From SCTN's investors page...
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Mar 03, 2011
FROM THE DESK OF CEO OF PHOENIX AND SCTN
Dear Phoenix/SCTN Shareholders
What is actually working now for the Phoenix/SCTN Companies-after over a year, we remain in the selection process with a major company that will deploy our technology; if and when chosen; which we believe will happen in the next few months. We continue to work with Total Venue Control to promote and enhance their products. We have several other products that we will bring to the table once the full base of the Airos development technology has been transferred to Phoenix that will include revenues from both scrip and non-profits. This will begin approximately within 45 to 60 days from that transfer.
The first two months of year 2011 have been very difficult for both the Phoenix and SCTN companies; however, that is all about to change by the transformation of Phoenix Company into a complete operating company with an ongoing development team that can be utilized to deploy the SCTN patented loyalty technology throughout North America. This quality operating system to deploy the SCTN patented loyalty technology has been the result of several years of development work accomplished by the Airos Group for the Phoenix Company. The cost of this development has been considerable; which is why, we cannot just disregard that operating system for SCTN as one investor has proposed.
Most company investors talk only about the SCTN patents and intellectual properties as the golden goose which is nothing more than a silver-plated spoon that does nothing to bring value to any company. Patents and IP of a company have no value to a company until it brings revenue income to the company; yet most investors keep hearing about the value of the patents and IP as if it were the holy grail. Any patents and IP has no actual value without a quality operating system such as the one that has been developed by Airos for Phoenix to utilize in the SCTN deployments to produce revenue.
WHY THE PHOENIX/SCTN RELATIONSHIP-because SCTN would have cease to exist years ago if Phoenix had not step into the picture when it did-that is the actual reality of the two companies.
SCTN had entered into a performance based exclusive license with Phoenix in exchange for terminating the principal and continued accruing interest from the Airos and SCTN secured note holder debt. SCTN receives 20% of the gross or 40% of net revenues that Phoenix earns from selling the SCTN technology regardless of the amount of expenses incurred by Phoenix for development, sales and operational expenses are in regard to the SCTN marketing, development, integration and roll-out of that technology.
SCTN has become a patent licensing company and takes no operational risk responsibility associated with the marketing, development, integration and roll-out of its products since it has all been assumed by Phoenix. During the setup and establishment of Phoenix, each individual SCTN Secured Convertible Promissory Note Holder and Airos chose to convert their debt into Phoenix shares, SCTN shares or cash.
Phoenix was established as a clean debt free operational entity in order to provide continued marketing and development of the SCTN products that SCTN was no longer able to fund. Phoenix was also the only entity that was able to sign contracts that SCTN could not because of some financial issues associated with the SCTN over the last several years that has restricted its growth and this process will continue until full funding comes into the company.
Phoenix has spent several millions of dollars in development work to build and customized operating system that will produce sales and revenues for both companies, and has lent and continues to lend money to SCTN for the Company's operational deficit and enhancement of its product offering.
SCTN and Phoenix are separate entities with Phoenix holding approximately 25% of the outstanding SCTN shares. This common bond motivates the management team to ensure that both companies become highly successful.
IRS
SCTN has continued its discussions with the IRS concerning previous debt.
OTHER DEBT
SCTN has continued in significantly reducing our debts and has eliminated all secured note debt. We have approached creditors whenever cash flow existed and settled past debts and will continue to deal with all creditor obligations fairly.
FOCUS ITEMS
Our focus items continue to be (1) completion of filings (2) increase license, transaction and professional services revenue (3) resolving the IRS debt and (4) resolving legal disputes.
We expect to have significant issues such as full financial disclosure, being current with the SEC, increased revenues and significant debt reduction completed by the end of this year. We, as you, have been through several difficult and stressful years caused by our funding issues. This year will be also be tough as well, however we anticipate that year 2011 will be the year for both company in terms of revenues and profitability.
The real issue in these companies currently has been lack of funding-managing both companies on less than $30,000 per month has and will continued to be difficult but that has been the reality. The company could do wonders with a $300,000 to $1,000,000 in infusion of funding in the company. We are currently in discussion with several lenders at this time and will inform the stockholders once funding takes places-this funding will take place because of the customized development accomplished by Airos over the years for SCTN that were paid by Phoenix.
I as the CEO of Phoenix and SCTN also intend to immediately set-up a patent defense fund that will invite any and all investors, whether SCTN, Phoenix or others to participate in this program and receive ten (10% of all gross revenues from that participation). You will be receiving detail of this program shortly. I will also be sending letters on a more frequent basis so that you, the investor, can be fully informed of what actually is happening within the company. I will enjoy hearing from anyone willing to assist or that has an idea to help the company and its investors. My direct line is (702) 361-3624. Please call me prior to 8AM.
Bernard F. McHale
CEO and President
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