Ann: China Revenue Update, page-86

Abas, at the core of any business it has to sell something for more than it costs.

So eg. they send out 100 texts and this has a cost and they might get say 5 sales from that. So this is likely breakeven (hopefully) but maybe even at a cost, but for a couple for months say 4 of those customers come back to continue playing that game or use that payment system so that retention is a sale with no cost and a gross profit on that sale. The thing is the retention fads as people get bored or change their mind and jump on the next text that someone pushes to them.

This is why the growth is linear. There is no actual growth from say word of mouth etc to curve it up. They have to pay for every customer and only make money the second and third time around. So they will reinvest to counter the slippage in retention. Plus they may burn customers as they go, that is customers might say been there done that. Which is why the roll out to new ground or new products keeps it going.

So a delay in settlement or a lack of working capital at any point could be catastrophic. It happend with One Tel. Not cause of the terms but cause they couldn't get the billing right and they fell over and the result would be the same here.

This is all speculation but could well be the scenario. Like I said if next q we are looking at 3-4m in marketing then the next quarter will be tricky cause they may not have enough working capital to drive more growth.

So for me I'm going to sell down half on the next spike and if they can't turn cashflow positive or the growth doesn't start to curve I will sell the rest after the next q.

I think they will drive a few anns soon and that will be great.

Good luck buddy. You deserve to make a profit on this one.