----- Original Message -----
From: Mark Anton
To: Daniel Verkerke
Sent: Thursday, July 26, 2001 10:18 PM
Subject: Some more answers
I also find the hard luck story a bit off. It seems like Mr. Anton is only including the monies from one casino. He also forgot to mention the $10'000.00 hit he received for managing partner of each of the casinos he managed. If you check out the link at "FINANCES" There is a break down with questions regarding funds. This is only in account for one casino. For Mr. Anton to state " AWG total revenue of $ 992,000.00 of which $ 692,000.00 came from software and ISP services provided to Non-Partnership Related Business." is really odd. Where is all the monies the partners invested in combination to all the casinos?
Sometimes the Casinos appear to be separated businesses, other times they are presented as AWG. If AWG has it's own entity apart from all the casinos then it is their revenues that pay Mr. Anton's wages. The only revenues Mr. Anton should receive from the Casinos is the $10'000.00. After all, as Mr .Anton has stated everything is done with software.Daniel Verkerke
ANSWER
The Casinos are separate e-commerce entities and have never been incorporated into AWG. AWG has never received money directly from any of the partnerships, and neither AWG or myself has ever received a $ 10,000.00 payment from any of the partnership casinos. The software development and marketing programs were developed by Softnetgaming who invoiced the partnership fulfillment account for the work done. Although all four of the partnerships shared the same fulfillment account, there was never any partnership investment money provided to AWG. I know this whole thing is a little confusing, and I know that I haven't done the best job of separating the partnership accounts, however, the only fees paid to AWG by any of the partnerships were for Web Site Hosting Services or for their share of Licensing fees.In fact, AWG has paid money (Site Revenues into the Partnership Fulfillment Account) This is how the $ 68,000.00 was distributed to Parlaybet and Gamblecom.
In the beginning, I have acted as the initial managing partner for each partnership, however, I have never taken any salary or fee from any of the partnerships, as I am a full time employee of AWG.
I apologize for any confusion in these matters, and will try to do a better job of explaining things in the future.
Regards,
Mark
----- Original Message -----
From: Mark Anton
To: Scott L Erickson
Sent: Thursday, July 26, 2001 7:37 PM
Subject: Some Answers
Dear Scott,
RE: your letter to Mr. Abbey.
I apologize for this format of convenience, however, time is important to me these days, and I still have to devote 10 - 12 hours each day to AWG.
Dear Mr. Abbey:
I share your disappointment and wish I had a clear solution. I have read Mark Anton's report to partners, and under the circumstances find it hugely unsatisfying. I encouraged Mark before he wrote this letter to concentrate on solutions to the business problem that he co-created with the other leadership at AWG/softnet. Lodging even the most legitimate attacks on others such as Bob Nies or Charles Giannino (and I am not dealing with those attacks one way or the other at this time) does nothing to directly deal with the issues at hand. In fact the outrageous commissions earned by the independent sales organizations were the design of AWG/softnet, not the sales people that took advantage of a attractive, high commission opportunity.
Answer- When we accepted the 45 - 50 % to the brokers, it was not by our design, it was in fact the lowest figure that we were able to negotiate, as believe it or not, many of the ISO organizations wanted 65% + a 10% back end interest.
Mark never takes responsibility for really anything - and until he does - he is simply not creditable. It is specifically his fault that most of the following things are wrong: 1 Even after 45% sales commissions and hugely inflated start up costs our casinos have not performed, while others have thrived. Ceasars just got paid for their first month with Luck's in Costa Rica and made $4200 with no advertising budget! Imagine what they could do with a year and $200k!
Answer - Ceasars had similar earnings with us. The marketing that was done by us for Ceasars is partially responsible for the initial business as it always did, and still does direct traffic to their site. They continue to utilize the Billboard van that we created for them, and this too contributes to their success.
Mark can criticize John German's claim that AWG is diverting traffic from us with all sorts of techno-talk - but the performance or lack of it speaks for itself! With all of the experience in casino advertising and operation - the efficiency that normally comes with volume - we should have performed 10 times better than German / Lucky's - but look at the results. Show me result. I have a hard time hearing your accusations and diversions - the lack of performance kills your voice. Truth always includes action. AWG has none! Now here are some facts that Mark Anton has confirmed with me on a nearly daily basis for months: OUR ADVERTISING MONEY IS GONE. IT WAS NOT ESCROWED IN A SECURE ACCOUNT, BUT WAS SPENT ALONG WITH EVERYBODY ELSE'S ON AWG operations.
Answer - None of the advertising money has ever gone into AWG operations. I have offered to open the AWG books to a group of Five managing partners, and if and when they come to our office in Antigua, you and they will see that this is true. A little over $ 300,000.00 of the initial partnerships money was spent directly for advertising, and this money was spend directly from a fulfillment account without ever having been in the possession of AWG.
I am not happy about that. Until he takes responsibility for that and the many other wrongs and works with us to correct them - we will not move forward. And then there are the accounting issues, the IRS issues, the creditability issues. Another pathetic example of diversions and taking responsibility is in chapter 4 where he paints a gloomy financial picture of only $300k in net gaming revenues, $290k licensing fees, $68k paid out, $120k paid out to unmentioned owners,
Answer - The $ 68,000.00 was in fact paid to Parlaybet and Gamblecom Partners The $ 120,000.00 figure combines several of the casinos that we operate for others, and also includes the 25 -35% paid to resellers (paid banners) and is in fact advertising / promotion expense.
$94K rolling reserve - leaving $421k to cover operating costs for 24 months........ low salary.... etc So what happened to the $1.1 million raised?
Answer - Much like the fact that an internet server that cost $ 50,000.00 only two years ago now costs less than $ 10,000.00, the web site that now costs $ 12,000.00 to create, originally cost between $ 60,000.00 and $ 70,000 when we first started developing them. Additionally, our individual site costs from Starnet was a lot higher in the early days. Almost all of the money that we got went into direct labor costs in producing the sites, and the rest did in fact go into promotional efforts and media.
Even with 45% going to Outside Sales Organizations - that leaves $6,000,000.00 (six million dollars) I simply cannot buy anymore poor me crap about where the money went.
Answer - We never got $ 6,000,000.00 we to date have only received 1.9 million of which we are still responsible to provide $ aprox 460,000.00 to fund the remaining ad budgets for the first four casinos ( I am leaving captains out of this issue because it is hardly funded at this point in time). I am confident that we will be able to fund the balance of the ad budgets and would like to work with the managing partners to develop a realistic schedule.
When this guy is ready to take responsibility for what he did and did not do, I am ready to listen and work out a tough solution with him. It will keep him out of jail, strip AWG of all assets and give those assets to the people that they were taken from, and maybe give Mark Anton/AWG a chance to contribute to a new beginning and share in the success of our new creation. But one thing is for sure - bullshit does not work, never has, and never will. And we are still getting it!
Answer - I have already offered to donate the 200 + partnership units that AWG owns, and in addition work out a plan to provide additional sites at no additional cost to the partnerships. My only condition is that none of the outside interests participate in either the selling of these units or the operation of these new sites. I made several mistakes in the way I operated the business, however, I have never intentionally done anything to hurt the project.
I will distribute the final copy of my report tomorrow or Saturday.
Thank you for your continued interest and dialog.
Mark
----- Original Message -----
From: Mark Anton
To: Stan
Sent: Thursday, July 26, 2001 11:53 PM
Subject: Some Answers
To Mark Anton
From Stan Narusiewicz
I have reviewed your State Of The Union message and am responding as requested.
In general, this whole issue is a classic example of human nature played to its fullest.
Lots of needless arguments and inaccurate statements with very little genuine, constructive, solution oriented suggestions and comments.
I will start by listing what I understand you said and did not say:
1. The Horse Racing and Casino Games are now up and running and will be in production in three weeks. If that is true, then we need to concentrate on obtaining customers.
2. The reporting software is being made available. Good.
3. Two of the five partnerships have separated but you leave us hanging when you say you are not sure if you are going along with the separation.
Answer - I am not certain that allowing the URL to move to a different provider, in an unlicensed, unregulated jurisdiction would be a responsible act on my part. Many of the partners have expressed concern that the original concept of having the credibility of licensing and regulation is an integral part of the investment. In the long run, it is the licensed/regulated sites that will own the marketplace, no matter how much of a problem it may be in getting this type of site going in the first place.
4. You say the brokerage firms took 50% of the investors money. Why did you wait until now to tell us that? You should have told us that within 90 days of inception. Never-the-less you make no statement about the impact of this or any other expense in your State of the Union message.
Answer - I did not wait ntil now to divulge this. This was stated verbally and in writing to yourself and the other managing partners at the first meeting in Miami, in January.
5. You say that some legal action was taken against you but no details about it or no statement about whether or not the issues were resolved or not. You wrote an eight page memo without telling the investing partners what they need to know.
Answer - The action was in the form of a number of law suits initiated by Betovernet, Jim Lane and Bob Nies. None of these ever resulted in any action in the courts.
6. You did not say how much money was available for each partnership to resume its advertising.
Nor did you say how much of the $94,000 held in reserve for bad credit cards was available or when it would be available.Answer - The reserve is held for six months, and is a rolling reserve. The reserve from six months ago is released next month, etc, however, as the reserve is held at a fixed percentage of credit card deposits, although it will always be an asset, we can never spend it.
7. Based on some of your comments, it appears you have already consolidated the accounting and promotion expenses of the five partnerships with all your other clients.
Answer - The money for the partnership accounts, although not in separate individual partnership accounts has never been mixed with AWG business, and has always been kept in a fulfillment account.
8. You have not resolved the Cyber squatting issue. You say it cannot happen, others say it has happen. What are the investors to believe or do we have a choice. There can only be one choice but we do not know which it is. Eight pages but no answer to this issue.
Answer - I did answer this and will again. We have heard this claim about many internet businesses and have always conducted a system of randomly registering on our own sites. Since we do this in a random fashion, and since we can check immediately if we show up on the EFS system, and since we have never not shown up immediately, it is safe to assume that this doesn't happen under the Starnet/EFS umbrella. Although several people have told us that they have evidence to the contrary, to date, none of them have ever provided us with such. If in fact, you or anyone else reading this has specific evidence to the contrary, I would welcome the opportunity to review it. If any such evidence exists, we all would have a multi-million dollar legal action against EFS, and all of our financial worries would be over.
9. You make proposals about consolidation and selling equity units without any specifics regarding price or equity adjustments. If ever there was an example of absolute specifics, it is demonstrated by the legal culture involved with securities investment letters and registration.
Answer I apologize for my lack of understanding in this matter, and have in fact reversed my position on the proposed incorporation, and rather wish to leave any combination of efforts up to the managing partners.
10. Your comments about Proposition 4 are purely speculative, meaningless and inconclusive. Your comments are innuendoes which you promised to avoid at the outset. You cannot imply what you are with your comments about Robert Neis, James Lang, Harland Williams, Jans Felix, Nick Trufyn and Charles Giannino. These people have nothing to do with the state of the union that you are trying to describe. They are the victims not creaters of a bad investment.
Answer - I was trying to show that this was not an impartial group, and therefore should not be the ones to help manage the partnership.
11. I commend you for your Proposal. Your proposal is very good in concept but it is like asking how long is a piece of string. No one can decide yes or no unless you define the proposal in a series of pro-forma equity and income statements.
Answer - I would like to leave this up to the managing partners. God knows I should stick to computer programming.
12. Overall, your natural inclinations to exhibit human nature overtook the mission embodied by a State of the Union message. I got very little of the State of the Union and I still know very little of the status of our Casinos. When will all this unnecessary talk end and when will we see some honest to goodness business progress.
Answer - This was a draft copy and delivered as such - The final version will be available for review and additional criticism in the next day or so - Watch for it on your local internet.
In conclusion, I am on record to give you, Mark Anton, a second chance to put things back to gather and go forward with good business ethics because it seemed most expedient to me. Our other choice is to take our Casinos to another Manager and go forward from there. We need to find a way to determine what to do because all this letter writing is not getting us anywhere..
Best personal regards,
Stan
PS Mark, maybe you should use any small company quarterly report as a guide and redo your State of the Union Message in a financial format with supporting notes. The current letter is far too subjective and it did not accomplish the goals you intended for it. If you want to sell your proposal, show us you have the managerial skills to execute it. I hate to say it but you current message will probably cause most partners to look for a new manager. For expediency, I would think you would be the right choice but now I don't know. Maybe you can show us you have what it takes and if so I recommend you show us.
Please refer to answers 9 & 11
----- Original Message -----
From: GM. Daniel Verkerke
To: Mark Anton
Sent: Friday, July 27, 2001 01:09
Subject: Where is all the money?
Hi Mark:
There is a break down of the investment funds at: "FINANCES" according to the memorandum concerning our partnership.
This is only concerning one casino. If you did not receive any money for managing partner, something is seriously wrong.
Answer - While I realize that I / We could have taken a fee for being the managing partner, I chose not to do so.
Also there is no mention of a 50% brokerage fee. There was a charge of $99'000.00 for the selling of the units. I'm guessing that is what the brokerage fees are about. According to your records below combined with the memorandom there should have been $990'000.00 for each of the 4 casinos with 249 units sold equaling $3'960.000.00 Adding the 123 units of Captains times $5000.00 each is another $615'000. The actual worth of each sold casino would have been $1'245'000.00 each that's including the shares given for work to AWG.
This is a huge amount of money to account for. If Softnet did not fullfill there obligations some sort of action should be made against them. You should be able to provide proof of the marketing services they provided along with statistics to the effectivness or non effectiveness. After all acording to the memorandom Softnet received $300'000.00 from each of the casinos for marketing. Does not sound like a business going under to me.
"For the record, as of today, the partnership subscribed unit breakdown is as follows:
AAA Gaming LLP - 97 Partners - 249 Units Sold
Captains Casino LLP - 20 Partners - 123 Units Sold - 126 Units Available
Five Stars LLP (Realmoney) - 82 Partners - 249 Units Sold
Gamblecom LLP - 96 Partners - 249 Units Sold
Parlaybet LLP - 106 Partners - 249 Units Sold"
Answer - The 49 units belonging to AWG were not "sold" but rather represent the 20% retained by AWG - This will be made clearer in the final report copy.
Our Partnership paid AWG $481.000.00 for Software Development and Communications. IT was stated "Atlantic West was to provide a turnkey operation for $481.000.00. If AWG had a problem with Softnet it should not have reflected unto our cost. We paid AWG for this service not Softnet. We paid Softnet $300'000.00 for marketing. AS the Manager of our Partnership you should have seen that these services were provided. AWG is responsible for the $481'000.00 they received to provide this turnkey operation. If they could not provide it because of Softnet, they should hold action against Softnet.
I believe what even makes it worse, this ordeal has been double duplicated. Everything is at least times 4. That means AWG received $1.924 Million from investors and Softnet received $1.200 Million from investors for Marketing plus what ever AWG paid them for Software.
Answer - If you adjust your figures and remove the 49 AWG units from the mix, I believe that my answer of yesterday makes more sense.
There is much to look at and I would like to see the complete results of one casino at a time. So I could cross reference costs afterwards.
You are doing much better replying, I will post your replies on our site. Hope to hear from you again.
Daniel Verkerke
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