Looks like the effect of the roll-out coming up. I'll get in next week. I've been making a killing off of google this week on all the ups and downs etc... Hoping GZFX stays down and waits for me lol
-------------------- This is some pretty gay Mc. Bestiality. Posts: 948 | From: Boston, MA | Registered: Oct 2005
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Tomorrow will be 30 days since the "nationwide roll-out" PR, so those of you who can should start calling your local CC store managers to inquire about the GameZnFlix startup results/sales/customer response or lack of response. This might give you some insight as to how the immediate reaction is going. Just a thought.
Posts: 1236 | From: The Bluegrass State | Registered: Sep 2005
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Scroll up the page alittle and you'll see the schedule for the national roll-out.What you where thinking was just the test run (the pilot program).
Posts: 106 | From: SC | Registered: Dec 2005
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Yes, we got a run from the news. But we did not get our run from the roll-out. Our run to .0206 was just a quick buck for us, the roll-out will be longer and stronger. I'm already amazed at how well the price is keeping up with all this dillution. It is a sure sign that we'll go positive in May just like back in November. I remember not believing my eyes when it happened, and the same for when it started going down. This time I'm being surprised again, but I expect it to go down often even though this will be much more powerfully driven.
-------------------- This is some pretty gay Mc. Bestiality. Posts: 948 | From: Boston, MA | Registered: Oct 2005
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Netflix put out some good numbers, Now its are turn!!
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By Edgar Online - (EDG = 10Q, 10K) Last Update: 4/25/2006 2:56:44 PM Data provided by
(EDGAR Online via COMTEX) -- ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.
The following management's discussion and analysis of financial condition and results of operations is based upon, and should be read in conjunction with, its unaudited financial statements and related notes included elsewhere in this Form 10-QSB, which have been prepared in accordance with accounting principles generally accepted in the United States.
In March 2004, the Company launched its website, http://www.gameznflix.com, and became fully operational in September 2004. In conjunction with the website, the Company runs ad campaigns designed to create awareness among its target consumers and to generate traffic to the website.
The Company, through its website www.gameznflix.com, is an online digital video disk ("DVD") movie and video game sales and rental business dedicated to providing subscribers a quality rental experience. The Company offers subscribers a reliable, web-based alternative to traditional store-based DVD and video game rentals on a national scale with an extensive library of approximately 40,000 DVD and video game titles. The Company offers subscribers several different subscription plans, ranging from $8.99 per month to $16.99 per month. The more popular subscription plan of $16.99 per month allows subscribers to have up to three DVD and video game titles out at the same time with no due dates, late fees or shipping charges. Subscribers select titles at the Company website which are then sent via U.S mail with a prepaid return mailer. The Company's service is an alternative to store- based video game rentals as the Company offers a high level of customer service, quality titles, and superior product availability.
In October 2005, the Company entered into an agreement with Circuit City Stores, Inc. that provided for a pilot program in 27 retail stores and on the Circuit City website to promote services offered by the Company. On March 24, 2006, the Company entered into a definitive co-marketing agreement with Circuit City that calls for a scheduled rollout of the Company's services to all the Circuit City Stores beginning in May 2006 with an anticipated complete rollout to all the stores by the end of December 2006. Although the overall number of subscribers obtained from the initial pilot program Circuit City service agreement was not considered significant in relation to the number of new subscribers added during the quarter ended 2005 and first quarter ended 2006, the Company believes that its relationship with Circuit City brought more prominence and recognition to the Company. The Company will continue to seek similar relationships with nationally known companies or agencies to further brand the company name.
Increasing growth will require the Company in the future to make more significant capital investment in library content, distribution infrastructure and technology. The Company's current capacity will allow it to service approximately 15,000 monthly subscribers before significant investment would be required. The Company currently monitors its monthly growth rate to ensure it properly anticipates the timing of making additional investment in library content, distribution infrastructure and technology. The Company currently has five distribution centers, located in Southern California, Colorado, Kentucky, Maryland, and Massachusetts. If the subscriber base grows, the Company may seek opening additional distribution centers.
Management has evaluated and continues to evaluate the Company's operations and operational needs. During 2005, the Company was able to negotiate a new mailer envelope with the United States Postal Service ("USPS") that reduced the Company's overall postage cost and increased the delivery turnaround time from 7 to 2 days.
The Company believes that its planned growth and profitability will depend in large part on its ability to promote its services, gain subscribers and expand its relationships with current subscribers. Accordingly, the Company intends to focus its attention and investment of resources in marketing, strategic partnerships and development of the subscriber base. If the Company is not successful in promoting its services and expanding its subscriber base, this may have a material adverse effect on its financial condition and the ability to continue to operate the business.
Results of Operations.
The Company had gross revenues of $403,610 and $160,773 for the quarters ended March 31, 2006 and 2005, respectively, an increase of $242,837 or approximately 150%. Gross revenues were derived mainly from monthly subscription fees. This increase was primarily due to a greater increase in the subscriber base compared to same period in 2005, fueled by more market awareness of the Company's services. During the first quarter of 2006, the Company's subscriber base averaged approximately 8,000 subscribers per month as compared with approximately 3,000 in the same period of the prior year.
The Company continues to focus on growing its subscriber base through marketing an affiliate partnership program, whereby a referral fee is paid for each new subscriber signed. Since the Company's DVD and video games rental activities are limited, it is unable to provide any meaningful churn figures. Churn is a monthly measure defined as customer cancellations in the quarter divided by the sum of beginning subscribers and gross subscriber additions, then divided by three months. Customer cancellations in the quarter include cancellations from gross subscriber additions, which is included in the gross subscriber additions in the denominator. Once the Company has more operational activity history, management will use churn as a measure to evaluate whether the Company is obtaining new subscribers while retaining existing subscribers in accordance to its business plans.
(b) Cost of Revenues.
The Company had cost of revenues of $176,613 and $138,261 for the quarters ended March 31, 2006 and 2005, respectively, an increase of $38,352 or approximately 28%. Cost of revenues decreased as a percentage of gross revenues during the first quarter of 2006 compared to the same period in 2005 primarily due to a decrease in the Company's mail delivery expense and providing the fulfillment services internally rather than having it outsourced in the prior year. In October 2005, the Company changed its USPS mailer to better make use of the first class mail rates and have overall reduced postage costs. During the third quarter of 2005, the Company terminated its outsourced fulfillment services and brought it in internally, which provided the Company better management of costs and fulfilling subscribers' order requests.
The Company had advertising expenses of $238,328 and $0 for the quarters ended March 31, 2006 and 2005, respectively. Such advertising consisted of direct marketing through print, radio and online internet advertising. The Company believes advertising expenses will continue to increase by at least 15% during 2006.
(d) Selling, General and Administrative Expenses.
The Company had selling, general and administrative expenses of $659,185 and $279,098 for the quarters ended March 31, 2006 and 2005, respectively, an increase of $380,087 or approximately 136%. Selling, general and administrative expenses are comprised primarily of related payroll expenses and contract services. Although selling, general and administrative expenses increased during the first quarter of 2006 compared to the same period in 2005, they decreased as a percentage of gross revenues by approximately 10% compared to the prior year. The Company believes selling, general and administrative expenses will increase in 2006 but in smaller proportion to overall gross revenues on a percentage basis.
(e) Consulting and Professional Fees.
The Company had consulting and professional fees of $489,267 and $197,906 for the quarters ended March 31, 2006 and 2005, respectively, an increase of $291,361 or approximately 147%. This increase in consulting and professional fees was primarily a result of additional business consultants utilized during 2006 to aid in developing a more effective marketing program.
(f) Net Losses.
The Company had net losses of $1,588,948 and $675,704 for the quarters ended March 31, 2006 and 2005, respectively, an increase of $913,244 or approximately 135%. This increase is the result of the factors discussed above. The Company anticipates having recurring net losses during 2006.
Factors That May Affect Operating Results.
The operating results of the Company can vary significantly depending upon a number of factors, many of which are outside its control. General factors that may affect the Company's operating results include:
- market acceptance of and changes in demand for services;
- a small number of customers account for, and may in future periods account for, substantial portions of the Company's revenue, and revenue could decline because of delays of customer orders or the failure to retain customers;
- gain or loss of clients or strategic relationships;
- announcement or introduction of new services by the Company or by its competitors;
- price competition;
- the ability to upgrade and develop systems and infrastructure to accommodate growth;
- the ability to introduce and market services in accordance with market demand;
- changes in governmental regulation; and
- reduction in or delay of capital spending by clients due to the effects of terrorism, war and political instability.
The Company believes that its planned growth and profitability will depend in large part on the ability to promote its services, gain clients and expand its relationship with current clients. Accordingly, the Company intends to invest in marketing, strategic partnerships, and development of its customer base. If the Company is not successful in promoting its services and expanding its customer base, this may have a material adverse effect on its financial condition and its ability to continue to operate its business.
The Company is also subject to the following specific factors that may affect its operations:
(a) Ability to Attract and Retain Subscribers Will Affect the Company's Business.
The Company must continue to attract and retain subscribers. To succeed, the Company must continue to attract subscribers who have traditionally used video and game retailers, video and game rental outlets, cable channels, such as HBO and Showtime and pay-per-view. The Company's ability to attract and retain subscribers will depend in part on its ability to consistently provide its subscribers a high quality experience for selecting, viewing or playing, receiving and returning titles. If consumers do not perceive the service offering to be of quality, or if the Company introduces new services that are not favorably received by them, it may not be able to attract or retain subscribers. If the efforts to satisfy its existing subscribers are not successful, the Company may not be able to attract new subscribers, and as a result, revenues will be affected adversely.
The Company must minimize the rate of loss of existing subscribers while adding new subscribers. Subscribers cancel their subscription to the Company's service for many reasons, including a perception that they do not use the service sufficiently, delivery takes too long, the service is a poor value and customer service issues are not satisfactorily resolved. The Company must continually add new subscribers both to replace subscribers who cancel and to grow the business beyond the current subscriber base. If too many subscribers cancel the Company's service, or if the Company is unable to attract new subscribers in numbers sufficient to grow the business, operating results will be adversely affected. Further, if excessive numbers of subscribers cancel the service, the Company may be required to incur significantly higher marketing expenditures than currently anticipated to replace these subscribers with new subscribers.
Subscribers to the service can view as many titles and/or play games as they want every month and, depending on the service plan, may have out between three and six titles at a time. With the Company's use of five shipping centers and the associated software and procedural upgrades, the Company has reduced the transit time of DVD's and games. As a result, subscribers have been able to exchange more titles each month, which has increased operating costs. As the Company established additional planned shipping centers or further refines its distribution process, it may see a continued increase in usage by subscribers. If subscriber retention does not increase or operating margins do not improve to an extent necessary to offset the effect of increased operating costs, operating results will be adversely affected.
Subscriber demand for titles may increase for a variety of other reasons beyond the Company's control, including promotion by studios and seasonal variations in movie watching. Subscriber growth and retention may be affected adversely if the Company attempts to increase monthly subscription fees to offset any increased costs of acquiring or delivering titles and games.
The "GameZnFlix" brand is young, and the Company must continue to build strong brand identity. To succeed, the Company must continue to attract and retain a number of owners of DVD and video game players who have traditionally relied on store-based rental outlets and persuade them to subscribe to its service through its website. The Company may be required to incur significantly higher advertising and promotional expenditures than currently anticipated to attract numbers of new subscribers. The Company believes that the importance of brand loyalty will increase with a proliferation of DVD and game subscription services and other means of distributing titles. If the Company's efforts to promote and maintain its brand are not successful, its operating results and ability to attract and retain subscribers will be affected adversely.
(b) Inability to Use Current Marketing Channels May Affect Ability to Attract New Subscribers.
The Company may not be able to continue to support the marketing of its service by current means if such activities are no longer available or are adverse to the business. In addition, the Company may be foreclosed from certain channels due to competitive reasons. If companies that currently promote the Company's service decide to enter the Company's line of business or a similar business, the Company may no longer be given access to such channels. If the available marketing channels are curtailed, the Company's ability to attract new subscribers may be affected adversely.
(c) Selection of Certain Titles by Subscribers.
Certain titles cost the Company more to acquire depending on the source from whom they are acquired and the terms on which they are acquired. If subscribers select these titles more often on a proportional basis compared to all titles selected, DVD or game acquisition expenses could increase, and gross margins could be adversely affected.
(d) Mix of Acquisition Sources May Affect Subscriber Levels.
The Company utilizes a mix of incentive-based and fixed-cost marketing programs to promote its service to potential new subscribers. The Company obtains a portion of its new subscribers through online marketing efforts, including third party banner ads, direct links and an active affiliate program. While the Company opportunistically adjusts its mix of incentive-based and fixed-cost marketing programs, it attempts to manage the marketing expenses to come within a prescribed range of acquisition cost per subscriber. To date, the Company has been able to manage its acquisition cost per subscriber; however, if it is unable to maintain or replace sources of subscribers with similarly effective sources, or if the cost of existing sources increases, subscriber levels may be affected adversely and the cost of marketing may increase.
(e) Competition May Affect the Business of the Company.
The market for on-line rental of DVD's and games is competitive and the Company expects competition to continue to increase. In addition, the companies with whom the Company has relationships could develop products or services, which compete with the Company's products or services. Also, some competitors have longer operating histories, significantly greater financial, technical, marketing and other resources, and greater brand recognition than the Company does. The Company also expects to face additional competition as other established and emerging companies enter the market for on-line rentals. To be competitive, the Company believes that it must, among other things, invest resources in developing new products, improving current services and maintaining customer satisfaction. Such investment will increase the Company's expenses and may affect its profitability. In addition, if it fails to make this investment, the Company may not be able to compete successfully with its competitors, which may have a material adverse effect on its revenue and future profitability.
(f) Any Significant Disruption in Service on the Company's Website Could Result in a Loss of Subscribers.
Subscribers and potential subscribers access the Company's service through its website, where the title selection process is integrated with the delivery processing systems and software. The Company's reputation and ability to attract, retain and serve its subscribers is dependent upon the reliable performance of the website, network infrastructure and fulfilment processes. Interruptions in these systems could make the website unavailable and hinder the Company's ability to fulfil selections. Service interruptions or the unavailability of the website could diminish the overall attractiveness of the subscription service to existing and potential subscribers.
The Company's servers utilize a number of techniques to track, deter and thwart attacks from computer viruses, physical or electronic break-ins and similar disruptions, which could lead to interruptions and delays in the service and operations as well as loss, misuse or theft of data. The Company currently uses both hardware and software to secure its systems, network and, most importantly, its data from these attacks; this includes several layers of security in place for the Company's protection and that of its members' data. The Company also has procedures in place to ensure that the latest security patches and software are running on its servers - thus maintaining another level of security.
Any attempts by hackers to disrupt the website service or the internal systems, if successful, could harm the business, be expensive to remedy and damage the Company's reputation. The Company does not have an insurance policy that covers expenses related to direct attacks on its website or internal systems. Any significant disruption to the website or internal computer systems could result in a loss of subscribers and adversely affect the business and results of operations.
(g) Potential Delivery Issues Could Result in a Loss of Subscribers.
The Company relies exclusively on the U.S. Postal Service to deliver DVD's and games from its shipping centers and to return DVD's and games from subscribers. The Company is subject to risks associated with using the public mail system to meet its shipping needs, including delays caused by bioterrorism, potential labor activism and inclement weather. The Company's DVD's and games are also subject to risks of breakage during delivery and handling by the U.S. Postal Service. The risk of breakage is also impacted by the materials and methods used to replicate DVD's and games. If the entities replicating DVD's and games use materials and methods more likely to break during delivery and handling or the Company fails to timely deliver DVD's and games to subscribers, subscribers could become dissatisfied and cancel the service, which could adversely affect operating results. In addition, increased breakage rates for DVD's and games will increase the Company's cost of acquiring titles.
(h) There May be a Change in Government Regulation of the Internet or Consumer Attitudes Toward Use of the Internet.
The adoption or modification of laws or regulations relating to the Internet or other areas of the Company's business could limit or otherwise adversely affect the manner in which it currently conducts its business. In addition, the growth and development of the market for online commerce may lead to more stringent consumer protection laws, which may impose additional burdens on the Company. If the Company is required to comply with new regulations or legislation or new interpretations of existing regulations or legislation, this compliance could cause the Company to incur additional expenses or alter its business model.
The manner in which Internet and other legislation may be interpreted and enforced cannot be precisely determined and may subject either the Company or its customers to potential liability, which in turn could have an adverse effect on the business, results of operations and financial condition. The adoption of any laws or regulations that adversely affect the popularity or growth in use of the Internet could decrease the demand for the subscription service and increase the cost of doing business.
In addition, if consumer attitudes toward use of the Internet change, consumers may become unwilling to select their entertainment online or otherwise provide the Company with information necessary for them to become subscribers. Further, the Company may not be able to effectively market its services online to users of the Internet. If the Company is unable to interact with consumers because of changes in their attitude toward use of the Internet, subscriber acquisition and retention may be affected adversely.
(i) Any Required Expenditures as a Result of Indemnification May Result in a Decrease of the Company's Net Income (or Increase in its Net Loss).
The Company's bylaws include provisions to the effect that it may indemnify any director, officer, or employee. In addition, provisions of Nevada law provide for such indemnification, as well as for a limitation of liability of the Company's directors and officers for monetary damages arising from a breach of their fiduciary duties. Any limitation on the liability of any director or officer, or indemnification of any director, officer, or employee, could result in substantial expenditures being made by the Company in covering any liability of such persons or in indemnifying them.
(j) The Inability to Issue Shares Upon Conversion of Debenture Would Require the Company to Pay Penalties to Golden Gate.
If the Company is unable to issue shares of common stock upon conversion of the convertible debenture as a result of its inability to increase its authorized shares of common stock or as a result of any other reason, it is required to:
- pay late payments to Golden Gate for late issuance of common stock upon conversion of the convertible debenture, in the amount of $100 per business day after the delivery date for each $10,000 of convertible debenture principal amount being converted or redeemed.
- in the event the Company is prohibited from issuing common stock, or fails to timely deliver common stock on a delivery date, or upon the occurrence of an event of default, then at the election of Golden Gate, the Company must pay Golden Gate a sum of money determined by multiplying up to the outstanding principal amount of the convertible debenture designated by Golden Gate by 130%, together with accrued but unpaid interest thereon
- if ten days after the date the Company is required to deliver common stock to Golden Gate pursuant to a conversion, Golden Gate purchases (in an open market transaction or otherwise) shares of common stock to deliver in satisfaction of a sale by Golden Gate of the common stock which it anticipated receiving upon such conversion (a "Buy-In"), then the Company is required to pay in cash to Golden Gate the amount by which its total purchase price (including brokerage commissions, if any) for the shares of common stock so purchased exceeds the aggregate principal and/or interest amount of the convertible debenture for which such conversion was not timely honored, together with interest thereon at a rate of 15% per annum, accruing until such amount and any accrued interest thereon is paid in full.
In the event that the Company is required to pay penalties to Golden Gate or redeem the convertible debentures held by Golden Gate, the Company may be required to curtail or cease its operations.
(k) Repayment of Debentures, If Required, Would Deplete Available Capital.
The convertible debenture issued to Golden Gate is due and payable, with 4 3/4% interest, three years from the date of issuance, unless sooner converted into shares of common stock. In addition, any event of default could require the early repayment of the convertible debentures at a price equal to 125% of the amount due under the debentures. The Company anticipates that the full amount of the convertible debentures, together with accrued interest, will be converted into shares of its common stock, in accordance with the terms of the debenture. If the Company were required to repay the debenture, it would be required to use its limited working capital and/or raise additional funds. If the Company were unable to repay the debentures when required, the debenture holder could commence legal action against the Company and foreclose on assets to recover the amounts due. Any such action may require the Company to curtail or cease operations.
The net cash used in operating activities was $1,443,711 for the three months ended March 31, 2006 compared to $357,333 for the three months ended March 31, 2005, an increase of $1,086,378 or approximately 300%. This increase is attributed to many changes from period to period, including the payment of stock based compensation.
Net cash used in investing activities was $4,606,283 for the three months ended March 31, 2006 compared to $225,852 for the three months ended March 31, 2005, an increase of $4,380,431 or approximately 1,900%. This increase resulted from increased investments of cash that the Company had as a result of the recent additional funds provided by Golden Gate Investors, Inc. as a result of the Addendum to Convertible Debenture and Warrant to Purchase Common Stock, between that firm and the Company (as discussed below).
Liquidity and Capital Resources.
As of March 31, 2006, the Company had total current assets of $10,219,311 and total current liabilities of $695,449, resulting in a working capital surplus of $9,523,862. The Company's cash and certificates of deposit balance as of March 31, 2006 totaled $5,340,867 and $3,000,000, respectively. The Company's net cash provided by financing activities for the three months ended March 31, 2006 was $5,488,466.
The Company's current cash balance will be sufficient to fund its operations for the next 24 months. However, the Company will continue to raise capital through either debt or equity instruments that will allow it the resources to increase its library content, distribution infrastructure and technology. As of March 31, 2006, the Company had stock subscriptions receivable totaling $3,150,000 from three investors in connection with approximately 163,846,000 shares of common stock that had been issued related to these receivable balances. The Company's management has reviewed and evaluated these receivable balances and believes there is no collectibility issue with regards to such receivables.
The Company's continued operations, as well as the implementation of its business plan, will depend upon its ability to raise additional funds through bank borrowings and equity or debt financing. The Company's ability to continue as a going concern is dependent on additional sources of capital and the success of its business plan. In connection with the Company's need for funding, it entered into a Securities Purchase Agreement with Golden Gate Investors, Inc. on November 11, 2004 for the sale of (i) a $150,000 convertible debenture and (ii) warrants to buy 15,000,000 shares of common stock.
The debenture bears interest at 4 3/4%, matures three years from the date of issuance, and is convertible into common stock, at Golden Gate's option. The convertible debenture is convertible into the . . .
Posts: 106 | From: SC | Registered: Dec 2005
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I bought a little more today, i'm thinkin (hopein) the next pr is gonna tell what stores are added to the roll out, and we will move up, at least make it worth while to swing. I also believe we are due for a pr. I also think this will play monthly for a few.
-------------------- I started with nothing, and still have most of it!!!! Posts: 181 | From: Mi. | Registered: Jan 2006
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