management and banking. This Lichtenstein-based company has been providing software services to the international banking industry and the government community.

Since that time, Winners Internet Network has further developed this prototype to offer the most expanded financial processing package available. It is not only secure with the advanced security technology, but is now a member of the CyberLink Trust providing protected asset management with a Trust that has been licensed and in business since 1954. Winners Internet Network has been recognized for the ability of its system and the potential the system offers.

With the increase in the Internet gaming market, WINR recognized the need for the player to have confidentiality and the ability to have access to his account ledger to insure the accuracy of payment and to create a new standard for the industry. The focus will also be directed toward all Internet transactions, allowing potential customers to deposit their money where it is confidential, safe and protected. The new Winners Internet Debit Card will provide players with access to funds worldwide in over 115 countries and over 350,000 ATM machines.

At the present time in the rapidly growing Internet gaming industry, a uniform structure does not exist and the customer is literally at the mercy of an unstructured and insecure payout system. Players may also unknowingly face legal problems that could harm them if they violate the gaming laws of their jurisdiction. WINR has a staff of executives who have personally been involved in the management and operation of many casinos and sports books, including the development of software for Internet casinos and sportsbooks These executives realized the problems facing the industry and the players under the current operating systems, and therefore ensured the development of Winners Internet Network’s unique, secure and comprehensive solutions.

There have been gaps in both credibility and integrity within the Internet gaming industry, and WINR is offering a structured system to solve these problems. The Company has been recognized in various publications to be the much needed "Standard for the Industry." It has also been stated that the system will establish the only legal and foolproof payout structure, and should add "light years to players’ confidence in casino gaming." It has further been quoted that Winners Internet Network will be giving a site respectability with "The Winners Seal of Assurance."

PRODUCT OFFERING

Winners Secure Online Financial Processing System

Global Gaming Link Systems, Inc. (GGLS), a Liechtenstein company, developed the initial test prototype software that established an initial database for Internet financial transactions. In 1997, Davki Agency signed an exclusive 10-year agreement with GGLS for the rights to use this test proprietary software. In 1998, Winners Internet secured exclusive use of this technology and further developed the software from its initial test stage to the completed and functioning system that the Company offers today – Winners Secure Online Financial Processing System. This software only utilizes upgraded technology that was exclusively developed by Winners Internet. The previous test software is not a functioning component of the technical and processing software technology, which is currently known as the Winners Processing System.

Winners Processing System provides a comprehensive system for the management of financial accounts, accounting services and financial transactions for Internet commerce. The system allows an Internet transaction to be completed totally on the Internet without requiring the transaction to be processed through non-Internet banks. The Winners Processing System relies on proprietary security protocols, and WINR has purchased encryption software to maintain the integrity of the transactions.

The system allows a vendor to receive transactions from customers by Visa, Master Card, American Express, Western Union, bank transfers and checks. It also has the capability to identify stolen credit cards, process transactions in 12 major currencies and allows the vendor to convert transactions into other currencies. The Company accepts financial transactions from 16 countries and its Winners Processing System accepts the U.S. dollar, Canadian dollar, British pound, French franc, Swiss franc, Austrian schilling, German Deutsche mark, Italian lira, Dutch guilder, Japanese yen, Belgian franc and Australian dollar.

CyberLink Monetary System

CyberLink Monetary System completes the processing of Internet transactions using WINR’s Winners Processing System. The CyberLink Monetary System is a data processing center based in Vaduz, Liechtenstein and is the entity that provides the link between customers, products and services, and licensed banking. The CyberLink Monetary System is managed by Intertreuhand Aktiengesellschaft with DDr. Reinhard Proksch serving as managing director on their behalf. DDr. Proksch, a Fullbright Scholar, holds dual doctorates in law and information systems.

Winners Internet became a member of the CyberLink Monetary System in July 1998 when CyberLink Monetary Systems agreed to exclusively license Winners Internet as the sole provider of Internet gaming for its data processing operations. The Company’s Winners Processing System interfaces with the CyberLink Monetary System's data processing. The financial transactions processed by the CyberLink Monetary System are then interfaced with the bank accounts managed by the CyberLink Monetary System.

The financial structure and established links WINR has forged with foreign banks through the CyberLink Monetary System are a material aspect of the Company’s operations.

Global Gaming Link System

WINR’s Winners Processing System and the CyberLink Monetary System provide the technology and financial transaction structure for the Company’s Gaming System, which provides a structure that ensures compliance with all existing gaming laws, an audit mechanism for the host governments and players and a method for a player's funds to be processed through the CyberLink Monetary System. Each casino or sportsbook must first apply for a license with Winners Internet Network, which then recommends the licensee as a member to the CyberLink Monetary System.

The acceptance of each license remains with the CyberLink Monetary System, which is not required to accept all applications. All licenses that have been submitted by Winners Internet Network to the CyberLink Monetary System up to the present time have been approved. As of December 1, 1999 there were 9 casinos, 7 sportsbooks, 1 card room, 1 lottery and 1 raffle that are licensed with WINR and that have been approved by CyberLink Monetary Systems.

WINR’s Gaming System provides credibility, uniformity and legality to Internet gaming. By using its Gaming System, the Company enables winnings from an Internet gaming site to be disbursed daily – with the player receiving immediate payment that is redeemable at a local bank since the funds are in that jurisdiction’s currency.

This feature enables the Company’s Gaming System to eliminate the lengthy process that is currently the status quo when an Internet player goes to an Internet gaming site and enters a charge card number or wires funds to the site operator. If the player wins, he must wait for the casino to send him a check, usually from a foreign jurisdiction. Then when he deposits the check in his own account, the player must generally wait 7 to 10 days for the check to be processed. Meanwhile, the casino may wait 30 to 45 days before the player cashes the check.

Once a casino becomes licensed with WINR, the Company requires the casino to use the Gaming System for all transactions. This system not only processes all incoming and outgoing transmissions, but also includes an entire accounting of the succession of each entry that supplies both the casino and the player with a record of winnings and losses. The player can access a separate accounting, which provides account information for all casinos that he has played that are using WINR’s Gaming System. This also provides a means for the player to insure that the casino is maintaining records.

The Gaming System uses the same method of payout for all of Winners Internet Network’s licensed Internet casinos, regardless of the host site location. Daily currency conversions are available, allowing players to be aware of the dollar or other currency rates for play and payment. The system is also programmed to monitor transactions to detect money laundering, violations of gaming laws and regulations - and it further prevents payouts to a player located in any jurisdiction in which Internet gaming is illegal.

PRODUCT DEVELOPMENT

In July 1998, CyberLink Monetary System began the development of the CMS Debit Card. WINR anticipates that CyberLink Monetary System will provide the CMS Debit Card for use in the Company’s Gaming System and other e-commerce operations. This card will function similar to other bank cards, allowing the user to conduct financial transactions on the Internet. Winners Internet Network intends to provide a means for complete accounting of all transactions for either its Internet gaming or other e-commerce transactions.

In February 1999, WINR entered into a licensing agreement with iChargeit, located in Huntington Beach, California. iChargeit intends to create global shopping cybermalls and has agreed that Winners Internet Network will have the exclusive right to process charge card activity for its cybermalls. The Company anticipates that iChargeit will provide a means for merchants to open an Internet storefront using the iChargeit Global Storesonline suite of services. Merchants will open a debit account with the CyberLink Monetary System and then be able to receive payments for their store’s e-sales in the currency of their choice and also able to accept payments in other currencies through the CMS Debit Card, once launched.

iChargeit completed Phase I of its development plan when it established the iChargeit Global Storesonline website in March 1999. WINR is currently in the process of opening an Internet portal between Winners Internet Network and iChargeit, which will allow the Company to process the financial transactions for Shopping Downtown and a yet unnamed online auction site.

DISTRIBUTION

Winners Internet Network markets its services and products through software licensing agreements with distributors and casinos and sports books. The Company currently has four software license agreements and two distributor agreements.

WINR’s license agreement allows the licensee the non-exclusive right to process data by using the Company’s software and also allows the licensee the right to load, use and copy the software. The license may allow single or multiple processor, single or multiple site or a national license that is a licensed domicile. The licensing agreement requires that the licensee not have a criminal record, that the software be regarded as secret and confidential, and that it shall remain in the licensee's effective control - the licensee is also required to sign a confidentiality agreement. The license fee is a one-time fee of $50,000 with a yearly renewal fee for a license at $20,000 for maintenance of the license, which includes all upgrades and/or new versions of Winners Internet Network’s software to meet industry technical and graphic advances.

The Company offers two types of programs to its licensees: the full program and the wager-in-only program. The full program assesses a 5.5% fee for processing-in, which is the transfer of money from a player's debit account to the licensee's gaming site. The full program also includes a 2.5% fee or a $5.00 fee for withdrawals from the licensee's gaming site back to the player's debit account, including payouts to winners. The wager-in-only program assesses a 6.5% fee for the transfer of money from a player's debit account to the licensee's gaming site. During 1999, WINR generated $1,744,878 in revenues from the processing fees for its licensing agreements.

Winners Internet Network presently has two software distributor agreements that grant the distributor the right to distribute the Gaming System in a specific territory. The Company must approve all licenses and the distributor agrees to promote WINR’s product and good reputation. The distributor is not the Company’s agent and the license cannot be assigned. The commission structure is 25% of the paid and collected licensing fees and net processing fees.

WINR’s two distributors own the territorial marketing rights for the Company’s software license in Australia, New Zealand and the Caribbean. In December 1998, Vaudeville Holding, Inc. became a licensed distributor with the rights to sell the Gaming System in the Caribbean, encompassing Antigua-Barbuda, Aruba, the Bahamas, Belize, Costa Rica, Dominica, Dominican Republic, Granada and St. Kitts. Vaudeville Holdings began its second year of online processing with Winners Internet Network and currently manages seven gaming websites. In December 1998, the Company entered into a software distributor's licensing agreement with Kenneth Hense. This agreement granted Mr. Hense the exclusive right to sell WINR’s Gaming System in Australia and New Zealand.

SUPPLIERS

Winners Internet Network relies on four suppliers for computer equipment and training. Computerhaus Gaechter, located in Feldkirch, Austria, supplied 74.7% of the Company’s computer equipment in fiscal 1998. Data Consultants, located in St. Augustine, Florida, supplied an additional 14.6% of such equipment and CompUSA, located in Jacksonville, Florida, supplied 6%. Secure It 5550, located in Norcross, Georgia, supplied computer secure systems representing 4.6% of WINR’s computer equipment.

MANAGEMENT

David C. Skinner, Jr, president, chief executive officer, treasurer and director, previously managed Skinner, Varney & Associates, a tax and business consulting firm. His background also includes work with Grand Holiday Casino of Aruba, where he managed the payout structure for an international sportsbook. Mr. Skinner also worked at the video gaming device manufacturer Enterprise Distributors, Inc. and served as president of Caribbean Palace, Inc. (Club Casablanca) of Myrtle Beach, South Carolina.

Charles E. Scott, vice president and chief technical officer, began his career as the office administrator at Skinner, Varney & Associates. He was also formerly with Telephone Information System Services in Curacao, where Mr. Scott designed and implemented secure Internet and intranet access to multiple sportsbooks. He received a bachelor’s degree in computer information systems from Florida State University.

Ronald Oehri, director, is chief executive officer of Quality Net AG, which provides Internet marketing services. He is currently and has been the CEO of the ISP SupraNet AG and of the trading company Koro AG.

EARNINGS PROJECTIONS

Stockreporter estimates the following projections to be very realistic and achievable given WINR’s current operations and aggressive diversification strategy – as well as the explosive nature of the Internet gaming industry and the burgeoning demand for secure online financial transactions throughout the e-commerce marketplace.

Revenues:
Year 2000: $18 million
Year 2001: $25 million
Year 2002: $35 million
Net Income:

Year 2000: $4.5 million
Year 2001: $6.3 million
Year 2002: $8.8 million

Management estimates that WINR will have approximately 15 million shares outstanding for the year 2000 (8,608,034 restricted shares and 6,509,671 shares in the free float). Based on these forecasts, we project the following earnings per share.
Earnings Projection per Share:
Year 2000: $0.30
Year 2001: $0.42
Year 2002: $0.59

EVALUATION AND OUTLOOK
Following these projections and calculations, Stockreporter conservatively expects $0.30 earnings per share for the year 2000. We therefore set our share price target to $12 for the year 2000 at a PER of 40, which we believe is conservative since Winners Internet Network is leveraging its established banking relationships and proprietary online financial transaction software to expand its business operations beyond Internet gaming to the overall e-commerce industry and since comparable high-tech companies on Nasdaq (where we expect WINR to be listed in the next few months) are trading at an average PER of more than 70. So we believe WINR’s shares are drastically undervalued at a current price of $2.50 per share.

Share Price Targets:
Year 2000: $12
Year 2001: $16.80
Year 2002: $23.60

Rapid corporate growth momentum over the last few months at Winners Internet Network was clarified for investors with the Company’s November 1999 software processing update. This development was extremely exciting for WINR with the announcement that the Company was launching its processing of credit cards in U.S. dollars for the majority of its customers, and with the expectation of adding the Euro to Winners Internet Network’s credit card processing during 2000.
WINR also reported that it was adding a new withdrawal feature for its vendors, which are now able to send checks and wires, and also able to refund credit cards directly from their businesses to the customer through the Company’s system; the vendors will also be able to deposit the customer's money in his or her WINR account. This added versatility gives the vendor the opportunity to cover the costs of the transactions directly for their customers.

The WINR's Membership Program gives the customer added benefits in using the Company’s program. The Silver Membership is given after the customer has completed their first deposit. The Gold Membership is earned when the customer sends the WINR Security Information and signature to Winners Internet Network. Silver Membership benefits include depositing up to $500 per week and Gold Membership benefits include depositing more than $500 per week. WINR intends to add more features to the Membership Program throughout the year 2000.

Then in mid-December, WINR announced that it renewed the contract with its first operator – Vaudeville Holding, Inc., which began its second year of online processing with WINR. Vaudeville Holding includes the following websites: www.bookiescafe.com, www.activegaming.com, www.wagertv.com, www.nudegaming.com, www.rocknrollcasino.com, www.casinocafe.com, www.tvcasino.com. These sites have been an integral part of the WINR operation since the Company’s inception.

After filing its 10-SB with the Securities and Exchange Commission on December 27th, Winners Internet Network is now a fully reporting company.

Given all of the foregoing, Stockreporter concludes that WINR’s current stock price of $2.50per share represents a very attractive buying opportunity for investors looking to profit from the explosive Internet gaming and e-commerce financial transaction markets. Investors have the potential to achieve superior returns due to WINR’s expanded presence within the investment community, resulting from its December 1999 10-SB filing, and the Company’s aggressive diversification strategy to leverage its advanced software and established banking relationships in lucrative sectors throughout the e-commerce industry. These distinct and sustainable advantages are expected to result in tremendous and rapid stock price appreciation in both the near and long term. For all of these reasons, Stockreporter is confident that WINR’s shares will rapidly appreciate from today’s undervalued levels and will offer investors some of the greatest profit opportunities in the small-cap arena over the short, medium and long term.

For information concerning the compensation received for the preparation of this report and other disclosures, see
Important Disclaimer and Disclosure Statement